ShoppableTV, Selling Cold Medicine on TikTok, and a Surprise $1.6 Million Tax Bill

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TAXES
An Amazon reseller of clothing, shoes, and groceries just got a notice that he could owe California as much as $1.6 million in back taxes that he didn’t collect from consumers: ‘It’s absurd. I haven’t sold enough inventory over time to warrant a tax bill like that. You could take every sale I’ve ever done. You could take the biggest sellers on Amazon, and I don’t think they would have a bill like that. They’re trying to scare people,’ [Brian] Freifelder said last week. …

“California’s aggressive tax-collection move against Freifelder and other third-party merchants on Amazon is an example of government trying to catch up to new forms of commerce that on the surface at least appear to evade obligations under old laws, whether it’s Amazon declaring it’s not a retailer for third-party merchants, Uber saying it’s not an employer, or Facebook denying it’s a publisher. … Jared Walczak, director of state tax policy at the Tax Foundation in Washington, said the pursuit of Amazon’s third-party merchants for back sales taxes is extreme and violates protections under the US Constitution, even though states have significant leeway in how they impose taxes.

“‘Retroactivity is always bad policy, but in this case, it raises serious constitutional due process concerns, because due process requires that you have notice and can anticipate a policy. Here the retailers lacked notice to collect. No one believed they were supposed to be collecting this tax for all of these years,’ Walczak said. California tax officials said Monday that they could not comment on specific tax liabilities.”

MARKETING
Here’s how Mucinex connected with TikTok creators to sell cold medicine: “Advertisers exploring how to reach people on the hottest, new app, TikTok, might not know where to start in such unfamiliar terrain. That’s where TikTok’s three-month-old Creator Marketplace comes in, connecting advertisers and influential TikTok creators. TikTok’s Creator Marketplace lets advertisers use parameters and filters such as follower count, content creation topics and audience analysis to find creators and see performance metrics for invited, verified creators. Mucinex worked with TikTok on a Halloween-themed campaign using the hashtag #TooSickToBeSick, … 

“The challenge [ran] through Nov. 2 and has already garnered more than 105 million views, encouraging TikTok users to show how they transform from being too sick to ‘so sick’ and ready to celebrate Halloween. The ad campaign came together in about a month, and TikTok helped connect Mucinex to three of the four creators who developed sponsored posts for the challenge. One of the sponsored posts from creator @ourfire, whom Mucinex found via the TikTok Creator Marketplace, has received 862,500 likes and 1,321 comments. Mucinex wouldn’t disclose how much it spent on this hashtag challenge, one of five advertising products TikTok currently offers. … However, a recently leaked TikTok pitch deck from June 2019 priced a six-day hashtag challenge package at $150,000.”

NBC is incorporating QR codes into its programming so that people can shop while watching television: “Midway through the episode [of ‘Songland,’] Ryan Tedder, a Grammy Award-winning singer and producer featured as a judge on the show, tinkered with an eye-catching, illuminated keyboard called Lumi. As Tedder played the instrument, a QR code casually appeared at the bottom of the screen with instructions that read more like commands than suggestions: ‘Open Camera, Scan Code, Shop Now.’ In the minutes after the code appeared, NBCUniversal executives say, thousands of viewers did exactly that, using their smartphones to link directly to a website where Lumi was available for purchase. To get there, they didn’t have to download an app, call a shopping network in a limited timeframe or embark on an online hunt. And that, executives say, was precisely the point. … The name for this new fusion of entertainment and mobile commerce is readily comprehensible, and purposefully so: ‘ShoppableTV.’”

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PAYMENT
More consumers are opting to pay digitally, whether in person or online: “A recent report found that the number of consumers choosing to pay with digital wallets such as Apple Pay and Google Pay when shopping in person has doubled in the last two years, going from five percent to 10 percent. When it comes to online shopping, usage of third-party payment methods like PayPal has nearly tripled, to 27 percent, in the last two years, according to the report from Bank of America Merchant Services. When consumers can’t pay by their preferred method, 17 percent said they would not make the purchase, the report said. 

“The biggest challenge to small businesses is not the availability of the technology, but the ‘willingness to purchase it, to see the value in that purchase and to understand and use it,’ said Bill Clark, a consultant with The Strawhecker Group, an Omaha firm focused on the electronic payments industry. … Vadim Nayman, owner-managing partner of Bagel Master in Syosset, [said] customers appreciate having the option of paying via digital wallet. ‘Customers weren’t asking for it but when they found out we were accepting it, they said it made things a lot easier,’ said Nayman.”

THE ECONOMY 
Despite companies cutting backconsumers continue to drive economic growth: “American consumers are energetically engaged in a spendathon. American businesses, by contrast, are not. Nathan Jeppson, the chief of Northwest Hardwoods, a major manufacturer of hardwood lumber, is definitely not in a YOLO mood. He recently canceled a $1.75 million order to buy 19 forklifts for his sawmills and dry-kiln yards. ‘We can’t justify that spend without certainty,’ said Mr. Jeppson, who has watched from his office in Tacoma, Wash., as sales and profits plummeted because of continuing trade discord between the United States and China. ‘So we’ll go into salvage-and-repair mode till there is.’ … Businesses and households swim in the same economic soup and their outlooks—gloomy or bright—are usually in sync. But in recent months, the two seem to occupy opposite ends of a teeter-totter, with consumers continuing to spend while business owners and managers are chastened by doubt and uncertainty.”

RETAIL
Fashion icon Barney’s has been sold for scrap: “Authentic Brands Group will take control of the Barneys name—one that has been part of the Manhattan landscape since 1923—and license it to other companies like Saks Fifth Avenue. The firm B. Riley Financial is preparing to liquidate Barneys’ high-end wares, at its five stores and two Warehouse locations, starting with private sale events for Barneys’ ‘most loyal’ shoppers next week. In announcing its acquisition, Authentic Brands said it was ‘building a business model that will adapt this legendary brand for the future of experiential luxury.’

“The retailer’s Madison Avenue store will be turned into an as-yet unnamed ‘pop-up retail experience,’ which will feature four floors of boutiques, art and cultural installations and ‘entertainment that fosters creativity and community,’ the company added. Authentic Brands also said that it had cut a deal with Saks that would introduce Barneys ‘shop-in-shops’ at Saks stores in the United States and in Canada. Customers will be able to see the unusual pairing of rivals at Saks’ New York flagship store, where a new version of Barneys New York will roll out on the fifth floor.”

STARTUPS
Modus wants to be the primary operating system for real estate transactions: “Modus has grown to 50-plus employees and facilitated more than $1 billion in residential purchases. It works with hundreds of agents in Washington state and will expand nationwide next year. The company expects to quadruple its headcount in 2020. While Modus is initially focused on title and escrow, it is developing products and services ‘that empower the real estate agent and consumers in various ways, which is our secret sauce,’ Day told GeekWire. He said the company is involved with customers before a home is even listed on the market.”

Nickl offers news subscriptions that bypass the paywall: “Launched in August, Nickl sells businesses a bundle of digital subscriptions from publishers like the Los Angeles Times, negotiating lower rates by leveraging a large volume of employees. Nickl has secured discounts as high as 70 percent, CEO Sumorwuo Zaza said, in deals that give news outlets more subscribers and Nickl a share of revenue from the sales. The startup enters the media market as news publishers look for new ways to make up for the erosion of print-advertising revenue. One way media outlets do that is by locking their articles behind paywalls to collect revenue directly from consumers. … Firms that buy the so-called Nickl Passes get past the paywalls of participating publishers through a web browser extension. About a dozen companies have bought subscriptions through Nickl so far, and nearly 100 media companies are participating, Zaza said.” 

FOOD AND BEVERAGE
Who do we have to thank for frozen pizzas and frozen chicken wings? Clarence Birdseye: “Birdseye developed a fascination with food preservation—particularly the methods of the Inuit ice fishermen. He noticed that as soon as a fish was pulled out from under the ice, it would immediately freeze, ‘mid-flip,’ in the -40°F air. The fish would then be packed in snow outdoors—and to Birdseye’s delight, it tasted perfectly fresh when thawed days, or even weeks, later. Back in New York, freezing food was a less palatable affair. At the time, the pervading preservation technique was to freeze food very slowly over a period of days at temperatures just below the freezing point. When this food thawed, it was grainy, leaky, and prone to rot. Only the lowest-grade food was frozen to begin with, and products were priced lower than canned goods. … 

“A convincing salesman, Birdseye raised $20k ($300k today) and launched Birdseye Seafoods with the promise of revolutionizing the logistics of frozen food. He ran a series of experiments attempting to replicate the arctic climate of Labrador, testing different salts, boxes, and conditions. In one instance, he even tried to freeze a fish with ice and an electric fan. Though the company showed promise, it ran out of money in 1924, and Birdseye relocated to Gloucester, Massachusetts, a port city with a thriving fishing industry. Here, he raised more funds—this time, a whopping $375k ($5.6m today)—and launched General Seafood Corporation. … By placing food inside two-inch-thick, insulated cartons and pressing them between hollowed-out metal plates cooled to -25°F, he found that he could ‘fast-freeze’ the contents and better preserve freshness. Soon, the metal plates were swapped for chilled belts, enabling rapid production of high-quality frozen food for the first time.”

And that’s what’s ahead.

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