July Ecommerce Digest

We hope our readers, even those in the Southern Hemisphere, have enjoyed a nice warm July. We’ve been keeping things hot on the blog with a variety of ecommerce content like:

For this month’s Ecommerce Digest, we’re discussing whether merchants should use Amazon as a channel partner, the psychological effects of subscription billing, and the infamous Chicago cloud tax.

Please share your thoughts and feelings in the comment section.

Amazon as a Channel

Amazon: The Merchant’s Best Friend? | PYMNTS
Should Amazon be a part of your ecommerce strategy? Typically, merchants think of Amazon as a competitor. But according to Patrick Gauthier, Vice President of External Payments at Amazon, this mindset is shortsighted. Rather then viewing Amazon as a competitor, merchants might do well to think of Amazon as a channel partner who can help them earn more customers.

Consider the fact that most of your customers already pay frequent visits to Amazon. If they are looking for a solution that you provide, you ought to be visible to these users, and try converting them through something like Amazon Advertising. So the real question is, can Amazon help you win customers and increase your conversion rate?

Additional resources

Advertising on Amazon: 3 Winning Channels

Amazon Advertising

Do you use Amazon as an advertising platform? Tell us if it’s been beneficial to you in the comment section below! ↓

Subscription Billing

The Psychology of Ecommerce Sales: Taking Advantage of Sunk Cost Effect | HubSpot
Here’s an interesting perspective on why subscription billing is so effective, and why more and more businesses who once sold perpetual licenses are trying to increase their customer lifetime values through predictable and recurring revenue.

The author makes the argument that because customers have already paid for a product, they will convince themselves they have made a great purchase, and therefore, will be more inclined to promote it on their social networks. This helps increase the value of a brand, and provides merchants an opportunity to up-sell customers higher value products.

Additional resources

The prime example of sunk cost effect is from a study that showed that people who already placed a bet on a horse race were more confident of their chance of winning that race than people who had yet to place their bet. See Sunk Costs Wikipedia article.

Chicago Cloud Tax

Chicago’s ‘Cloud Tax’ Makes Netflix and Other Streaming Services More Expensive | The Verge
Time to hire a tax lawyer!

With the Chicago “cloud tax” making headlines this month, it seems that individuals and companies using cloud-based services—anything from Netflix to Amazon Web Services—will be assessed a nine percent use tax on those services. The city is trying to generate revenue lost from locally leased movies, but what is the impact on companies who have customers in Chicago?

It appears that service providers who don’t have a tax nexus in Chicago have to start identifying customers in the city and collecting a new tax from them. Although this is really a use tax, we all know how strictly consumers adhere to the laws of use tax for online purchases, so companies like Netflix have accepted the onus for collection and remittance on themselves.

The consternation from both providers and consumers will increase if/when cities everywhere adopt the Chicago model: Providers will have to offer unique sales tax assessments on customers throughout the country and the rest of the world. Apparently, this tax applies to all sorts of products that fall into categories like, amusement (Netflix),  word processing (Microsoft Office 365),  tax preparation (Intuit Quickbooks) and other applications available to a customer through access to a provider’s computer and its software (Salesforce and Adobe Creative Cloud).

Additional resources

For a deeper understanding of this issue, read this analysis from Reed Smith. However, you’re better off finding a legal authority to dissect the Personal Property Lease Transaction Tax Ruling to see if you have to remit use tax on SaaS products if you use them in Chicago, or if you’ll have to collect and remit a sales tax on these items if you are leasing them to customers in Chicago.

What do you think about the Chicago cloud tax? Is it fair or unfair, or just an inevitable wave of the future of ecommerce? Tell us in the comment section!