Holiday retail sales are increasing. Consumer confidence is climbing. Yet all is not nirvana in the rocky world of the retail economy.
According to Forbes, Cyber Monday 2016 was the biggest day in the history of U.S. e-commerce. Sales surpassed initial expectations by hitting a record $3.9 billion during this online-focused day of the holiday shopping season. Such extraordinary growth came at the expense of local stores (CNBC). ShopperTrak noted that consumer visits to brick-and-mortar locations fell 1 percent on Thanksgiving weekend and Black Friday, showing that consumers are allocating more of their budgets toward the web. The National Retail Federation’s consumer survey indicated that, on Black Friday weekend, 3 million fewer people visited local stores, while 5.5 million more placed holiday orders online.
As online record breaking sales continued through New Year’s, stalwarts of the brick-and-mortar retail industry – Macy’s, Kohl’s and J.C. Penney – reported significant sales declines. Macy’s is scheduled to close 68 stores and slash 10,000 jobs due to poor earnings forecasts. The closings include stores which have survived for decades in Virginia, such as the Landmark Macy’s in Alexandria, Virginia, which opened its doors in 1965 and employs 119 local folks; and Lynchburg’s River Ridge Macy’s, which has survived for 47 years and has 80 employees. These Virginia closings follow on the heels of last year’s shutting down of three Macy’s in Hampton Roads: Military Circle in Norfolk, Chesapeake Square in Chesapeake and Peninsula Town Center in Hampton, resulting in 273 lay-offs; and three stores in Richmond, two at Regency Square and one at Virginia Center Commons, totaling 216 job losses. While Amazon is touting an addition of 100,000 jobs to the national job market, employment at America’s department stores has plunged by 250,000 jobs since 2012 (Marketwatch, January 20, 2017).
Of course, these lay-offs add to the unemployment rolls, which are just now showing positive declines following a dire recession. Moreover, what does this dismal outlook for brick- and- mortar stores mean to localities and state governments which count on sales and use taxes, BPOL taxes and payroll taxes? It means services which citizens depend on may have to eventually be rescheduled or delayed or cut back unless city officials can scramble budgets to fill the gaps.
During the 2016 holidays, Governor Terry McAuliffe proposed that Virginia become one of the states that are collecting their fair share of online tax. In his budget address to the Virginia General Assembly, he projected that this proposal will generate new state and local revenue of $21 million. The legislation will require out-of-state merchants using warehouses or fulfillment centers located in Virginia to register as dealers for the collection of sales tax on their sales into Virginia.
Moreover, Senator Emmett Hanger from Staunton, Republican co-chair of the Senate Finance Committee, has submitted SB 962; and Delegate Vivian Watts from Northern Virginia has filed HB 2058. Both bills mirror the governor’s proposal and offer online sales tax as one of the few bi-partisan efforts at the General Assembly. In 2012, Senator Frank Wagner from Virginia Beach and Senator Hanger were co-patrons of the landmark legislation, advocated by the Virginia Retail Federation and others, to require Amazon to collect sales and use tax in Virginia. All three legislators have proven to be tireless champions in the fight for e-fairness at the state level.
This advocacy for e-fairness is eminently conservative. It seeks to remove government interference in the marketplace, where currently many online-only retailers enjoy what is in effect a government price advantage. By exploiting an outdated legal loophole, online-only retailers have for decades avoided collecting sales tax. This sales tax loophole grows more threatening with each holiday season. In today’s unfair online economy, local retail entrepreneurs and their big-box neighbors are facing a survival crisis that threatens to snuff out their businesses.
Struggling Virginia retailers need the Virginia General Assembly to take action. From Hampton Roads to Richmond, NoVa to the Shenandoah Valley, the Blue Ridge to Southside, local merchants are fighting valiantly for their businesses and communities. We call on Virginia’s legislators to support Senator Hanger, Delegate Watts and Governor McAuliffe in their efforts to bring fair retail competition to the Virginia marketplace; strengthen Virginia’s budget; and ensure survival of retail stores that support localities’ bottom lines, jobs and economic prosperity.
Raymond J. Mattes, Jr.
Nancy C. Thomas
About Virginia Retail Federation
The Virginia Retail Federation’s mission is to proactively represent and support the legislative interests of Virginia retailers at the Federal, State and local levels. To learn more about VRF, visit www.virginiaretailfederation.com, follow us on twitter @VARetailFed, or on Facebook.