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New Movers Are the Key to Attracting (and Keeping) Loyal Customers

Guest Blog By Michael Plummer

In today’s world, local businesses have more marketing tools at their fingertips than ever before. The explosion of online marketing concepts has made a big impact on the way consumers think about and react to campaigns. In fact, the emergence of social media gives consumers the power to influence and shape the brands they know. This has fundamentally changed the game because marketing is now as much, if not more, about controlling the message than shaping it.

However, there are still “push” marketing tools that can pay big dividends for local businesses, the most powerful of which is new mover direct marketing. Think about it – countless people move in and out of your hometown each year. Naturally, this means small businesses lose a percentage of their loyal customer base each year no matter how well they run their businesses – a potentially crippling problem for a small retail business.

The best way to replace those loyal customers is to reach and influence new movers with a targeted direct marketing program. Companies like Our Town America (www.ourtownamerica.com) specialize in those types of programs and are helping retail businesses around the country market to impressionable new movers who have yet to establish brand loyalties.

OK, yes, I hear you. “Why not daily deal sites?” “Why not direct mail companies that reach a larger group more often?” Here’s why:

  • Daily Deal sites are certainly effective at getting people to come to the store, but they rarely spark long-term relationships. Many of the customers these deals attract are serial couponers who always looking for the bigger, better deal. They’re not buying your products or services – they’re buying the deal.
  • Creating social media profiles and engaging with customers online is a great way to maintain and build customer relationships, but it takes a long time to make a sustainable impact through those tools. Additionally, executing social media campaigns successfully is a full-time job and a daily grind. It’s not easy and requires a professional to do it well, which can be expensive.
  • Broader direct marketing campaigns are less effective than new-mover-specific campaigns as well, because most people who receive the package aren’t new to town. They’ve established their brand preferences and are comfortable with the local brands they already use.

Conversely, new-mover programs – like the welcoming packages delivered by Our Town America – are affordable, targeted and personalized. They allow local businesses to welcome new residents to town right when they’re trying to figure out who to turn to in their new community when they need pizza, groceries, etc.

Timing is everything, even in today’s world. The local retailers who do the best job of reaching new movers at the right time will be the ones who best compensate for the customers they lose each year. Why, you ask? Because, even in today’s world dominated by cell phones and the Internet, people still love to feel welcomed, loved and appreciated. No marketing tool is better suited to evoke those emotions than a warm, hand-delivered package.

Michael Plummer is CEO of Our Town America. For more information, visit www.ourtownamerica.com.

Retail Merchandiser magazine is pleased to present the points of view of many different industry stakeholders. If you would like to contribute your own guest blog to our site, please contact the editor at russ.gager@phoenixmediacorp.com.

 

ZIP Code Collection: Retailers Beware

Guest Blog by Thomas Cohn

Last year, the California Supreme Court held that collecting a customer’s ZIP code during a credit card transaction violates the state’s Song-Beverly Credit Card Act (“Song-Beverly”). Thanks to this case (Pineda v. Williams-Sonoma Stores Inc.), California retailers have effectively been prohibited from requesting and recording customers’ ZIP codes during credit card transactions. Meanwhile, more than 100 consumer class-action lawsuits have been filed against California retailers.

In Pineda, the plaintiff alleged that Williams-Sonoma requested her ZIP code as part of a store credit card purchase and recorded it for marketing purposes. According to the act, a business cannot ask for personal identification information (PII) as a condition for a credit card transaction. The appellate court ruled for Williams-Sonoma, determining that ZIP codes are group identifiers rather than PII.

The California Supreme Court reversed, contending that a consumer’s ZIP code is protected under the act because it is definitively concerning the cardholder. Furthermore, the act was passed to prevent misuse of consumer information and later amended to “prevent retailers from ‘requesting’ personal identification information and then matching it with the consumer’s credit card number.”

Some of the recent class actions have considered questions left unanswered by Pineda, such as whether the act is violated by requesting a ZIP code if a business credit card is used (no), or when a personal credit card is used for a business transaction (yes). Most recently, a California federal court in May granted plaintiffs’ motion for class certification in an action against IKEA. This class action suit (Yeoman and Medellin v. Ikea U.S. West Inc.) alleges that IKEA violated Song-Beverly by requesting that cardholders provide their ZIP codes during credit card transactions, and then recording that information in an electronic database. The court found that the class definition was not overbroad and that IKEA’s practice of requesting ZIP codes showed common questions of law best resolved through a class action.

Song-Beverly is different from laws in other states because it forbids requesting, not just requiring, PII. One such law in New Jersey was tested last year in two cases. In Imbert v. Harmon Stores Inc., a Superior Court judge denied Harmon Stores’ motion to dismiss a ZIP code-collection class action. In addition to citing a statute that prohibits retailers from requiring PII, Imbert asserted that Harmon had violated a second statute that prohibits sellers from violating any “clearly established right” of a consumer.

At the same time, a federal judge dismissed a similar class action, Feder v. Williams-Sonoma Stores Inc., brought under the same two New Jersey laws. The court held that the plaintiff did not identify any provision of a “written consumer contract” violating state or federal law that would establish a claim under the second statute above. A ZIP code, the court argued, is not a contract provision violating a person’s rights.

In construing a similar state statute, a Massachusetts federal court recently came to much the same conclusion as California did in Pineda, but then dismissed the suit for lack of alleged injury. The court viewed the Massachusetts statute, which prohibits anyone from recording or requiring a credit card holder to write PII on the transaction form, as being primarily concerned with fraud-prevention and security, not privacy. But it still found that the retailer’s entry of the customer’s ZIP code (with name and credit card number) into an electronic terminal technically violated the Massachusetts statute, reasoning that a ZIP code was PII because it could be combined with other data to identify a particular person. The court dismissed the case (Tyler v. Michaels Stores Inc.) because the plaintiff failed to allege a cognizable injury like identity theft and, at most, complained of a deluge of unwanted mail.

Retailers trying to make sense of the ZIP code issue should note each case’s practical aspects. In California, merely requesting a ZIP code will violate the law, while in New Jersey and some other states, the law is only violated when the code is required to complete the transaction. In the Massachusetts case, the violation existed because the credit card information, name and ZIP code were combined in a single electronic file.

Retailers should separate such information and finish the transaction before asking for any personal information. Given regulators’ heightened interest in protecting consumers’ PII, merchants need to be fully aware of all relevant state laws and the legislative intent behind them.

Thomas Cohn is a partner in the New York City office of national law firm LeClairRyan and a former Federal Trade Commission regional director. He is a member of the firm’s retail industry team and can be contacted at Thomas.Cohn@leclairryan.com.

Retail Merchandiser magazine is pleased to present the points of view of many different industry stakeholders. If you would like to contribute your own guest blog to our site, please contact the editor at russ.gager@phoenixmediacorp.com.

 

The Internet and Sales Tax: What You Need to Know

Guest Blog by David Seiden

Why do some online retailers collect sales tax and others don’t? Why do some online retailers collect sales tax in certain states and not in others? Why are some states requiring online retailers to collect sales tax despite not having a physical presence in the state? Over the last 10 years as online shopping has gone mainstream, the issue of when an online retailer is required to collect sales tax has grown increasingly murky.

In the “good old days,” sales tax collection on retail sales was straightforward. A consumer would go into his or her local store, buy merchandise and pay sales tax at the register. Today, many local retail stores have either gone out of business or been replaced by large national retailers. Consumers spend more time “shopping” on their computer than they do in stores. The result is a significant drain on state sales tax revenue, which – coupled with the downturn in the overall economy – has resulted in significant budget deficits in many states.

Most of these states realize that the only way to curb the drain on sales tax revenue is to aggressively enforce their existing tax laws and adopt new laws that would require online retailers to collect sales taxes regardless of whether the company has a physical presence in the state or not.

The central issue that transcends both the enforcement of existing sales tax laws and the adoption of new tax laws involves the concept of “nexus.” Nexus is typically defined as a seller’s minimum level of presence in a state before such state can require the seller to collect and remit sales tax. While the term “nexus” is not overly complicated to understand, how states apply the term has been vigorously debated in the courts and in Congress for many years.

In 1992, the U.S. Supreme Court (the “court”) ruled that before a state can require a seller to collect sales tax, the seller must have more than a “de minimis physical presence” in the state. Despite the court’s 1992 ruling, numerous state courts have held that a business with no physical presence in the state may, under certain circumstances, be liable for collecting sales tax on merchandise shipped into that state.

For example, in 2008 New York state adopted the so-called “Amazon tax,” which expanded the definition of what constitutes a vendor in New York. This new law, named after Internet retail giant Amazon.com, permits New York State to require certain out-of-state Internet retailers, with no physical presence in New York, to collect sales tax on shipments made into the state.

Since 2008, more than a dozen other states have adopted similar Amazon tax laws, with new states jumping onboard every day. Until either the court decides to hear a case involving the Amazon tax or until Congress decides to act on this issue, states will continue to impose nexus on out-of-state retailers aggressively.

During this time of sales tax uncertainty, online retailers should closely monitor their potential exposure in uncollected sales taxes and implement procedures that can help minimize future liabilities. For example, we recommend to our clients that if possible, they should file sales tax returns even if they show zero taxable sales. This way, the company starts the statute of limitations – the number of years a state can “go back” and access tax­ – which is generally three years in most states.

David Seiden is the partner-in-charge of Citrin Cooperman’s state and local tax practice. Citrin Cooperman is a full-service accounting and consulting firm.

Retail Merchandiser magazine is pleased to present the points of view of many different industry stakeholders. If you would like to contribute your own guest blog to our site, please contact the editor at russ.gager@phoenixmediacorp.com.