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Macy’s, Amazon CFOs Say The Darndest Things

Written by Evan Schuman
May 2nd, 2012

Two major retail CFOs in the last week both spoke with unusual candor. The Macy’s CFO admitted how much she doesn’t like coupons, but said that efforts to minimize them are doomed to fail. And Amazon’s CFO offered two interesting stats: One shows that Amazon is collecting a lot more state sales taxes than is generally perceived, and the second reports that almost 40 percent of Amazon’s sales these days are not from products the E-tailer directly sells.

Macy’s CFO Karen Hoguet told an investor’s conference that JCPenney’s efforts to halt coupons won’t work.

When “we bought May Co. and tried to reduce the coupons Day One, it was a failure,” according to a report in Women’s Wear Daily. “I mean, you all remember it. It didn’t work. People love these coupons. They love thinking they got us. They love getting the value. So I know, intellectually, couponing sounds complicated and not a good thing. But I am telling you from the customer perspective, it’s been very important. If I were starting from scratch, would I want to start that way? No, but customers are used to it and, frankly, they love them.”

Amazon CFO Thomas Szkutak, speaking during an analyst call, challenged the perception that the E-tailer doesn’t yet collect and process much in state sales taxes.

Szkutak said with “approximately 50 percent of our sales” Amazon “either collects a sales tax or a value-added tax. So we collect it in several states today in the U.S. and a large number of geographies outside of the U.S. So this is not anything new. This is something that we’ve been doing for a long period of time. And we have very good businesses in those geographies and states that we collect.”

As for Amazon revenue, Szkutak said the massive E-tailer has brought in so many third-party retailers that they today account for “approximately 39 percent of our total units, so it’s very meaningful.” Yeah, I’d say that is rather meaningful.

But it’s a meaning that has a downside. Many Amazon customers love the site’s customer service and ability to track and refund errant packages. That ability, though, is generally limited to its directly sold merchandise. Items sold from third parties—the 39 percent that Szkutak referenced—handle their own tracking and customer service efforts. As that percentage increases, one of the most powerful of Amazon’s advantages decreases.

The silver lining for retail chains? We apologize in advance for mixing mythical stories: You may have just discovered the Achilles’ heel of this Goliath.


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2 Comments | Read Macy’s, Amazon CFOs Say The Darndest Things

  1. Andy Says:

    Amazon only collects state sales taxes today in five states. The comment from Amazon CFO Thomas Szkutak is misleading because he is factoring all overseas sales in, and they must collect VAT taxes in Europe. Their collection percentage is miniscule in the United States and they are using this 50 percent number to mislead the public.

  2. Evan Schuman Says:

    I understand your concern, Andy, but in this instance, I just don’t see that they were trying to mislead anybody. The point of his comment is that Amazon has a lot more experience dealing with processing tax issues than most think. And, assuming these global numbers are true, that is a fair comment. He didn’t try and portray these numbers as U.S. only. Also, five states is not a trivial figure. The experience of dealing with those five states is quite likely to prepare them for handling all states. Misleading is a very common pastime in retail but in this case, there’s nothing here to suggest that Amazon’s CFO (at that moment) was trying to do that.

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