In late 2014, online retail giant Amazon showed how innovative the industry is becoming by announcing plans to open its first brick-and-mortar store in New York. In early 2015 at the National Retail Foundation’s (NRF’s) 104th Annual Convention & EXPO, Staples Executive Vice President of Global E-Commerce, Faisal Masud, confirmed that innovation has become a necessity: “You don’t have a choice,” he asserted. “You need to innovate.”
Judging from the ideas, insights and innovations rippling through the presentations and discussions at this month’s NRF event in New York, the retail industry is in the throes of transformation. These changes promise to create more complexity for retail tax functions, which will need to operate with greater agility in response.
When considered in combination, current retail innovations and changes are a bit staggering. Traditional online retailers are opening physical storefronts to deepen their engagement with customers. Some retailers are even beginning to offer same-day delivery through other forms of online and brick-and-mortar integration. Innovative partnerships like Google-powered kiosks are also creating new types of integration designed to drive customer value. Additionally, most retailers are moving full-speed ahead with omni-channel marketing efforts. “Social” remains a hot topic – in more than one respect. In addition to honing their (online) social media activities, many retailers are devising new (physical) strategies (e.g., cafés in home-goods shops) that cultivate more meaningful social experiences for customers.
One of the recurring themes at the NRF event was the industry’s drive to experiment. “You have to take chances,” Uber executive Jason Droege explained, “so, we have to have a culture that says failure is fine as long as we’re learning something.”
For tax professionals adjusting to this brave new world of retail innovation, one of the most important takeaways relates to the value of being nimble. Although the tax implications of these transformative partnerships, offerings and strategies are still emerging, it’s a safe bet that many of these experiments will produce new tax treatments, new challenges to tax planning and, of course, new rules and regulations from numerous different jurisdictions.
The more innovative retail strategists and marketers become, the more nimble their tax colleagues will need to become in 2015 and beyond.
Please remember that the Tax Matters provides information for educational purposes, not specific tax or legal advice. Always consult a qualified tax or legal advisor before taking any action based on this information.