Thursday, June 3, 2010

Realizing greater profits via e-Commerce:
How Walmart, Target and Guitar Center
could generate millions-$$$
more in yearly revenue

Decades ago I discovered advertising agencies receive 15 percent from traditional media for every print and broadcast ad placed. For almost 30 years, I’ve been creating in-house advertising agencies for every company I’ve consulted or worked with. One company realized $1-million per month(!) in added, or return, revenue.

On the First of June, Arizona raised its state taxes by one percent. Now, anything I purchase in many Arizona towns is going to cost me an additional 10 percent.

Major companies like Barnes & Noble, Walmart, Target, even Guitar Center have failed to grasp why millions throughout the world purchase online – to avoid taxes.

Here’s how it works. If I buy a guitar at Guitar Center, I’m going to pay $40 in taxes for a $400 guitar. Guitar Center operates in my state, same with Walmart, Target, many major stores. So if I purchase the same priced $400 guitar at Musician’s Friend, I get free shipping, I save $40 in taxes. There’s no Musician’s Friend physically located in the Sonoran desert.

Granted, people shop these retailers – including car dealers and other sales vehicles – due to their reputation. Let’s suppose Guitar Center wanted to offer me tax free shopping plus its reputation.

Here’s how smart e-Commerce practitioners are doing it. You created a wholly-owned subsidiary. In this case, let’s create an e-Commerce vehicle called Guitar One Musical Instruments. Similar name and the profits go to the parent. If Guitar Center were publically traded, they could spin off Guitar Center as a wholly-owned subsidiary and call themselves ABC Music or anything as the parent company.

That way, I could purchase online at Guitar One Musical Instruments, still with Guitar Center’s reputation, maybe even a lower price than its stores, but pay no taxes. So I purchase at Guitar One and save taxes since there is a Guitar Center but no Guitar One in my desert.

Dell Computers has a similar situation, and are brilliant e-marketers. I can order a Dell and pay no taxes. If I need it NOW, I can go to a store – Walmart I believe, and purchase it. Then I would pay taxes. They have distribution agreements, but since Dell’s only physical presence is Texas, any other state, no taxes. For all I know, since it is a corporate headquarters, maybe no taxes in Texas. I had to use that one.

No comments:

Post a Comment