In its second-largest acquisition, Amazon buys the company for $970 million.
Industry group cries foul over mobile app. Too bad.
As a proponent of a tax-free Internet and a mobile commerce enthusiast, I had to laugh yesterday when the Retail Industry Leaders Association, or RILA, released a statement aggressively accusing Amazon.com Inc. of unfair practices because the e-retailer has a highly effective mobile app.
RILA’s argument boils down to the tax advantage online retailers have over bricks-and-mortar merchants. For the most part, Internet retailers don’t have to collect sales taxes. Here’s what RILA had to say yesterday.
“Retailers compete on price 365 days a year, and at no time is that competition hotter than during the make-or-break holiday shopping season,” says Katherine Lugar, executive vice president of public affairs. “However, by continuing to evade collecting state sales taxes, Amazon’s exploitation of a pre-Internet tax loophole is resulting in a 6-10% perceived price advantage over their competitors on Main Street.”
She went on. “Amazon’s aggressive promotion of its Price Check app shows the lengths they are willing to go to exploit this tax loophole, and is a stark reminder of why Congress needs to act to protect retailers on Main Street,” she says. “A failure to act is an implicit endorsement of a subsidy of Amazon, a subsidy that distorts the free market and puts jobs on Main Street at risk.”
I’m not going to debate here the pros and cons of an Internet sales tax. I’m concerned about m-commerce. And this is what I have to say to RILA. If store retailers are going to get up in arms over a mobile app that Amazon offers, they should do something about it: Namely, build a better mobile app and promote the hell out of it.
We’re living in a mobile world now. Mobile shopping is going through the roof. In September two-thirds of all smartphone owners shopped in some way on their phones, including comparing products and prices, searching for coupons, taking product pictures, and locating a retail store, finds web and mobile measurement firm comScore in its comScore Mobile Retail Advisor report. 38% of smartphone owners have used their phone to make a purchase at least once—that’s 34.2 million U.S. consumers, comScore says.
If store retailers don’t act, it’s their fault, not Amazon’s. They know they often can’t compete on price with Amazon, sales tax or no sales tax, so when they can’t, they have to compete on value and loyalty, and with special offers. Create an app that provides access to deep product information and customer reviews. Integrate a 2-D bar code scanner that enables shoppers in stores to scan a QR code with their smartphone to view engaging product videos that not only better explain products but reinforce the store as, in the merchant’s view, the trustworthy name. Offer mobile-only promotions and discounts or deliver coupons through GPS location-based services; Amazon, for example, just announced that shoppers this holiday season will get 5% off any purchase made through the Price Check app. Emphasize the store loyalty program through the app, giving customers the ability to check points, and earn points. There’s so much a store can do.
Then, the most important thing a store retailer with an app must do is promote it. Big time. So many retailers build apps and then expect consumers to find them in an app store. Many will. These will be the most loyal customers. But everyone needs to know about the app. And the only way to do that is with a permanent box dedicated to m-commerce on the home page and in e-mail marketing pieces, occasional e-mail marketing pieces dedicated solely to m-commerce, and in-store signs that play up the benefits of using the app.
Consumers are flocking to mobile commerce. The cost to entry for retailers is low. For $10,000 or less you can have a great m-commerce site. For $50,000 you can have a killer app with tools like bar code scanners and augmented reality. Amazon has great apps, and store retailers can’t cry foul when Amazon promotes them. Store retailers who complain need to learn how to compete in the world of m-commerce. There’s a lot of store retailers out there that already know how.