HED 460 Taxation 3-year moratorium imposed in 1998 ended Oct. 21 Congress plans to pass an extension by year’s end

HED 460 Taxation Why should Internet commerce be taxed? Why should Internet commerce NOT be taxed?

HED 460 Taxation - for Required to collect from customers who live in states of e-tailer presence State/local govts argue loss of sales tax revenue harms Bricks and mortar retail Local schools Local governments

HED 460 Taxation - against Retailers argue state/local tax codes are complex Lost tax revenue is a drop in the bucket since e-commerce is a small percentage of total retail sales

HED 460 Taxation - Michigan State says it is no different than catalog Puts Internet and stores on level playing field Cost to collect is $2 million Additional revenue is $240 million

HED 460 Taxation - future Moratorium will probably be extended Tax codes need to be simplified Sales tax calculation and remittance software needs refining and validating

HED 460 Pricing Feasible to test new pricing models Traditional price setting is being modernized due to information availability Internet reduces transaction costs for consumers On-line prices are usually lower

HED 460 Pricing Most prevalent model is fixed pricing Prices are set; consumers decide 79% of all e-tailers use it Amazon.com, bn.com, buy.com, etoys.com, gap.com, macys.com

HED 460 Auctions Publicly held sale Property/goods sold to highest bidder 20% of on-line sales Amazon, eBay, Egghead, uBid, Yahoo! Reverse auction Buyers specify; sellers compete to offer best price – liquidprice.com

HED 460 Auctions - problems Inefficient commerce and pricing Artificially bidding up prices Collusion Two bidders can illegally team up to win Payment New systems – credit card is debited

HED 460 Auctions - benefits Create hype and bolster traffic Improve inventory management Excess goods/returned merchandise Generates repeat business Estimate consumer demand Evaluate price points for new products

HED 460 Name your own price Consumer’s suggest price Service presents price to sellers Sellers decide whether to accept price Similar to reverse auction Priceline.com

HED 460 Demand aggregation Group buying Service assembles buyers who want to purchase same product More buyers = lower prices 1% of online sales Actbig.com, mercata.com, mobshop.com

HED 460 Automatic price decline Initial retail Prices fall by seller-determined % at regular intervals Prices quit declining when all is sold Basement.com, jcpenney.com, outletzoo.com

HED 460

Negotiated buy Search for lowest prices available for specific product Shoppers negotiate with select sellers to obtain better price Hagglezone.com, nextag.com

HED 460 Barter sites Person-to-person trading communities Trade second-hand goods Users negotiate with each other and reach agreement online Mail items to each other Intellibarter.com, swap.com, switchhouse,com, webswap.com

HED 460 Internet Levels playing field Consumers Lowers transaction costs Price comparisons, easily and quickly Retailers Easy to shop the competition Ability to track consumer clicks online Helps identify price thresholds and willingness to pay for different products/services

HED 460 Synonymous pricing Availability of pricing info places overall downward pressure on price Creates an environment of frequent price changes E-tailers offer similar products at the same price

HED 460 Synonymous pricing Feasibility depends on nature of product Stephen King novel is Stephen King novel, regardless of retailer Wal-mart polo vs. Ralph Lauren polo Differentiated products are not likely to experience synonymous pricing

HED 460 Synonymous pricing Price is not always the driver Gift giving Some consumers are unwilling to spend time to track prices Retailers will focus on the most important products for synonymous