A new president and federal administration inevitably brings change for businesses in the United States and for foreign firms that sell to U.S. consumers. With the inauguration of Donald Trump as president on Friday morning, e-commerce could change, though no one’s quite sure how.
Because Trump is a Republican, it could mean more business-friendly policies that allow online retailers to grow, says Rachel Honoway, president of the board of directors at the Performance Marketing Association, a trade group that represents affiliate marketers.
“Republican politicians tend to be more business-friendly, developing fewer and sometimes even reducing regulations and taxes for businesses,” she says. “Based on Mr. Trump’s campaign promises, we believe we’ll see him follow in that tradition. This can create positive new opportunities for online retailers to capitalize on. Lower taxes, for example, gives e-commerce advertisers and publishers more money to invest back into their businesses.”
But some online retailers say they’re not so sure that Trump will look out for their best interests.
“I think the question will be whether any of the policies favoring businesses will be done in such a way as to prevent the all-too-often effects of unintended consequences,” says Paul Shrater, co-founder and chief operating officer of personal care products e-retailer Minimus LLC, No. 934 in the 2016 Internet Retailer 2016 Top 1000. Minimus is based in Newbury Park, Calif. “Trump, coming from the business world, has talked about favoring businesses in various policy areas. However, in the state of California there are many more stringent policies for businesses that supersede federal policies. Thus, if Trump is more favorable toward businesses on a federal level, it could potentially make California less competitive on a national scale (and e-commerce businesses like ours operate on a national scale)—unless the policies are done in such a way that put California on a level playing field with the rest of the country.”
In terms of policies, Honoway says she’s keeping an eye on what, if anything, Trump might do about a national online sales tax. Right now, there is no such tax in place, however a number of states are moving to implement their own online sales tax rules. Last month, the U.S. Supreme Court declined to hear an appeal from the Data & Marketing Association (formerly the Direct Marketing Association) seeking to overturn a Colorado law that would require retailers to turn over to the state the names and online purchase information of state residents who spend more than $500 annually with them.
A spokeswoman for the Colorado Department of Revenue said via email the department is still evaluating the Supreme Court’s decision and determining what its next steps are going to be in terms of actually implementing the law. The DMA could not be reached for comment about the Trump administration’s potential impact on e-retailers.
Online sales tax is an issue that has been brewing at the state level for years, and some states have tried to use affiliate marketers’ locations to create nexus for an out-of-state e-retailer. To have nexus in a state means a retailer has a physical presence in the state. Having a physical presence in the state would mean a retailer has to collect sales tax in that state.
“Much of that legislation has stalled or fizzled out in debates over the last two years as we waited for the new president and Congress to be elected,” Honoway says. “Now that we know who is filling those seats, we see states taking the issue up again and attempting to force the federal government to intervene. That could mean that the issue reaches the Supreme Court, which has an open seat for which our new president will soon appoint a nominee.”
“His administration is looking at forcing all e-commerce companies to pay state sales taxes based on where the delivery is not where this e-commerce business is based,” says Phil Rooke, CEO of online custom apparel retailer Spreadshirt Inc., referring to legislation proposed by House Judiciary Chairman Robert Goodlatte, R-Va. “Personally if this is done well it could be a good thing but if done in a popularity way it will cause a lot of damage.”
Another area which may affect e-retailers, is if Trump follows through on his stated goal to impose a 45% tariff on Chinese imports.
“In the short term, the worst-case scenario is a 45% tariff on specific goods from specific countries,” according to a blog post from Scottsdale, Ariz.-based law firm Kelly/Warner about the potential impact of Trump’s presidency on e-commerce. Kelly/Warner specializes in Internet law, e-commerce and Internet business law. “Will Trump’s administration likely brandish its trade privileges during negotiations? Sure. They’re bargaining chips. In a way, he’d be a fool not to. But at some point, restraint will probably prevail, because neither the Executive or Legislative bodies want to be responsible for hurling the country into a Great Recession on account of an ill-considered, quickly implemented tariff hike,” the blog states.
Matt Kubancik, founder and CEO of Street Moda, says he hopes Trump’s policies bring more good jobs back to the United States because that will give consumers more money to spend online and in stores. StreetModa.com sells overstock footwear and apparel and Kubancik worries that higher tariffs on those goods, most of which are manufactured outside the United States, would raise the price he pays for them.
At the same time, however, such policies may hinder some foreign sellers from marketing to U.S. online consumers, especially sellers through online marketplaces operated by Amazon.com Inc. and eBay Inc. These online marketplaces permit non-U.S. merchants to sell directly to U.S. consumers, often at prices U.S. sellers have a tough time competing with. Kubancik says government subsidies help manufacturers in Hong Kong and China sell on U.S. online marketplaces and ship goods for free. “Just looking at e-commerce, all the dumping that’s going on, it’s very detrimental to U.S. sellers,” he says. “If you allow a Chinese seller to send something air mail and get a rebate from the government, that should not be allowed because it’s an extreme competitive advantage over U.S. sellers.”
One Amazon seller of mostly Chinese goods, CEO Jason Ji of New York-based Axon US Corp., says he doesn’t think Trump will have a big impact on Chinese e-retailers selling in the U.S. “Instead, his policies may do more good than harm,” Ji says.
“First, Trump is a practical businessman, though his speeches often surprise everyone,” Ji says. “I believe his policies will improve the economy and allow U.S. people to have a better living.” That, he adds, will provide sales opportunities for all kinds of retailers.
As for imposing tariffs on goods imported from China, Ji says that would raise prices for all kinds of products sold by many retailers. “Consumers will have to pay a higher price and it may give a chance for e-commerce sellers to stand out” as their costs are lower than those of retailers that operate stores, Ji says.
Another Chinese e-retailer says he also does not believe the Trump administration will have a big impact on this business. “He said he want to create more job opportunity,” says Alex Zhou, founder and CEO of Yamibuy.com, an online seller of cosmetics and nutritional supplements. “We are a e-retailer selling Asian brand products and we have hired 200 workers in the U.S. Everyone knows trade is good for economics. If the new president raises tariffs and hurts our business, we won’t be able to hire more people in the future.”
For custom apparel retailer Spreadshirt, No. 442 in the 2016 Top 500, Trump’s election presents a mixed bag.
“Love Donald Trump or hate him, he sells a lot of t-shirts,” Rooke says. “Our business is allowing people to express the things they are passionate about and the next 4 years are going to be passionate. So I do not think he will harm our business from that side. But we are also an exporter from the U.S. and isolationism and the threat to NAFTA puts in danger our U.S. exports.”
Alibaba Group Holding Ltd., for one, say it is looking to create up to a million jobs in the United States, although the company was vague on how it would do so. Alibaba Chairman Jack Ma met with Trump earlier this month to discuss how the two could work together so that small to medium-sized businesses in the United States can more easily sell goods to Chinese online consumers.
“Jack and I are going to do some great things together,” Trump said after the pair met.
Trump has already taken a run at Amazon.
In an interview with Fox News last year, Trump accused Amazon founder Jeff Bezos of “using The Washington Post for power so that the politicians in Washington don’t tax Amazon like they should be taxed.” Bezos bought the Washington Post for $250 million in August 2013. Amazon, No. 1 in the Internet Retailer 2016 Top 500 Guide, could not be reached for comment.
Trump’s use of social media and its potential impact on businesses also warrants attention from e-retailers.
Trump is an avid Twitter user who has used his account to hit back at media outlets and other companies when he sees fit. “I think it’s worth it for retailers to keep an eye on the topics that Mr. Trump is tweeting about, just as they are watching other news and opinions that affect their industry,” Honoway says. “That being said, we have to remember that a tweet is tweet, a reflection of someone’s opinion at a given time and that Mr. Trump often (as we all do) changes his mind.”
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