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June 21, 2018 • Volume 18


Will Quill rewrite the rules for e-commerce?

No doubt in response to entreaties published in the Observer only months ago, the U.S. Supreme Court has reversed the ill-conceived Quill v. North Dakota precedent that prevented states from compelling merchants to collect sales tax on purchases made by its residents when they bought from out-of-state merchants [it’s more complicated than this, but I don’t think that most of the Observer’s readers are interested in the details]. The new law of the land is South Dakota v. Wayfair.  South Dakota can now enforce its law requiring out-of-state merchants to collect a 4.5 percent tax on sales to its residents from any merchant that sells more than $100,000 or 200 transactions, annually in the state.

By the time you’re reading this, President Trump will have undoubtedly tweeted that this is a much deserved comeuppance to his frequent foil, Jeff Bezos. The reality, though, is that Amazon’s first-party business has not been adversely impacted by its requirement to charge sales tax in states where Amazon has physical presence over the years. Back in 2016, we ran an analysis that looked at the impact on Amazon share and sales growth when it began collecting sales tax in South Carolina (January 2016) and Colorado (February 2016). I’ll spare you the details, but when we compared Amazon’s share and sales growth in these two states with adjacent states where no tax change had occurred, we saw that Amazon suffered no adverse impact in share or growth.

It seems that consumers weren’t making merchant buying decisions to avoid paying sales tax as I suspect they were in the earliest days of e-commerce.  Avoidance of sales tax might have compelled some people to make their first computer or TV purchase online, but ultimately it was low item prices, broad selection, and convenience that hooked them.

This will be tricky for smaller merchants which will now have to stay abreast of state and local sales tax rules. In this software as a service [SAAS] world, though, countless vendors will develop solutions that integrate into e-commerce platforms with minimal pain. And, ironically, it may push more retailers into Amazon’s marketplace, where Amazon will undoubtedly take care of this hassle, perhaps for a fee.

Amazon remains un-trumped by this ruling

In the long run, in fact, the death of the Quill precedent will be a blessing for the retailers, like Wayfair, that have contorted the geographic footprint of their businesses in an effort to avoid having to collect sales tax.

What happens next? This part is easy. State legislators across America will remember 2018 as the ‘Summer of Special Sessions’ wherein every state scrambles to write their own legislation ensuring that they don’t miss out on the opportunity to collect a tax that they can say isn’t actually a tax increase, given that consumers have actually been legally obligated to self-report their online purchases since Quill. This might help ease burdens on stretched state governments, and hopefully [for those of us in the Constitution State] obviates the need to bring highway tolls back to Connecticut.

This will also place a burden on the Federal government to simplify sales tax collection for retailers by imposing a national online sales tax rate to be paid to the states, as many retailers [including Amazon] have been requesting for years. I’d not bet that this Congress is going to act before midterms, but hopefully once the dust settles after November, this becomes an easy bi-partisan move [OK, perhaps I’m being naïve].

Marriott guests start sleeping with Alexa

Amazon announced last week that it had struck a deal with Marriott to place Alexa powered Echo devices in select hotel rooms, beginning this summer. These devices will presumably contain all of Alexa’s functionality (alarms, weather, etc.), but what is more interesting is Marriott’s plan to develop Alexa as a part of the hotels’ operating systems. We’ll be able to control the thermostat, open the drapes, order room service, or connect with the concierge to get a restaurant recommendation without having to get out of bed.

As a Marriott loyalist who rarely takes advantage of the too-complicated-to-learn-to-use-for-a-one-night-stay technologies that often inhabit hotel rooms that aspire to impress the digitally-savvy business traveler, I’m excited to listen to my local NPR station in the morning, and to Spotify to put me to sleep at night without having to crack open the instruction manual or fiddle with an alarm clock wired with 1970’s technology. No more missed flights due to the confusion over am/pm or any of the other Seinfeldian quirks that cause alarm clocks to fail us!

This also provides Marriott with another reason to persuade business travelers to not opt for an Airbnb experience where available technologies will inconsistent.

We don’t know the deal terms, but unless Amazon paid Marriott, this is a great deal for Amazon. It reinforces the I-can’t-live-without-my-Echo sentiment that prods consumers to buy new Echo devices for more rooms in their house and it creates trial amongst those that haven’t yet taken the plunge.

There are reports that Marriott evaluated Alexa and Siri before settling on Alexa. Which begs the question, ‘Why wasn’t Google in the mix here?’ as Google aspires to unseat Amazon in the voice powered speaker domain. 

It’s been said that voice-powered user interfaces are the future of computing, which is a clear overstatement. Voice-powered UIs, though, are clearly an important part of the future of computing, and each baby step matters. Hey Google, if you’re listening, Call Hilton!

About Ken

Ken Cassar is vice president, principal analyst at Rakuten Intelligence, where he looks at trends in the e-commerce industry armed with Slice’s robust set of online sales data.

Ken brings a rich online retail background to Rakuten Intelligence. Most recently, Ken was SVP, Media Analytic Solutions at Nielsen, where he developed several innovative digital commerce measurement and advertising effectiveness solutions. Prior to Nielsen, Ken was an analyst at Jupiter Research, where he was an early thought leader, trusted adviser, and media source on e-commerce. His prescient outlook on fledgling e-commerce industry was a key contributor to Jupiter’s dominance as a digital media zeitgeist at the dawn of the Internet.

Ken has an MBA and Bachelors Degree in Political Science from the University of Connecticut. Ken aspires to stay technologically ahead of his teenage children, as evidenced by his ‘Gadget Geek’ Rakuten Intelligence's profile. He also has the appropriate jacket for every occasion.