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Taxation

3-year moratorium imposed in 1998 ended Oct. 21

Congress plans to pass an extension by year’s end

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Taxation

Why should Internet commerce be taxed?

Why should Internet commerce NOT be taxed?

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Taxation - for Required to collect from

customers who live in states of e-tailer presence

State/local govts argue loss of sales tax revenue harms Bricks and mortar retail Local schools Local governments

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Taxation - against

Retailers argue state/local tax codes are complex

Lost tax revenue is a drop in the bucket since e-commerce is a small percentage of total retail sales

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Taxation - Michigan

State says it is no different than catalog

Puts Internet and stores on level playing field

Cost to collect is $2 million Additional revenue is $240

million

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Taxation - future

Moratorium will probably be extended

Tax codes need to be simplified

Sales tax calculation and remittance software needs refining and validating

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Pricing

Feasible to test new pricing models

Traditional price setting is being modernized due to information availability

Internet reduces transaction costs for consumers

On-line prices are usually lower

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Pricing

Most prevalent model is fixed pricing Prices are set; consumers decide 79% of all e-tailers use it Amazon.com, bn.com, buy.com,

etoys.com, gap.com, macys.com

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Auctions

Publicly held sale Property/goods sold to highest bidder 20% of on-line sales Amazon, eBay, Egghead, uBid, Yahoo! Reverse auction

Buyers specify; sellers compete to offer best price – liquidprice.com

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Auctions - problems

Inefficient commerce and pricing Artificially bidding up prices Collusion

Two bidders can illegally team up to win

Payment New systems – credit card is debited

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Auctions - benefits

Create hype and bolster traffic Improve inventory management

Excess goods/returned merchandise Generates repeat business Estimate consumer demand Evaluate price points for new

products

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Name your own price

Consumer’s suggest price Service presents price to sellers Sellers decide whether to accept

price Similar to reverse auction

Priceline.com

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Demand aggregation

Group buying Service assembles buyers who

want to purchase same product More buyers = lower prices 1% of online sales Actbig.com, mercata.com,

mobshop.com

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Automatic price decline

Initial retail Prices fall by seller-determined %

at regular intervals Prices quit declining when all is

sold Basement.com, jcpenney.com,

outletzoo.com

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Negotiated buy

Search for lowest prices available for specific product

Shoppers negotiate with select sellers to obtain better price

Hagglezone.com, nextag.com

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Barter sites

Person-to-person trading communities

Trade second-hand goods Users negotiate with each other and

reach agreement online Mail items to each other Intellibarter.com, swap.com,

switchhouse,com, webswap.com

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Internet Levels playing field

Consumers Lowers transaction costs Price comparisons, easily and quickly

Retailers Easy to shop the competition Ability to track consumer clicks online

Helps identify price thresholds and willingness to pay for different products/services

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Synonymous pricing

Availability of pricing info places overall downward pressure on price

Creates an environment of frequent price changes

E-tailers offer similar products at the same price

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Synonymous pricing

Feasibility depends on nature of product Stephen King novel is Stephen King

novel, regardless of retailer Wal-mart polo vs. Ralph Lauren polo

Differentiated products are not likely to experience synonymous pricing

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Synonymous pricing

Price is not always the driver Gift giving

Some consumers are unwilling to spend time to track prices

Retailers will focus on the most important products for synonymous