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During last month, the luxury category posted a 15.5% year-over-year increase, paralleling its 15.2% jump in February. Electronics sales increased 8.5% year-over-year in April 2010, while women's apparel saw a 4.1% decline and men's apparel dropped 0.5% during the same period.

“The recession has been e-commerce's best friend,” said Fiona Dias, EVP of strategy and marketing at e-commerce firm GSI Commerce. “If you look at [fourth quarter] 2009 for retail stores, retail started to cut costs. They took associates out of their store; they took inventory out.”

She added that retail will eventually recover, “but not at the same pace as e-commerce.”

Mike Berry, director of industry research at MasterCard SpendingPulse, noted that “in many sectors of the retail marketplace, e-commerce is the only major growth sector.”

“The retailers who are growing are the ones who are growing e-commerce traffic,” he said. “Many of the drivers of the e-commerce space are pure e-commerce players. They don't even have a bricks-and-mortar presence.”

The “Internet Transactions Resolutions Program,” a result of several months of dialogue between the state and e-commerce merchants, is available to “any e-commerce retailer that has operated an affiliate program at any time in the state of North Carolina,” said Beth Stevenson, director of public affairs for the North Carolina Department of Revenue.

Retailers that successfully complete the program will not be assessed tax penalties or interest prior to September 1. The state will also not try to obtain consumer information from retailers to collect tax liabilities prior to the same date. Tax penalties will not be waived for retailers who fail to participate in the program.

The state recently demanded in a federal lawsuit that Amazon.com provide the names and addresses of buyers for tax purposes. Numerous states, many of them cash-strapped as a result of the recession, are considering ways to tax out-of-state e-commerce purchases.

The state will contact “at least 350 retailers” for participation, according to Stevenson. Retailers that fit the eligibility criteria must register to participate by June 30.

E-commerce retail sales will jump 12.7% in 2010, according to a forecast released last month by eMarketer. This projected growth dovetails with a recent Census Bureau's report showing that online sales grew by 14.6% during last year's fourth quarter.

"We think it's unconstitutional," said Jonathan Johnson, president of online retail giant Overstock.com.

Retailers are questioning whether this Colorado law, which became effective May 1, violates the 1992 Quill Corp. v. North Dakota case in which the US Supreme Court ruled that retailers who do not have a physical presence in a state do not have to collect and remit sales taxes there.

"We think it's problematic for several reasons," Johnson said. "They're imposing a burden on an out-of-state retailer that has no footprint in the state of Colorado. Secondly, the costs are significant to us. We're going to mail out at the end of the year a notice to each of our Colorado customers and a list to the state. That's a burden that no [bricks-and-mortar] retailer doing business in Colorado has."

Chris Bradley, president and CEO of Cuddledown, a Maine-based e-commerce company specializing in home furnishings, said his company will comply with the law but expressed concern that future legislation could invade consumer privacy.

"We sell pretty pedestrian stuff — no one should be embarrassed that they get pillows — but there are a lot of companies out there that people buy from because they buy through the mail and don't want anyone to know about it," he said. "If we do it in Colorado, what happens with other states if they're successful? It seems to be a very problematic law from everyone's standpoint."

"Clearly the interstate commerce will be something that we're going to be using as grounds [to challenge this law]," said Jerry Cerasale, SVP of government affairs at the Direct Marketing Association.

The DMA sent members a call for contributions to fund a federal lawsuit seeking a preliminary injunction on April 30, saying that "a suit in federal count is the next reasonable course of action."

In addition to concerns about the constitutionality of the law, most online retailers and direct marketers believe that the tax is part of the state's strategy to replenish its cash-strapped coffers, he added.

"The law itself was included in a budget package that was passed by the [Colorado] legislature and signed by the governor," Cerasale continued. "It's all part of the economic situation that all of us are finding ourselves in. It was likely the trigger for this law."

In a letter dated April 27, Hamilton Davison, American Catalog Mailing Association president and executive director, implored members and non-members alike to make monetary contributions that would fund litigation against the state of Colorado.

"What's worse than having to pay sales taxes in every state?" he wrote. "Having to report to every state every purchase your customers have made so the taxing authorities can start chasing your customers down and ordering them to pay back taxes."

Davison told DMNews that the law, which he says Tennessee and California are watching closely to possibly emulate, is "an opportunity to get revenue for the state without making the constituents angry."

"It's basically the government putting us against our customer. It's a dangerous precedent and an unfair tax," he said. "It's an egregious burden, and it is just very wrong on every level. It has to be opposed quickly and challenged quickly."

His plea has generated sympathy from Johnson, who said he not only will support the fight against the tax, but "we will participate in the funding of the DMA lawsuit."

"We'll be compliant with the law that's on the books but we'll fight to show it's not constitutional," he continued. "As more states [enact similar legislation], we are likely to see that we have no nexus in those states so we have no affiliates there, which is hurtful to the local businesses who are employing people there."

To strengthen its legal stance against the state of Colorado, the DMA has hired George Isaacson, a senior partner in the Lewiston, ME law firm of Brann & Isaacson, to act as attorney.

Davison added that the Multistate Tax Commission, an organization that coordinates state government policies on interstate commerce, is citing the Colorado law as a model for other states to consider. Tennessee and California, both of which are suffering fiscal difficulties, may follow suit with similar legislation, he said. North Carolina's Department of Revenue launched a program on April 23 that urged Internet retailers to collect sales taxes on products sold online in order to "resolve issues of tax liability."

The "Internet Transactions Resolutions Program," the result of several months of dialogue between the state and e-commerce merchants, is available to any e-commerce retailer with an affiliate program in the state. Merchants that complete the program will not be assessed tax penalties or interest prior to September 1.

The Colorado tax bill's sponsor, State Sen. Rollie Heath, a Democrat, told the Associated Press that "there's no new tax."

"We're just collecting what's already on the books," he told the AP.

Monica Smith, CEO of Marketsmith, a marketing services company, said her firm is advising clients to consult with attorneys on the issue and formulate a state-by-state strategy for dealing with potential future taxes.

"Colorado's got through, but a company shouldn't just focus on Colorado. It should focus on the fact that each state needs to generate revenue," she said. "You should be prepared to manage e-commerce in each state."

Smith noted that the Colorado law also affects eBay sales, commonly used by both companies and individuals.

The organization's Ninth Annual Merchant Survey found that 59% of respondents plan to invest more in their e-commerce web sites in 2010 than they did last year. At the start of 2009, 36% said they would increase e-commerce web site investment.

With the economy in recession last year, e-commerce web sites, though a bright spot on the broader retail landscape, fell 2% to $209.6 billion, marking the first yearly decline for the category, according to ComScore figures. Nonetheless, 92% of those surveyed predicted their 2010 e-commerce web site revenues would increase from last year, with 33% predicting growth of between 6% and 15%.

“Seasoned sellers, emerging retailers and manufacturers are all positioning themselves for growth as the economy rebounds,” said Lauren Freedman, president of The E-tailing Group, in a statement. “Results of our Ninth Annual Merchant Survey find retailers taking a laser-like focus on performance where results dictate category-centric demands and solid execution sets the tone for incremental revenue.”

Keyword search, cross-sells, seasonal promotions, sales or specials and e-mail remain the most valuable tactics, but merchants continue to improvise new ways to sell.

Online conversion rates remained at 3% or lower, according to the survey. To increase engagement and profitability, merchants are relying on analytic data such as conversion rates, but they also plan to increase targeted e-mail (79%), refine onsite search (72%) and enhance merchandising (70%). Other popular improvement tactics for 2010 include usability or A/B testing (58%), videos (48%) and social networking efforts (58%).

Merchants also mentioned social networking efforts considerably more than last year (44%). More respondents also added blogs, customer reviews and community features such as forums and share-by-social to their sites as well. Facebook fan pages ranked as the top social tool for merchants, though 80% also will employ Twitter in the next year. In addition, nearly 40% plan to use mobile to improve e-commerce performance, compared to 19% last year.

The Chicago-based consultancy surveyed 152 merchants in the first quarter of 2010.

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"E-commerce giant Amazon.com reported a 68% year-over-year increase in first quarter net income to $299 million from $177 million.

The company's US and Canadian Web sites combined for a 47% increase in quarter-over-quarter sales. International sales were up 45% from the last quarter.

Among the two product classifications broken out in Amazon's earnings report, “media” sales increased 22% quarter-over-quarter, to $1.6 billion from $1.3 billion, while “electronics and other general merchandise” sales were up 73%, to $2 billion from $1.2 billion."

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To find out how we can increase your E-commerce web site sales online call me today!

Douglas A. Marks
Website Marketing Consultant
Website - www.websiteforge.com
Business - (888) 558.2446  Ext. 208
Fax - (517) 338-5064

Business Hours: (Monday - Friday) 10 AM - 6 PM Eastern Standard Time