The logic behind retailers’ aversion to collecting sales tax wasn’t hard to understand: if given a choice between two retailers, one charging sales tax and one not, many consumers would probably choose the former.
Fast forward to 2016. Half of online shoppers are now paying sales tax and nearly half indicate that they either don’t consider sales tax in deciding which retailer to purchase from, or don’t consider it highly.
That’s according to new data (PDF) published by Bizrate Insights, a division of Connexity, which also found that more than three-quarters of shoppers who paid sales tax did not consider abandoning their purchases because of the tax.
Even among shoppers who didn’t pay sales tax, 42% indicated that they would not have purchased from a different retailer because their choice “depended on other factors.”
Just over a third (36%) said sales tax might have led them to purchase from another retailer, but that’s down from 39% in 2011.
Perhaps not surprisingly, sales tax weighs on purchasing decisions as order value increases.
While 39% of those polled stated that sales tax is not something they consider generally (compared to just 9% who stated that it is always important), nearly a quarter (24%) revealed that sales tax becomes more important as the cost of an order increases.
The primacy of customer experience
It’s no accident that more online purchases today involve sales tax.
Understanding that they have to deliver on customer experience and not just price, retailers like Amazon are making a concerted effort to ensure that they can get products to customers as quickly as possible.
As Hayley Silver, VP of Bizrate Insights, explained, this has typically involved expansion of distribution networks “such that more and more online purchases become eligible for sales tax.”
Thanks to Amazon’s distribution network, Amazon Prime members in 27 metro areas can now choose free same-day delivery on over a million items, and through Prime Now, they can even get two-hour delivery on more than 25,000 items.
Its ability to get millions of items into the hands of its customers quickly gives Amazon a formidable customer experience advantage.
And it’s no coincidence that perhaps the only retailer that can compete broadly with Amazon on price, Walmart, just acquired Jet.com in a multi-billion dollar bid to improve the overall experience it offers customers online.