by Hayley Silver, Vice President
with Cory Mitchell, Manager
Not paying sales tax has been the catalyst for many an online sale. Why? Because it’s a money saver. Online pure plays, retailers with relatively small store foot prints, and online shoppers reaped HUGE benefits from our tax codes. But courtesy of new government regulations and the imposition of sales tax on most online purchases, times are changing – and 72% of online shoppers intend to change their shopping behavior in response.
Savings Remain Most Important
Keeping costs under control is a big driver for consumers: If forced to pay sales tax for purchases that previously were tax-free, 43% of buyers will put more effort into finding ways to pay less, through coupons and promotions (27%) or comparison shopping engines (16%).
Buyers remain consistent
This isn’t a new trend. Dating back to April-May 2011, online buyers’ were equally concerned with costs—39% of those who didn’t pay tax on their purchase stated that they might shop with a different retailer if tax were charged because “total cost is my primary consideration.” This dropped only marginally to 37% when we asked the same question in May 2013. Furthermore, in both time periods, 37% of all online buyers stated that sales tax was an important factor in their decision of which retailer to purchase from on its own (8%) or as a part of total cost (29%). Not surprisingly, the bigger the purchase, the more likely shoppers are to take notice.
Hope Is Not Lost for Pure Plays
Sales tax and total costs are not most important to all online shoppers. Consistently, 26% of buyers who did not pay sales tax on their purchase did not consider whether or not tax is charged in their decision about where to place their order. A whopping 74% of those who did pay sales tax did not consider abandoning their order due to the sales tax, while 6 in 10 of those who did consider abandonment due to sales tax stated that “factors other than cost were more important in my decision” of which retailer to purchase from. This says something about product quality and assortment, strong on-time delivery, or outstanding customer service – all things that significantly contribute to customer loyalty.
What this means for retailers is that any loyalty accrued by tax-free status will be gone: Shoppers will re-enter the market to explore the option of other retailers. So searching for other drivers of conversion and loyalty will need to be identified, captured and secured.
About the Study
The Bizrate Insights Sales Tax Study was conducted via the Bizrate Insights survey platform and offered to online buyers immediately after purchasing from the Bizrate Insights Network of over 5,000 e-commerce retailers in the US and Canada. Data from the Sales Tax Study was collected from 34,022 online buyers from April 21 – May 31, 2011, and from 10,086 online buyers from May 1 – 9, 2013.
For over 12 years, Bizrate Insights has helped retailers listen to their customers in a way that is fast and measurable, resulting in insights, action, conversation, and customer loyalty. The Bizrate Insights customer feedback and ratings platform allows retailers to collect seller ratings directly from verified customers immediately post-transaction. Standard ratings are published across the leading comparison shopping site, Bizrate.com, and syndicated across the web’s largest search engines to help drive conversion and traffic. Collecting over 26 million surveys annually, Bizrate Insights is one of the largest sources of consumer-generated review content in the world, delivering actionable insights and valuable shopper data to key decision makers in e-commerce. Bizrate Insights is used by over 40% of Internet Retailer’s Top 500 retailers, as well as thousands of smaller boutiques.
Visit http://www.connexity.com to learn more about our FREE and paid buyer and site abandonment survey and reporting products.
For more information, please contact:
Vice President, Bizrate Insights
12200 W. Olympic Boulevard Suite 300
Los Angeles, California 90064