The New Politics of the New Economy
Over the years, retailers have become all too familiar with the steady stream of legislative and regulatory challenges facing their businesses. Whether it's living wage laws, paid sick leave, zoning restrictions or even the zeal with which the National Labor Relations Board (NLRB) is trying to assist the unions in organizing the industry, small business operators have banded together either in ad-hoc coalitions or through trade association leadership to successfully manage those issues.
What is less familiar, however, is managing the growing trends within the retail community that will have a profound impact on how -- or even if -- many retailers will be doing business in the future. Some issues are pitting businesses and industries against not only their traditional political opponents, but increasingly against each other.
Take technology, for example. Technological advances have changed nearly everything within the walls of a small business. From labor savings to inventory control to payment options for consumers, advancements in technology have changed the way operators run their businesses. But ironically, this has created radically different marketplaces and ways of doing business that are making it significantly harder for many retailers to compete.
The end result is that instead of their traditional efforts at getting government out of their way, businesses are increasingly asking government to mitigate disputes among themselves and lay out the ground rules for new and emerging marketplaces.
Look no further than debit and credit cards. The traditional way that consumers purchase goods and services continues to change and the speed of that change is steadily increasing. Technology created the ability for consumers to purchase products in an entirely different way and sparked the now epic feud between Main Street and Wall Street over the costs and benefits of that technology and who should ultimately pay for it.
Not a traditional fight, mind you, between the business community and Big Labor -- but a fight among businesses. After a costly and lengthy siege, Congress reluctantly laid down some parameters for how retailers and card issuers conduct their relationship.
In another example, technology is currently exposing how hopelessly antiquated our tax system has become in many respects. Who could have predicted 10 years ago that the biggest threat to Wal-Mart's future growth was not Andy Stern and his labor union cronies, but another business model -- online-only retailing -- whose major competitive advantage comes not in quality or service, but on the ability of both provider and consumer to renege on their tax responsibilities. Why shop at a Best Buy when you have the opportunity to save real money buying the same television on Amazon.com?
Of course, we know the savings are nothing more than unpaid tax. Recognizing that inequity, along with the fact that sales taxes are such a significant component of total tax revenue, Congress is reluctantly being dragged into the fight and has to decide whether or not to acknowledge that the current tax code is essentially picking winners and losers in the marketplace of the New Economy. This battle actually went to the Supreme Court 20 years ago with the Quill decision, and the court said Congress would need to act in order to clear up the confusion.
It took way too long for Congress to eventually do the right thing on debit card fees and the debate over sales tax collection on Internet sales promises to drag on much longer. In fact, the hurdle may be higher since unfortunately, many in Congress equate tax code modernization to tax increases and are reluctant to gamble with the political risk that entails. Even with state houses across the country drowning in red ink, amazingly many states are cutting deals with Amazon and other retailers to delay fulfilling their sales tax collection obligations until some nebulous date in the future, as they await federal action on how best to account for and collect taxes rightfully generated by Internet sales. My guess is that it's going to be a pretty long wait.
Perhaps another reason that some states are reluctant to punish online-only retailers is because they are increasingly becoming one. As noted in this space before, states are getting more entrepreneurial and entering into lines of business that directly compete with small business owners. Interstate rest area commercialization is one of those areas, but another particularly alarming one is online lottery. The perfect example of leveraging technology to create new marketplaces and punish existing ones.
You don't need an MBA from Harvard to understand the impact that this would have on convenience store sales. You might need one, however, to fix it. It's hard to ask a state to mitigate a business dispute that happens to be with, well, that same state.
Technology is changing the nature of our relationship with government. Going forward, all traditional small business owners are going to grapple with these and other issues that come with the New Economy, and it is going to put a lot of pressure on our traditional mechanisms of issue management and political engagement to sort it all out. Certainly the states will be grappling with it as well. I just wonder whether they will give themselves the same sweetheart deals on sales tax collection that they are so eager to give Amazon!
Joe Kefauver is managing partner of Parquet Public Affairs, a national issue management, communications, government relations and reputation assurance firm that specializes in service sector industries. Parquet's clients include Fortune 500 corporations, trade associations, regional businesses and non-profit organizations. For more information, go to www.ParquetPA.com.
Editor's Note: The opinions expressed in this column are the author's, and do not necessarily reflect the views of Convenience Store News.