The incoming Biden administration must address trade relations with China, and that could impact online retailers, say industry executives. They are also closely watching whether the new president and Democrat-controlled Congress will seek to break up tech giants or force them to take greater responsibility for what’s on their sites, which could include marketplaces like Amazon and eBay.

With the inauguration of Joe Biden as president, the Democratic Party now controls the White House and both houses of Congress for the first time in several years. Ecommerce executives are especially watching how the new administration and its congressional allies will regulate technology giants and address trade with China, as both could impact online retailers directly.

Other issues of concern include the handling of the coronavirus pandemic, minimum wage legislation and consumer protection laws.

I wouldn’t be surprised to see Congress ‘get tough’ with the social media platforms.
Brad Wolansky, CEO
Dover Saddlery

One question likely to be on the agenda is a key provision of federal law that has protected online social networks and marketplaces, Section 230 of the 1996 Communications Decency Act, which says that website operators are not responsible for content posted on their sites by others.

“The whole Section 230 social media thing will get attention, and I wouldn’t be surprised to see Congress ‘get tough’ with the social media platforms,” says Brad Wolansky, CEO of online retailer Dover Saddlery,  No. 630 in in the 2020 Digital Commerce 360 Top 1000. “Not sure where Biden stands on all of that, and it’s a Congress-first type of thing, which he ultimately would need to sign.  But I do expect changes there.”

While Wolansky says social media has not had the impact on ecommerce some predicted, “most activities online are interrelated in some way, and if customer speech is inhibited or changed via social, that may inhibit shopping in some unforeseen way.”

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There is considerable sentiment on both the left and right to rein in tech giants like Amazon, Google and Facebook, says Stuart Rose, a partner at Mirus Capital Advisers Inc., who has advised catalog and online retailers on acquisitions and fundraising for years. “They each may face antitrust actions due to their size and dominance of their individual markets,” Rose says.

The Democrats likely want to take some action regarding tech companies, says Robin Gaster, president of technology consulting firm Incumetrics Inc. and author of the forthcoming book “Behemoth: Amazon Rising.” But, he adds, “I imagine that Facebook and Twitter are highest on the radar, followed by Google. Amazon is a much tougher target and I think strategically less attractive.”

Sucharita Mulpuru-Kodali, vice president and principal analyst, Forrester Research

Sucharita Kodali, vice president and principal analyst, Forrester Research

Forrester Research analyst Sucharita Kodali says weakening the Section 230 protections could force marketplaces like those operated by Amazon.com Inc. and eBay Inc. to ensure merchants don’t sell dangerous goods. She says current state laws vary on who is responsible and court rulings have been inconsistent. If retailers have to more carefully assess the safety of the goods they sell, that could increase their costs, Mulpuru says.

She adds that retailer costs could go up if the Democrats push U.S. companies to diversify away from manufacturing in China.

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International trade is a major challenge for Biden

Several executives expressed hope that the Biden administration would improve trade relations with China and other countries, or at least provide more certainty about trade than existed during the tenure of President Donald Trump.

“The outgoing administration created great uncertainty for many businesses due to ever-changing trade and tariff disputes with Mexico, Canada, Europe and, of course, China,” says Adam Greenberg, owner and president of NorthShore Care Supply, an online retailer of adult diapers and other home healthcare products that is No. 790 in the Top 1000.

Adam Greenberg, owner and president of NorthShore Care Supply

Adam Greenberg, owner and president of NorthShore Care Supply

“This made it extremely difficult to make decisions about where and how to source goods and limited ecommerce companies from building long-term relationships with valued suppliers,” Greenberg says. “We greatly hope that the new administration fosters a more stable trade policy, including ending the China tariffs that act as a tax on American consumers, so we can continue to invest in product innovation with our manufacturing partners around the world.”

Chip Overstreet, CEO of e-retailer Spiceology, says he also will be closely following the new administration’s trade policies.

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“We’re impacted by regulations around the importing of spices from other countries, but we’d like to start selling our products into several overseas markets in 2021,” he says. “The U.S. economy has always benefited when U.S. companies are able to trade freely in international markets.”

Heather Nigro, CEO and founder of ecommerce consulting firm Moxxii, believes Biden will bring welcome stability on several fronts.

“Politics can be one of the most unpredictable elements in ecommerce and business, affecting the economy, regulation, manufacturing and trade,” Nigro says. “With Biden now in office, I feel global stability will re-emerge under his presidency.”

She says she also will “be closely following relations with China, in particular customs and manufacturing. Tariff rates have risen steadily over the years, which has affected everything from fashion, to housewares and electronic goods.”

Progress against the pandemic and ecommerce

Several executives noted the importance of the Biden administration’s strategy for the COVID-19 pandemic.

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“The biggest trends in retail and ecommerce are being shaped by the coronavirus,” says Evan Mendelsohn, founder of online retailer Tipsy Elves, No. 860 in the Top 1000. “COVID is dictating how and where people shop and what types of products they buy. It will be very telling to see how federal oversight of vaccination efforts play out in the coming months.”

He also notes that, “Stimulus checks and COVID relief will also play a role in consumer spending online, so we’ll be monitoring new relief packages and their timing.”

Jim Tuchler, president, Techny Advisors LLC, parent company of GiftsForYouNow.com

Jim Tuchler, president, Techny Advisors LLC, parent company of GiftsForYouNow.com

The pandemic has also disrupted manufacturing in Asia and caused shipping bottlenecks, and Jim Tuchler, president of Techny Advisers LLC, parent company of GiftsForYouNow.com, says “shipping costs and supply chains” are his main concern. “No close second,” he adds.

If the government succeeds, it could slow down the past year’s rapid growth in online shopping, says Eric Roth, managing director, consumer at private equity firm MidOcean Partners.

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“Mass vaccination of the U.S. population will unleash pent-up demand for travel and leisure and in-store shopping, which means the incredible ecommerce growth trends of 2020 should moderate as share of wallet shifts a bit,” Roth says. “That said, the floor for ecommerce penetration has been pulled forward several years.” A Digital Commerce 360 analysis suggests online sales accounted for 25.7% of U.S. retail sales in November-December 2020, up from 19.2% during the previous year’s holiday period.

Roth says Biden and his congressional allies may strengthen consumer protections and increase the federal minimum wage, “which could make life incrementally more difficult for smaller ecommerce players, given compliance requirements and increased payroll. That said, and likely more importantly, antitrust action against big tech is likely to increase and that would swing the pendulum, perhaps in a big way, back in favor of smaller players having a more even playing field on which to compete.”

Rose agrees that a $15 minimum wage, which Biden has proposed, would increase online retailers’ costs in operating their contact and fulfillment centers.

While a change in the political party in power often causes companies to pause technology investments as they wait to see how the new administration governs, that’s not likely to be the case this year for ecommerce tech spending, says Scott Webb, CEO of ecommerce marketing and design consulting firm Avionos.

“President Biden is not walking into a typical economy,” Webb says. “We actually expect to see investments in ecommerce continue to grow significantly this year and potentially even outpace 2020 levels as those firms that paused last year during pandemic uncertainty race to catch up with competitors who leaned into the macro changes in consumer and business purchasing and already have mature digital offerings.”

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Vaccination rollouts are crucial

Even though ending the pandemic might slow the growth in online shopping, online retail executives expressed hope that the new administration will soon bring the coronavirus under control.

“As an ecommerce company with a mission toward improving the quality of lives of people with disabilities, including seniors, it has been a devastating year for our customers and their families who have suffered great loss of life and continue to be haunted by fear due to their vulnerabilities,” says Greenberg of NorthShore Care Supply. “We continue to pray for a quick and successful rollout of vaccines to the entire population.”

Joel Schlessinger, a dermatologist who is president of online skin care products retailer LovelySkin

Joel Schlessinger, president, LovelySkin

A similar view came from Joel Schlessinger, a dermatologist who is president of online skin care products retailer LovelySkin, No. 646.

“Clearly, while the previous administration did a great job in getting the vaccine approved, their focus on a decentralized process for the ‘last inch’ of the vaccinations (the actual injection) has led to a disastrous rollout,” Schlessinger says. “Our medical dermatology practice employees are still not vaccinated at this time, and it is likely going to be months before our warehouse and other support workers get the vaccine unless strong steps are taken.

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Schlessinger would like to see Biden deploy the National Guard to speed up the vaccination process. “While this isn’t exactly ecommerce-related from an initial examination,” he says, “it is truly important as employee health is imperative in any operation.”

The U.S. Postal Service could face changes

Other lower-profile issues could also impact online retailers.

Rose notes that an increase in capital gains taxes, which Democrats favor, would hit entrepreneurs, including the owners of e-retail businesses, when they sell their businesses. And if income taxes go up on high earners that will cut into the profits that successful ecommerce owners keep.

He also believes it will be necessary for the government to address ongoing losses in the U.S. Postal Service, which delivers parcels for many web merchants. “Correcting it, or right-sizing the post office will be necessary over the next several years,” Rose says.

Whatever the impact on ecommerce, Rose notes that those working in the online retail industry “are citizens first” and those impacted by all the broader issues facing society, including healthcare, taxes, infrastructure and climate change.

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“Whether you voted for him or not, let’s hope for Joe Biden’s success,” Rose says. “Because if he succeeds, so will the rest of America.”

 

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