The sheer ingenuity of retail businesses never ceases to impress me. In recent years, retailers have navigated the rise of in-store pickup and the blurring of the lines between e-commerce and in-person shopping. Even as bricks-and-mortar sellers head for the Web, online-native businesses are putting down roots in physical locations (and facing new tax challenges – see Clicks to Bricks: New Opportunities and New Complexity for Retailers).
Now, as the post-pandemic “retail reset” continues to push forward – and as retail tax rates continue to undergo major changes -- companies are eyeing new opportunities and business models beyond retail.
A recent McKinsey article explores this trend. Forward-thinking retailers “are developing a more nuanced and dynamic understanding of where, when, and how consumers want to be served,” the article notes. Beyond that, industry leaders are “making bold moves to create new, complementary profit pools to fuel their investment in the customer.” Progressive retail leaders are asking some big questions, including:
- How can we become more integrated in consumers’ lives?
- Is there a role that we can play in healthcare or connectivity?
- How about financial services, travel or entertainment?
The key to successful decision-making here is to look beyond the potential profit and loss benefits and consider your distinctive capabilities and assets and how they can fill gaps in what’s currently available to consumers. A ‘beyond retail’ strategy might involve adopting a new business model, such as a partnership or joint venture. I’d add that it should also involve keeping an eye on potential changes in your tax environment.
I’ll keep you posted on emerging retail tax trends, many of which will be discussed at the National Retail Federation’s (NRF’s) annual event. In fact, Vertex is one of the sponsors of NRF 2024: Retail’s Big Show, which takes place in New York on Jan. 14-16.
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. The views and opinions expressed in Tax Matters are those of the authors and do not necessarily reflect the official policy, position, or opinion of Vertex Inc.