How U.S. Trade Policy is Making Online Competition Tougher
Pet specialty retailers who are already concerned about the growing impact of competition from online retailers may have a new reason to worry, thanks to a recent change in the way duties and taxes are applied to imported products, making them cheaper for U.S. consumers to purchase online.
According to a recent report by the Wall Street Journal (WSJ), new trade rules that took effect in March increased the amount of foreign goods that Americans can import at one time from $200 to $800. This significant development is expected to be a boon for online merchants based overseas, as import duties and taxes can have a considerable impact on pricing. WSJ says that before the new trade rules, the top 50 imported products averaged duties of 33 percent when purchases exceeded $200. That percentage can jump much higher for some products—for example, the article points to costume jewelry, which previously carried a duty of 110 percent on purchases over $200.
To provide some context for just how big the online retail market is for foreign goods, WSJ reports that it is expected to encompass 943 million consumers spending a total of $994 billion by 2020. And this isn’t just a future problem; according to the article, a survey by comScore and UPS revealed that 54 percent of U.S. online shoppers have already made a purchase overseas. It stands to reason that the new trade rules could drive that number up even higher.
Of course, there is probably no reason to panic over this development in the short term. Brick-and-mortar pet stores already have plenty to worry about with the competition they face from domestic online retailers, and there is little evidence that major overseas retail players have been able to make inroads in the U.S. pet market. However, given how quickly the internet is attracting shoppers and shrinking the global marketplace, it would myopic to think that the dynamics of foreign trade policy won’t have a direct impact on our industry at some point.
With that in mind, retailers should not necessarily let developments like this be relegated to back-burner status. Instead, they should engage their representatives in Congress and make their concerns known. That is the only way to influence the future of global retail trade—a future that will be here before you know it.