December 13, 2018

All These Little Taxes ... And Big Taxes Too

For twenty years, Amazon capably made a ton of profit ... they just didn't pass it on to shareholders ... instead, they reinvested the money in the business (thereby avoiding state and local taxes). You do that for two decades non-stop and you might just end up with a competitive advantage ... meanwhile the rest of us do our civic duty and it makes it harder to grow fast over time.

Amazon gets a lot of data ... you give them a ton of data for free. Think about it. You sell on their platform, and they make money off of your transactions and they learn what works and what doesn't work with your product assortment. You get some money. Seems like the fairness of the transaction is out of balance, #amirite? In other words, there's a data tax ... you are paying the data tax to Amazon, and they reinvest the knowledge elsewhere in their business.

Now let's get back to typical brands. Think about all of the taxes you are paying.
  • Every month you pay a paper tax. Yup. You pay paper and postage and printing ... those dollars go out the door and they don't come back. I know, you'll say those dollars generate sales and you can't get the sales without the paper. Nonsense. I was part of a team that shut down a catalog division at Nordstrom and without $36,000,000 in paper expense our online sales GREW and retail sales GREW and profit INCREASED. And we had mail/holdout tests to prove that wouldn't happen. It happened.
  • If you prospect with paper, you pay a data tax. You give your co-op data FOR FREE. Why do you do this? You give them data FOR FREE and then they sell you data in kind for a fee. Meanwhile, the co-op pumps your data into their ecosystem and they make money ... you are ultimately paying a tax.
  • If you are a mall-based retail brand, you are paying an 8% +/- tax to have a physical presence. That money goes out the door each month and doesn't come back. I know, I know, you'll say that without the physical presence you won't sell anything. And yet, there are experiential brands who now have physical stores where they pay the tax and don't even bother to sell anything, so that's another whole step removed from selling. In either case, the brand is paying a tax.
  • E-commerce brands pay taxes too ... Google and Facebook are modern tax collectors. They have the audience (i.e. everybody), and they collect a tax for the right to communicate to a customer. Retargeters aren't much different ... collecting taxes all over the internet.
The entire omnichannel thesis is designed to get you (the brand) to pay myriad third parties taxes to theoretically get you access to customers.

Even attribution algorithms and databases and the machine learning magic you're being taught ... they're all taxes.

The job of a modern "brand" is to pay as little in taxes (defined as fees paid to third parties, especially fees paid to gain temporary access to customers and prospects) as possible. This needs to be a significant part of your 2019 goals and objectives.

P.S.: Watch this video (click here) and tell me you don't want to buy this thing? You sell something that deserves this style of attention, right?

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