Tricia Schafer-Petrecz: Welcome, I’m Tricia Schafer-Petrecz, public relations and social media lead at Vertex. You’re listening to Tax Matters, a Vertex podcast. In this episode, business writer, Eric Krell, talks to Forrester Senior Analyst Lily Varón. Lily’s research focuses on the strategies and technologies that companies use to win, serve and retain customers in the digital business era.
Her work covers many aspects of retail, e-commerce and the customer experience. In this podcast, Lily shares her engaging take on the state of e-commerce and best practices that savvy companies deploy to gain competitive advantage. Lily discusses recent Forrester research on customer experience, site navigation, checkout, payments, fulfillment, tax compliance challenges and supporting technologies.
She also explains why “omnichannel is an adjective” and why retailers can expect innovations like curbside pickup and BOPUS to have staying power. Stick around to hear Lily explain these developments, as well as the meaning of the acronym BORIS. Now, I’ll turn it over to Eric and Lily.
Eric Krell: A lot of changes occurred in retail e-commerce during the past year, starting with the global pandemic and continuing through a unique holiday season. I’m curious about what high-level insights were gleaned last year that we can expect retailers to act on in 2021. What lessons are shaping e-commerce this year, Lily?
Lily Varón: We cannot make do without digitizing our business strategies. I think that was the biggest takeaway from 2020, and e-commerce has proven especially resilient -- definitely more than we anticipated. So retail shrunk, depending on the country, between 2% and 5% across the globe, but e-commerce grew anywhere from 13% to 23%. E-commerce was that life jacket, that buoy, that kept retail from sinking completely… but we’re on thin ice. During the holidays last year, nearly half of US consumers spent less than the previous year, and half of those spent significantly less. So until store foot traffic returns to normal levels and until jobs and earnings get restored to normal levels, this is our life for the foreseeable future, at least through late 2021. In in some ways, I think we’ll see even longer term impacts.
There are some common weaknesses that brought retailers to their knees this year. The pandemic environment created a situation of haves and have nots, to borrow a phrase that the National Retail Federation used. We saw quite a few fundamental gaps in experiences this year – many of them having to do with things like logistics, out-of-stock items, long shipping times, late deliveries, higher prices because of demand, and cancelled orders. Overall, companies really hadn’t done enough work in e-commerce and order management and fulfillment to prepare for the kinds of experiences they needed to deliver in the pandemic environment.
Eric Krell: A big part of your job involves taking a close look at best practices. What are some of the hallmarks of a leading e-commerce capability right now after all of the experiences retailers have gone through – after the incredibly rich learning experiences they gained during the pandemic?
Lily Varón: In truth, retailers and brands have been optimizing their e-commerce experiences from the beginning. It’s just that the right experience -- the best experience -- is a moving target. It’s really not hyperbolic to say that it’s never been more important than now to get it right. And we haven’t been stellar at this, to be honest. Forrester has been doing digital experience reviews since 2012, and it’s kind of shocking how retailers’ e-commerce sites routinely stumble on some of these basics. The basics are really about site navigation, product detail pages (PDPs) and check-out flow. For site nav and for product detail pages, I think we know fundamentally what those basics are. It’s site search, and refining those results, and optimizing vertical space for best-sellers or new products. And in PDPs, it’s helping consumers learn about the product that they’re looking at -- imagery, sizing, reviews, etc. Those are basics that we’re still not getting right in a lot of cases.
Eric Krell: What about check-outs? What are some key developments there?
Lily Varón: Retailers and brands have truly been obsessing over the check-out experience for decades, but we still have a lot of work to do to create fast and easy task flows. With things like status bars and breadcrumbs and error messages that make sense in plain language and pop up when you’ve made the error, not at the end of the experience. Things like removing unnecessary fields. My favorite example of this is the credit card – you know, based on the first digit of their credit card number, what type of credit card it is. So, don’t ask them to check a box to tell you which credit card it is. On mobile devices, those alternative payment methods that really expedite the check-out experience – that, to me, is a must-have check-out experience.
Eric Krell: And you have strong feelings about shipping, I know. Tell me a little bit about shipping in terms of what’s important to offer there.
Lily Varón: Free shipping! Everyone should offer free shipping. Free shipping is more important to consumers than fast shipping. If you ask consumers, in an ideal world they want free and fast shipping. In reality, free shipping is more important to them. Shipping methods abound today, and this is an especially fragmented space. You have different products in different places, so shipping times and costs change. You’ve got shipping from third parties, you’ve got buy online pick up in store (BOPUS), you’ve got lockers, you’ve got multiple addresses, split shipments, gift messaging and gift wrapping. All of those options are necessary, but will overwhelm a consumer if you present them all to them. This is where, again, you have to have selectively present those options with collapsible lists and nested items -- things that will help close that sale, hopefully, with the minimum amount of frustration.
Eric Krell: And a lot of those shipping options have different tax implications, which we’ll get to in a moment. First, you’ve spoken and written about the importance of satisfying the consumer’s desire for confidence when purchasing online. What are some points where that confidence is especially prone to either increase or decrease significantly?
Lily Varón: Consumers want confidence, especially now. That’s not to be confused with stasis. Consumers are definitely open to new experiences, but they want to be informed, they want clarity and they want control. So, how do you elevate those e-commerce must-haves over e-commerce nice-to-haves in a way that eliminates doubt and uncertainty and instills confidence? I think there are a few examples of this, including making sure that you add details that matter. Those include shipping times, how close to the day of the estimated shipping time you get, and also how far away from can you get from an accurate, transparent and up-to-date estimate on those shipping times.
Also, scour the site for confusing terms, things like product descriptions. The call center transcripts are a great place to go to find things that customers don’t understand, or they’re not clear on. Use those insights to conduct an audit on the site to clarify those issues. The other really important one that I don’t hear enough folks talking about is chat and elevating the chat visibility. And make sure to staff chat appropriately because consumer expectations concerning chat are rising. In 2019, 27% of US online adults said that it was important for retailers to offer live chat on their sites. In 2020, that number jumped to 42%. That’s because you can get quick answers fast with chat, which is also sort of a generational thing. I joke about being a Millennial and that we Millennials have a thing called “telephone-phobia” There are memes on this, but, truly, chat is all about getting access to information in a quick manner.
Eric Krell: I’ve heard you say that omnichannel is an adjective. What do you mean by that, and how can that perspective help retailers?
Lily Varón: Omnichannel is absolutely an adjective. I think most people talk about it thinking of continuity and seamlessness, but without another word, you don’t know in what the context is. Is it omnichannel commerce? Is it omnichannel marketing? Omnichannel fulfillment? Omnichannel service? In most cases, I think omnichannel-ness, regardless of context, always touches on certain key activities, such as product visibility, order orchestration, store operations, labor management and analytics. I think it can be quite an all-encompassing concept. For most retailers and brands that I talk to, omnichannel commerce and fulfillment are top of mind. I think that that’s true, especially now, when curbside pickup has become such a big thing. One in five consumers used curbside during their holiday shopping.
“BOPUS” – or buy online, pick up in store – is the same: One in five consumers also used BOPUS. One of my favorite acronyms, BORIS – buy online, return in store, is an increasingly popular way to return products. This e-commerce experience that we’ve been talking about, and that retailers and brands focus on, they’re just one component of the whole customer experience, and I think that’s what the omnichannel as an adjective idea is getting at.
Eric Krell: Sales tax rules, rates and complexity continue to increase in the US and globally. How are retailers with leading e-commerce capabilities reducing some – or even a lot of – these tax-related uncertainties? What are they doing?
Lily Varón: There are certain truths that I hold to be self-evident: E-commerce is growing, online and offline is getting more nebulous (these experiences are getting quite blurry), and the tax landscape is really complicated. There are 19,000 global tax jurisdictions. In the US, there are roughly 11,000 alone. In Brazil, there are about 5,000. US and Brazil account for the largest number there, and the bulk of the complexity. These rules change -- what products or services are taxable and what entities are required to comply. In the US, the 2018 Supreme Court’s South Dakota v. Wayfair case was certainly a game-changer. More recently, some states are now considering some form of digital services tax. The other day, I got an email from Spotify letting me know that, due to the Florida Communication Services Tax they must now comply with, they’re bumping up the cost of my subscription. Maryland and a few other states have tried and failed in 2020 to adopt digital services taxes, but I don’t think it’s off the table for 2021. When one state or county enacts, others watch really closely to see how it’s working and how much revenue is being generated.
We saw this in Latin America. Uruguay was the first in the region to enact a digital services tax, and lo and behold, country after country across the region enacted similar laws. I would hazard a guess that with e-commerce becoming bigger and more important, there’s going to be more regulation around the corner, and with more changes come more audits and more urgency to get it right. So, for retailers and brands, it’s either about building a war room to manage this one thing, or seeking help, finding what is ripe for automation. This is where retailers can seek help to comply.
Eric Krell: Lily, last question: Are there any other e-commerce trends that you’re monitoring in 2021, and if so, do any of these have any tax implications?
Lily Varón: One that I’m tracking that I think is really interesting is this trend of live-streaming or shoppable video – this “see now, buy now” trend has been big in China for a few years. And it’s finally making its way to the US. In fact, the other day I saw that QVC announced that its supporting live-streaming video on YouTube TV, and I think we’re going to see more and more of this. As retailers and brands start to experiment with this, there is a real-time pressure to get that e-commerce transaction right, and to execute on the transaction. This is an event on video – a moment in time. So, retailers and brands have to be ready to deliver the right pricing, the right tax calculation and the right support for that kind of transaction.
Eric Krell: Lily, thanks so much. I really appreciate talking to you, hearing your insights, and I really hope to do so again in the near future.
Lily Varón: Me, too. This was fun. Thanks so much.
Tricia Schafer-Petrecz: Thank you for listening to Tax Matters, a Vertex podcast. Check back here for more episodes soon.