As efforts to stimulate the economy and kickstart the highstreet back into life look to find the catalyst for revival, the UK government are working to implement various plans, practices and initiatives to best help.
To begin with, the introduction of mask wearing in shops was made compulsory. Alongside the notion of it being a sensible measure to ensure the spread of Covid-19 is dramatically lessened is the idea that it will provide consumers with the peace of mind that they are able to return to the highstreet in a safe manner. We have also seen the ‘Eat Out to Help Out’ government initiative which was rolled out to try and encourage people to return to high streets in an effort to reboot the economy. But perhaps most tellingly in the context of the last few months, lockdown and purchasing habits is the news Chancellor Rishi Sunak is mulling a new tax on online retail sales.
What a sales tax for eCommerce fails to consider
On the face of it it is another measure to ease pressure on the struggling UK highstreet and act as a catalyst for spending in brick and mortar stores. However, the introduction of what is essentially an eCommerce tax appears to be a knee-jerk reaction to a highstreet that has been ailing for years, not simply off the back of the Covid-19 enforced lockdown. It ignores that online shopping has grown in popularity and thrived for a number of reasons, and that brick and mortar have struggled more because of the significant costs of business rates - an issue that has been long debated.
In October last year, a Commons select committee published a report urging the government to examine alternatives to the broken business rate system. It concluded that the “unfair system [of business rates] places a greater cost on high street shops and sectors like manufacturing than online businesses.”
Instead of fixing the business rates system, however, the government appears to be giving in to the calls for a digital tax. Far from levelling the playing field, this will simply penalise the successful business model of eCommerce and one which, crucially, consumers seem to like and have relied upon.
Its importance has been underlined over the lockdown period which showed eCommerce to be both popular and essential to our lives in the post Covid-19 world. In the UK, retail insights firm Edge by Ascential, says the surge in online shopping caused by the Covid-19 pandemic is expected to add £5.3 billion to UK eCommerce sales this year. It also fails to consider how a part of this is likely made up by certain factions of the public that rely on online - those who may be unable to get out, those who suffer with disabilities, or those who are susceptible to the threat of Covid-19.
Dr Jamie Lewis from Cardiff University commented on the proposed taxation. He said:
“Has the government considered the impact an eCommerce tax will have on particular individuals? It seems remarkably unfair to punish those with disabilities and other vulnerabilities - including those shielding due to Covid-19 - who might use online shopping as a replacement for highstreet shopping. This does not seem to be a 'levelling up' as I have seen some commentators argue, but potentially unfair, unequal and in my opinion unjust."
eCommerce can continue to thrive in light of taxation considerations
The government is considering two approaches to the potential online sales tax. One option is a 2% levy on goods sold online, and the other is a charge on deliveries. The knock on effect is that prices will be raised for consumers and it’ll be more challenging to sell online.
To combat this, eCommerce businesses are likely going to have customer relations at key touch points throughout the journey with more care and offer them a greater customer experience incentivising them to complete their purchase.
Cloud.IQ’s overlays address this by utilising overlays that plug key points such as the browsing stage and the cart stage of the customer journey - both of which are highly susceptible to abandonment. Using the overlays, eCommerce businesses are able to nurture customers' desire to purchase by providing discounts in exchange for newsletter sign-ups, or even simply notify customers that they are yet to complete their purchase and offer them a direct way to return.
To learn more about creating a customer journey that continues to drive sales in different contexts, click below for a free trial of the Cloud.IQ platform.