No online sales tax is good news – for now

No online sales tax is good news – for now

For online retailers what the Chancellor of the Exchequer did not announce in his Spring Budget statement was arguably more significant than anything that he did unveil, says Charlie Walker, marketing director of Walker Logistics

Internet retailers were handed a major boost when the Chancellor of the Exchequer sat down after concluding his Spring Budget statement having failed to introduce the new tax in online sales that had been anticipated.

Often dubbed the ‘Amazon Tax,’ the long-rumoured two per cent levy on e-commerce sellers and marketplaces could raise around two billion pounds annually and is thought to be seen by the Government as a useful way of ‘levelling the playing field’ for high street retailers that have been struggling to compete with online sellers – even before Covid.

Clearly bringing in the tax at this time would have been particularly unfair on those bricks and mortar retailers that strengthened their multi-channel capabilities during the pandemic to allow themselves to continue trading while their shops were closed.

Nevertheless, as it looks to start paying off the huge amounts that it borrowed to fend-off Covid, the Government is unlikely to pass up the chance to rake in an additional two billion a year forever and, not surprisingly, there is now talk that the online sales tax’s introduction has only be postponed until this Autumn.

But would such a tax really bring about the return of thriving high streets or lead to the ‘level playing field’ that the Government is trying to achieve in the retail sector? 

While there is no doubt that the Coronavirus pandemic has accelerated the trend towards e-commerce, the fact is that traditional retail outlets had been struggling to compete with the convenience, choice and efficiency offered by internet shopping way before Covid struck.

And research points to the likelihood of consumers continuing to shop online  – even once the lockdown restrictions end and high street stores selling ‘non-essentials’ are able to open again.

Many feel that, if anything, an internet sales tax would have a negative impact on both retailers and shoppers as online traders would inevitably seek to attempt to sustain their profit margins by passing the costs of the new tax burden on to their customers.

However, rather than simply putting up prices which, of course, runs the risk of driving away cost-conscious internet shoppers, sensible online retailers should be looking for other ways of mitigating the impact of any additional tax grab on their business.

Outsourcing to an experienced order fulfillment specialist is one way of bringing financial efficiencies to any online retail operation. Quite simply, using a logistics partner means supply chain costs are likely to be far lower than if an internet seller undertakes essential picking, packing and dispatching tasks in-house.

For instance, choosing to store goods in a ‘shared user’ warehouse can be particularly cost-effective as the store’s overheads are split between various companies. And, because they are shipping parcels in huge numbers every day, logistics companies can offer their customers considerably lower transit rates than SME e-commerce retailers can negotiate with shippers on their own.

Outsourcing to a fulfillment expert also means that instead of having to pay for its own warehouse building and the staff and machinery required to run it – which can’t be scaled up or down quickly or simply – internet traders have access to flexible levels of storage space and human resources as and when they need them.

So, if an e-commerce business is seasonal or experiences spikes in demand, there is no need to worry because the necessary space and resource can be created as required.

And, as companies expand or shrink they may be faced with a need to upgrade or downsize facilities and systems and both scenarios can require significant financial investment. If, for example, an online retail business is expanding, a bigger warehouse facility will be required. But how big? Nobody wants to change warehouse every couple of years, so it’s got to be a building that meets a retailer’s requirements now and in the future. 

 A pro-active fulfilment company will always be able to provide sufficient storage space by taking a ‘rubber wall’ approach to its client’s warehousing needs. And, with countless examples of internet traders whose reputation has taken a hit because the company has been unable to cope with a sudden upsurge in new orders, this can be invaluable.

With talk of an internet sales tax refusing to go away, online sellers who have not already outsourced their storage and fulfillment functions to a logistics specialist really should consider doing so. If you wait until after this Autumn’s Budget you might regret it. 

Walker Logistics provide bespoke logistics solutions to a diverse range of online retail companies from a 250,000 sq. ft. multi user facility, which is sited close to Junction 14 of the M4 motorway in Berkshire.