Marketplace Sales Tax, AmazonFresh Expansion, 2020 Home Improvement GrowthBy Cleveland Admin
During 3Q19, 14 states began enforcing changes to sales taxes, which require small out of state sellers with no local nexus to charge sales tax, collected by marketplaces. This caused a number of eTailers to see headwinds to Gross Merchandise Value (GMV) growth, and this is expected to worsen in 4Q19 with 11 more states enforcing these changes, including Texas and California. In particular eBay noted that taxation issues were likely to slow GMV growth by 200bps in 2020, and Etsy expects it to reduce GMV by 100bps in 2019. This has proven to be a key challenge for many manufacturers looking to use a hybrid model on Amazon’s 3P marketplace, forcing many to look to outside service providers specializing in tax collection.
AmazonFresh Continues to Expand, Adding Cincinnati, Charlotte, Richmond and Virginia Beach
News out this week that Amazon has expanded its UltraFast Fresh delivery service (1-2 hour delivery) to four new markets: Cincinnati, Charlotte, Richmond, and Virginia Beach. This brings the total number of AmazonFresh markets to 23 nationwide, according to Amazon. In November, Amazon also announced that it was removing the additional subscription fee for Amazon Prime members ($14.99/month on top of Prime membership), allowing free delivery for orders of $35 or more in an effort to gain share in the competitive online grocery category. Feedback on Amazon’s new UltraFast Fresh offering has been generally positive, as Amazon hopes that free two-hour delivery will help it to make headway in grocery in 2020. In our research, many manufacturers have been disappointed in Fresh performance over the last several years, but are growing increasingly optimistic with the removal of the monthly fee and the expansion of its 1-2 hour delivery capability.
Amazon Expected to Grow Fastest in Home Improvement in 2020
Feedback from our Home Improvement Summit last week indicates manufacturers are expecting Amazon to be the fastest growing platform in eCommerce in 2020, particularly with the DIY consumer. Feedback from our partners at Stackline has indicated Amazon has been the fastest growing platform within the Home Improvement category through November of this year, with Lowe’s in particular seeing dramatically slower digital growth as it focuses on its brick and mortar business and upgrades the back end of its online platform.