Omnichannel is reshaping retail – and retail tax compliance

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The retail industry continues to adapt to – and in many ways drive – the digital economy with wave after wave of innovation. The execution of omnichannel strategies notched massive progress during the pandemic as retailers were forced to accelerate e-commerce growth. Today, the goal is to provide seamless customer experiences regardless of location or channel. Among many other actions, this means blending the advantages of physical stores with digital services through capabilities such as buy online and pick up in store (BOPIS). 

A new KPMG report looks at how e-commerce is changing, and becoming more complex, as retailers deploy omnichannel strategies across the customer journey. The research is comprehensive: KPMG partnered with the National Retail Federation to interview C-Suite executives and then analysed those insights in conjunction with results from a survey of 2,000 consumers. Here are several takeaways that strike me as compelling:  

  • Online sales are driving the future of retail: While in-store sales have seen relatively flat growth for the past couple of years, online sales have continued to increase rapidly. This trend looks durable. Younger generations are more likely to expand their online spend in the future than older demographic cohorts: 40% of Millennials plan to do so, but only 17% of Boomers expect to increase e-commerce spending. 
  • Convenience is paramount: Nearly half of consumers say that convenience is the primary factor in shopping online. Parcel delivery is the fulfilment model with the highest expected growth. However, this model is less dominant in grocery retail, where consumers are more likely to expand their use of in-store, same-day delivery and BOPIS over the next three years. 
  • Businesses are anchoring e-commerce with brick-and-mortar stores: Physical stores account for around 70% of retail sales. Retailers are turning to advanced data and analytics technologies to link online and in-store experiences. Case in point: they are providing greater personalisation across all interactions, including in-store assistance, call centres and live agents on websites. 

As omnichannel continues to surge, retailers will encounter new tax landscapes and complexities. For example, smaller operations expanding from local brick-and-mortar stores to online, multi-state markets will need to navigate nexus considerations as well as unfamiliar sales tax rules and rates. (There’s a reason why searching the term “online store tax questions” produces upwards of 800 million results.) Selling via social media or online marketplaces can involve some complexity; the rules as to whether the platform or the seller is responsible for collecting sales tax vary from state to state. By the same token, online-only sellers who are exploring the use of physical retail locations as fulfilment centres should review the sales tax implications. 

Blog Author

Pete Olanday

Pete Olanday

Retail Practice Leader, Vertex Consulting

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Pete Olanday is Vertex Consulting Retail Practice Leader, responsible for the integration of Vertex's Indirect Tax solutions in the retail space, specifically with Point-of-Sale systems and e-commerce platforms. Prior to joining Vertex, Pete worked for IKEA and EY. Pete has a B.S. in information and decision sciences from Carnegie Mellon University.

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