As Cyber Monday starts to gain on Black Friday sales, government eyes taxes
The over-the-top shopping day after Thanksgiving, known as “Black Friday,” has gotten so big that it’s not really confined to Friday any more. Retail stores used to kick off their Black Friday sales marathons in the wee hours before dawn; now they’re starting at midnight, or even Thursday evening. Saturday brings a barrage of emails assuring shoppers that Black Friday pricing is still in effect.
The Thanksgiving weekend culminates in a new tradition, “Cyber Monday,” in which online retailers offer special deals to Internet shoppers. But Cyber Monday is also too big for any one day. Many of the deals actually begin on Thanksgiving or Black Friday, and frequently extend well into Tuesday.
Does that sound confusing? Good. Many retailers like it that way. The ideal Thanksgiving weekend marketplace is filled with dazed customers who don’t really know when to begin, or end, their bargain hunting. The hype surrounding Black Friday creates an atmosphere of frenzy, which can become even more pronounced in tough economic times, as people who have lived frugally throughout the year decide to take advantage of big sales and splurge on holiday gifts for their loved ones. The Thanksgiving shop-a-pocalypse often has a certain air of desperation around it.
The rise of Cyber Monday poses a keen dilemma for brick-and-mortar retailers. The Black Friday experience can be unpleasant, and, sometimes even dangerous for in-person shoppers.
Violent altercations were reported around the nation. Over the course of Black Friday 2012, a mass melee broke out at a Georgia Wal-Mart over bargain-priced smart phones. Shots were fired in a dispute over parking spaces at another Wal-Mart in Florida. A man in San Antonio pulled a gun after someone cut into line ahead of him.
A teenage boy emerging from a Bed, Bath & Beyond in Maryland was set upon by a gang and robbed. Numerous fistfights erupted in the aisles, videos of which found their way onto YouTube. And in the most headline-grabbing incident of the weekend, a shoplifter in Georgia was killed by a chokehold, applied during a scuffle with employees.
Why fight your way into Thunderdome in search of discounted holiday gifts, when you can order them with a few mouse clicks from the comfort of your home? Many popular entertainment products, such as music and video games, can be downloaded digitally after purchase, while even the largest tangible goods can be shipped with remarkable speed, usually for free. The danger of being lured into a shopping spree by scarce “doorbuster” specials that sell out five minutes after the doors open is reduced—if the item is unavailable when shoppers arrive at a retail website, they’ve lost nothing but the time it took to load the web page.
Cyber Monday 2012 was a huge success, with preliminary figures showing a 17 percent increase over the already robust sales from 2011. A total of $1.46 billion was spent online in that single day, making it the busiest day for online commerce in history. This added to a total of $16.4 billion in online sales for the month of November.
Interestingly, retail analysts credit much of the sales increase to “m-commerce”: shopping with cell phones and other mobile Internet devices. The implication is that some of these electronic sales came from people wandering through retail outlets, scanning items with their cell phones, and using price-comparison apps to purchase them online.
On the other hand, despite some early media hype and dubious preliminary figures reported in retailer polls, Black Friday sales were actually down by almost 2 percent from 2011, for a total of $11.2 billion. Expanded shopping hours and special prices extended through the weekend have been credited with some of the decline, but it’s notable that Cyber Monday is now eating almost 15 percent of Black Friday’s lunch.
Safety and taxes
Two public policy issues linger from the Thanksgiving weekend sales bonanza: mounting concerns about violence at retail outlets, and more fuel for the drive to tax Internet sales. The former issue is tricky for even the most dedicated nanny-state socialist, because it’s hard to imagine a way to forbid retailers from holding big sales on special days, particularly when those sales represent a sizable chunk of their annual revenue. But there’s always the chance that a greater liability burden for the safety of shoppers could be placed on retail outlets, prompting them to evade lawsuits and higher insurance costs by ramping down the Black Friday hype.
As for taxing the Internet, that’s a crusade that will only be intensified by the bags of virtual cash flying around on Cyber Monday. It’s worth noting that many of these online sales were subject to taxation, because they were conducted by the online departments of retail stores with physical taxation “nexus” in every state, such as Wal-Mart and Best Buy. But revenue-hungry governments will remain captivated by the thought of getting an even bigger slice of that billion-dollar Cyber Monday revenue.
And even though traditional retailers have always complained about the unfair “advantage” of untaxed online sales, they might regret “winning” the online sales tax battle.
Internet sales giant Amazon.com recently agreed to start collecting sales taxes for cash-starved California voluntarily in exchange for taxpayer subsidies for construction of its new California distribution centers. Those warehouses will make same-day shipping possible in the state. How will that affect the balance between Black Friday and Cyber Monday in the years ahead?