There are good reasons to focus on one sales channel, and some even better reasons to sell through multiple channels. Retailers capable of reaching consumers where they’re most comfortable are better able to foster brand awareness and loyalty. Those that allow consumers to seamlessly browse by phone or social media platform will get more eyes on their products. And the more places a person can click “buy,” the more often “buy” will be clicked.
During a normal year, a brick-and-mortar store may get enough foot traffic to cover expenses and then some. But the events of 2020 exposed the fragility of relying on in-store sales. Within weeks or months of watching the ball drop, nonessential businesses in many parts of the country and world were forced to shutter or operate under severely restricted circumstances. The number of feet crossing the threshold of even the most heavily visited stores dwindled alarmingly or stopped altogether.
Foot traffic has bounced back: Retail sales in March 2021 were nearly 18% higher than in March 2020, and National Retail Federation Chief Economist Jack Kleinhenz finds the data “confirms reports that people are going out and spending and that in-store traffic has picked up.” Yet lessons from the pandemic — the limitations of physical stores — won’t soon be forgotten. For many retailers, growth hinges on ecommerce and making the most of the opportunities the internet provides.
One such opportunity is buy online pickup in store, or BOPIS.
Consumers like BOPIS
There’s nothing new about BOPIS. About 47% of shoppers surveyed in 2013? said they had used in-store pickup, and in 2019, Business Insider reported that 68% of U.S. consumers had made “multiple click-and-collect purchases.” At that time, avoiding shipping costs was a primary motivation for BOPIS. During the pandemic, click-and-collect has helped consumers and retailers reduce the chances of COVID-19 transmission.
The appeal of BOPIS will endure because it combines the ease of online shopping with the instant gratification of in-person shopping. And as COVID-19 vaccinations continue to reduce the risk of infection, BOPIS could once again lead to more impulse buying. In 2019, 85% of shoppers said they made additional in-store purchases while picking up an online order.
Indeed, retailers may find it pays to reward consumers for going with BOPIS or curbside pickup. It reduces the likelihood that shipping delays will negatively impact customer experience, improving overall customer satisfaction. It can also significantly reduce costs for retailers that offer free shipping.
Still, BOPIS doesn’t appeal to all consumers because not all people are alike.
Different sales channels appeal to different consumers
Different ecommerce channels speak to different demographics: Baby boomers tend to be most comfortable shopping from branded online stores, while younger consumers (Generation Z and millennials) are more likely to shop through social channels like Instagram and Snapchat. The sandwich generation, Gen X, spreads its dollars across all channels: Amazon, eBay, physical stores, and various social media platforms.
Each channel brings unique opportunities. Influencers can promote products on social media platforms, where their opinions can be validated by peer reviews. Branded stores cultivate familiarity; they can identify repeat customers and serve them products most suited to their tastes. Marketplaces enable easy comparisons and may provide the speediest, most reliable delivery.
Selling across multiple channels allows retailers to reach consumers where they’re most likely to buy. But it also brings unique challenges when it comes to sales tax compliance.
The more you sell in a state, the more likely you are to develop sales tax nexus — an obligation to collect sales tax. Most states now require out-of-state businesses to register with the state tax department then collect and remit sales tax once their sales into the state reach a certain threshold (the economic nexus threshold).
Unfortunately, each state’s economic nexus threshold is unique. For example:
- California’s threshold is $500,000 in sales of tangible personal property
- The threshold in Illinois is $100,000 in sales or 200 transactions of taxable or exempt tangible personal property (excluding sales for resale)
- New York’s threshold is $500,000 in sales and 100 transactions of tangible personal property
Some states include services, some include exempt sales, and so on. As soon as you have customers in a state, you need to start tracking your sales into that state to ensure you’ll know to register should your sales meet the economic nexus threshold. Once you establish economic nexus, you’re obligated to register, collect and remit sales tax as required by law, and file returns on time.
Most states also have marketplace facilitator laws requiring marketplaces to collect and remit sales tax on behalf of third-party sellers.
This is a double-edged sword. While marketplace facilitator laws may relieve marketplace sellers of the grind of collection and remittance, they don’t necessarily relieve sellers of their obligation to file returns: Some states require all marketplace sellers to register and file, even those with no physical presence in the state.
Some states include marketplace sales in the economic nexus threshold; in other states, retailers should only include direct sales when calculating whether the threshold has been met. So, while selling through marketplaces can help you broaden your reach, it also complicates sales tax compliance.
Manage sales tax across all channels and systems
Success in retail relies on being adaptable and responding to changing circumstances. The same is true for successful management of sales tax.
For retailers selling across multiple channels, handling sales tax manually can quickly become an unsustainable burden. An automated sales tax solution that can consolidate sales information from all your sales channels is a better way to go; it reduces risk and increases efficiencies.
Learn more about the benefits of multichannel selling in How selling through multiple channels can impact your sales tax obligations.
SALES TAX RATES, RULES, AND REGULATIONS CHANGE FREQUENTLY. ALTHOUGH WE HOPE YOU’LL FIND THIS INFORMATION HELPFUL, THIS BLOG IS FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT PROVIDE LEGAL OR TAX ADVICE.