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E-Commerce Success in a Post-Marketplace Fairness Act World

Posted on 7.24.2013

:: Jake Weatherly, CEO of SheerID ::


Instead of simply waiting with baited breath to see whether or not the Marketplace Fairness Act passes the House, many online retailers are taking a proactive approach by putting programs in place now to ensure that if and when a new online sales tax requirement goes into effect, they’ll be ready.

Forward-thinking e-retailers realize that the Marketplace Fairness Act will affect the online shopping behavior of some customers, simply because the law will soon put in place new regulations and purchasing software requirements, which will ultimately trickle down to the consumers. Even if online companies aren’t forced to increase their prices to cover new costs, sales tax will be perceived as a price increase by many fiscally responsible shoppers who currently prefer online shopping to avoid taxes, and they may choose to shop elsewhere. Although there are several strategies that can help offset the impact of the Marketplace Fairness Act, targeting new customers with discounts and special offers is a valuable solution for businesses that must align with new tax regulations while maintaining their customer base.

Retailers, who know the lifetime value of their customers, will often offer deeper discounts to attract new customers, but they cannot afford to give that special pricing to their entire customer base without hurting margins. This makes it difficult to create special offers for new customers without alienating existing customers or opening the door to fraudulent discount usage. However, very few people resent a company for offering a special discount to those who serve our country, protect our communities or nurture our children. In fact, many customers applaud businesses who offer military, first responder or teacher discounts. Similarly, the majority of consumers recall what it was like to be a broke college student with a mountain of student loans, or they’ve read recent reports about the growing cost of education, and they don’t begrudge students a student discount.

Offering an exclusive discount to a niche audience like students, military or teachers has other advantages as well. With a carefully targeted audience, it is possible to create effective marketing and outreach campaigns without a huge ad spend. Close knit, active communities of military spouses, veterans, teachers and students already exist online. If a targeted discount is truly exclusive and compelling, getting it to go viral can be as simple as reaching out to a few well-connected, respected bloggers or online community leaders about the new special offer, especially for bigger brands. These consumers are also extremely loyal to companies that offer discounts, making them highly desirable as new, long-term return customers.

Fathead, an online company that specializes in entertainment and sports graphics products for large and small spaces, is a perfect example of a business that has successfully grown their customer base by introducing a military discount. In March 2013, Fathead began offering an everyday discount of 20 percent to active service members and their immediate family members as part of its military appreciation program using verification software to verify military credentials so that only qualified customers could redeem the discount. Three months later, they’d seen a 60 percent increase in unique visitors to their military landing page and discovered that 70 percent of the verified military members who used the discount were new to Fathead.

Similarly, when Shooter’s Pro Shop, began offering a 10 percent military discount that immediately went viral, they experienced 26 percent growth in registered online customers within 30 days. Not only did they see a spike in registered online customers, but 10 percent of their total revenue within 30 days of launching their military discount was from verified military members, and their ROI was 1.3.

Fathead and Shooter’s Pro Shop are only two examples of online companies that have launched new initiatives that address customer growth while rewarding military service. This month, a wave of retailers announced exclusive military discounts around the Fourth of July, including Karen Kane, Armed Forces Eyewear, All American Gifts, Vail Valley Anglers, Traeger Grills, and OnePlay.com. All of these discounts are redeemable online, and they are all part of the growing number of businesses taking innovative steps to maintain and grow customers in what will soon be a post-Marketplace Fairness Act world.

With a larger base of loyal, core customers, e-commerce retailers will be better prepared to weather the aftershocks of the Marketplace Fairness Act if it passes into law without any long-term damage.


Jake Weatherly is a co-founder and CEO of SheerID, an online shopping cart platform that provides group verification.

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