July 29, 2009 : A rush to beat the Mass. sales tax hike

NEXT BUYERS ARE IN A FRENZY
BUYING UP DEALS BEFORE THE TAX
HIKE BUT IS IT WORTH IT?
WITH JUST A FEW PRECIOUS
SHOPPING HOURS REMAINING BEFORE
THE STATE SALES TAX SEES A 25%
HIKE ON SATURDAY, IT APPEARS
CUSTOMERS ARE FLOCKING TO
STORES.
IT'S A BOON FOR RETAILERS AND
THE ECONOMY FOR NOW.
THE POTENTIAL SAVINGS MAY BE
SMALL BUT THESE NEWBURY STREET
SHOPPERS ARE IN A BIG RUSH TO DO
SOME BUYING BEFORE THE STATE
SALES TAX GOES UP ON SATURDAY.

>> WHY NOT DO IT BEFORE IT
HAPPENS?

>> IN FACT, I HAVE MY SNEAKERS
ON WHICH IS GOING TO HELP WITH
BEING EFFICIENT.

>> IT'S ENOUGH.
THEY TAKE ENOUGH TAXES.
TOO MUCH.

>> Jared: ON AUGUST 1, THE SALES
TAX WILL JUMP FROM 5% TO 6.25%
ADDING $1.25 IN TAXES TO EVERY
$100 SPENT.
FOR SOME CONSUMERS, RETAILERS
SAY, SHOPPING NOW IS ALL ABOUT
STICKING IT TO THE TAX MAN.

>> A LOT OF STORES ARE VERY
BUSY.
WHETHER IT'S CONSUMERS ACTUALLY
JUST TRYING TO BE VERY FRUGAL,
WATCHING-- TO CONSERVE THEIR TAX
DOLLARS, OR, FRANKLY, IT'S A BIT
OF A BOSTON TEA PARTY EFFECT.

>> Jared: AND THAT'S GOOD NEWS
FOR RETAILERS WHO HAVE
AGGRESSIVELY LURED CUSTOMERS
WITH DISCOUNTS AND ADS PLAYING
ON CONCERNS ABOUT THE
APPROACHING TAX HIKE.

>> THEY'RE TRYING TO MAKE
LEMONADES OUT OF LEMONS.
I THINK JULY OF 2009 MAY BE THE
FIRST OPPORTUNITY TO ACTUALLY
HAVE AN INCREASE OVER THE PRIOR
YEAR THAT WE'VE SEEN IN A YEAR.

>> Jared: THAT'S ESPECIALLY TRUE
FOR BIG-TICKET ITEMS LIKE CARS
AND APPLIANCES.
OVERAT YALE APPLIANCE AND
LIGHTING IN DORCHESTER,
KATHERINE HARVEY SNOPD FOR A
LIGHT FIXTURE BUT WAS EYEING
WASHERS AND DRYERS.

>> IT HAS BEEN ON MY MIND.
I DON'T HAVE PLANS FOR A
BIG-TICKET ITEM BUT I'M ALMOST
TRYING TO THINK IS THERE
ANYTHING THAT WE NEED.

>> Jared: YALE'S SALES MANAGER
SAYS TAX-CONSCIOUS CUSTOMERS
HAVE DPRIFEN A WELCOME INCREASE
IN SALES OVER THE PAST MONTH.

>> YEAR ON YEAR, WE'RE UP
PROBABLY 20%.

>> Jared: BUT McDONALD SAYS EVEN
A GOOD MONTH ISN'T GOING TO MAKE
MUCH OF A DIFFERENCE IF LARGE
NUMBERS OF CONSUMERS TURN TO
SALES TAX-FREE NEW HAMPSHIRE OR
TO THE INTERNET FOR THEIR
SHOPPING AFTER THIS WEEKEND.

>> THE REALITY IS, ALTHOUGH A
SHORT-TERM FLURRY IS GOOD FOR US
RIGHT NOW,UN, LONG TERM, WE'VE
YET TO SEE THE IMPACT, AND I
THINK IT COULD BE EVEN MORE
CHALLENGING MUG FORWARD IN AN
ALREADY CHALLENGING TIME.

>> Jared: AND WITH ME NOW ARE
CAR DEMOCRAT MAGNATE ERNIE BOCH,
AND BRUCE WEINBERG CHAIR OF THE
MARKETING DEPARTMENT AT BENTLEY
UNIVERSITY.
YOU TOLD US EARLIER WHEN WE
CALLED YOU THAT THIS IS THE
PERFECT STORM.
NOT ONLY DO YOU HAVE PEOPLE
RUSHING OUT TO BEAT THE HIKE BUT
THEY HAVE THE CASH FOR CLUNKERS.
WHAT KIND OF INFLUX ARE YOU
SEEING?

>> WE'RE SEEING A TREMENDOUS
INCREASE IN BUSINESS.
I WOULD VEPTD VENTURE TO SAY
THIS WILL BE THE BEST-SELLING
CAR MONTH OF THE YEAR.

>> Jared: REALLY?
IS IT SIMPLY MOTIVATED BY TRYING
TO BEAT THE HIKE?

>> YOU HAVE THE HIKE WHICH IS
DEFINITELY AN ISSUE, BUT THEN
THE CASH FOR CLUNKERS, AND THE
SELLING SEASON, AND THE
CLEARANCE.
IT'S ALL TOGETHER.
IT'S GOING TO BE A GOOD MONTH, A
VERY GOOD MONTH.

>> Jared: WHEN I WAS POLLING
THROUGH THE RESEARCH, SOMEBODY
SAID WE HAVEN'T SEEN ANYTHING
LIKE THIS SINCE THE 1980s.
WHAT'S YOUR PRECEDENT THAT
YOU'RE SEEING?

>> WE WILL BE UP THIS YEAR OVER
LAST YEAR.
IT'S PROBABLY GOING TO BE THE
FIRST AND ONLY MONTH THAT WE
WILL BECAUSE OF, YOU KNOW, WHAT
HAPPENED WITH THE INDUSTRY.
BUT I'M EXCITED.
I THINK IT'S GOOD.
I'M AGAINST THE HIKE, THE TAX
HIKE.
I JUST WANT TO SAY THAT RIGHT
OUT THERE.
I'M AGAINST IT.

>> Jared: BRUCE, WE DID A LITTLE
BIT OF MATH TODAY, AND SO A
$32,000 CAR, YOU'RE GOING TO
SAVE ABOUT $400 BY BEATING THE
TAX HIKE.
FOR A $1500 SOFA YOU'RE SAVING
ABOUT $20 AND $7FOR A 32-INCH
TELEVISION.
OTHER THAN A CAR, IT'S NOT
SUBSTANTIAL SAVINGS.
WHAT'S REALLY MOTIVATING PEOPLE?

>> I THINK FOR THE DURABLE GOODS
AND LARGE-TICKET ITEMS IT MAKES
SENSE.
IT'S NOT JUST THE PEOPLE IN THE
MARKET NOW BUT PROBABLY PEOPLE
WHO WERE GOING TO BE IN THE
MARKET IN THE NEAR-TERM FUTURE
ARE GOING TO ACCELERATE THE
PURCHASE AND DO IT NOW RATHER
THAN TWO MONTHS, THREE MONTHS
DOWN THE ROAD.
FOR OTHER ITEMS, I THINK IT'S
PURELY PSYCHOLOGICAL.
SOME PEOPLE, WAIT THIS IS BEING
FRAMED -- AND IT'S INTERESTING
HOW THE TAX IS SEPARATED OUT
FROM THE PRICE ON THE ITEM--
WILL VIEW SOME SOMEWHAT AS A
PROMOTION.
SO THERE ARE ALL TYPES OF
PEOPLE.
YOU MIGHT BE SENSITIVE-- SOME
MIGHT BE SENSITIVE TO A DOLLAR,
SOME MIGHT NOT BE, BUT THOSE
THAT ARE ARE GOING TO ACCELERATE
THE PURCHASES.
MYSELF, I'M GOING TO THE LIQUOR
STORE.
I DON'T WANT TO PAY THE EXTRA
6.25%.

>> Jared: THERE'S NEVER BEEN A
SALES TAX PER SE, JUST THE SIN
TAX AND SUDDENLY OVERNIGHT WE
HAVE A 6.25% ON ALCOHOL.
YOU'RE STOCKING UP.

>> I'M GOING TO GO THERE.
MY WIFE NEEDS HER WINE.

>> Jared: WHAT DO YOU SEE
HAPPENING POST-AUGUST 1?

>> THERE WILL PROBABLY BE A
LITTLE BIT OF A SLOWDOWN.
THERE'S YOU ALWAYS A SLOWDOWN AT
THE BEGINNING OF THE MONTH.
BUT IT IS A SIGNIFICANT-- IT'S
25%.
IF YOU SAVE 25% ON ANYTHING,
THAT'S SIGNIFICANT NO MATTER THE
DOLLAR AMOUNT.

>> Jared: HOW DO YOU COMPENSATE
FOR THIS AFTERWARD?
UNTIL THIS HAS TAKEN PLACE,
PEOPLE HAVE DONE THE MATH AND
THEY'VE SORT OF BECOME IN THIS
VERY BRIEF PERIOD ACCUSTOMED TO
A CERTAIN PRICE.
NOW WHAT DO YOU DO?

>> I THINK LIKE EVERY NEW TAX
WHEN IT COMES, PEOPLE GET USED
TO IT.
AND IT WILL JUST BE ACCEPTED.
WE REALLY SHOULD BE PROTESTING
IN THE STREETS.
WE REALLY SHOULD BE.

>> I THINK, CLEARLY, GOOD
OPPORTUNITIES CROWD OUT A LOT OF
PRIVATE SECTOR HERE, AND I THINK
WHILE YOU'LL FIND EMPLOYMENT IN
THE GOVERNMENT SECTOR WILL COME
OUT REASONABLY WELL IN THE SHORT
TERM I DON'T THINK THEY'RE GOING
TO GET PROCEEDS THEY EXPECT
BECAUSE PEOPLE WILL ALWAYS CUT
BACK ON CONSUMPTION.
YOU'RE GOING TO SEE CROWDING OUT
IN THE PRIVATE SECTOR.
I THINK SOME RETAILERSES'
PROFITS ARE GOING TO DROP OR
THEY'LL GO OUT OF BUSINESS OR
THE QUALITY WILL GO DOWN.

>> Jared: I WAS WONDERING ABOUT
THE ADVERTISING.
THERE'S SUCH A HUGE BLITZ RIGHT
NOW BETWEEN THE TELEVISION ADS
AND PRINT ADS.
THAT'S GOT TO COST QUITE A BIT.

>> THEY'RE SUBSTITUTING.
THEY'RE SUBSTITUTING NORMAL ADS.
I DON'T THINK THEY'RE ADDING
ADDITIONAL ADS.
BUT, AGAIN, IT'S 25%.
THAT'S SIGNIFICANT.

>> THE FRAMING IS INTERESTING.
AT BENTLEY WE DO QUITE A BIT OF
RESEARCH ON PRICE, AND I HAVE TO
SAY IT'S BRILLIANT THE WAY THE
RETAILERS HAVE SEPARATED THAT
OUT AND JUST LOOKED AT WHAT THE
25% IS THE INCREASE ON.
IF I SAY, I'LL SALE YOU YOU THE
CAR IT'S TIRES WENT UP 25%, I'M
NOT SO SURE EVERYBODY IS GOING
TO RUN OUT AND GET THE NEW CAR
QUICKLY.
IN SPIRIT, THAT PORTION OF THE
TOTAL PRICE ONE PAYS FOR A
PRODUCT IS THE SALES TAX?
IT DOESN'T MATTER.
THE FRAMING ON THAT FROM A
MARKETING PERSPECTIVE HAS BEEN
ABSOLUTELY BRILLIANT.

>> Jared: THIS ISN'T GOING TO
AFFECT YOU BECAUSE YOU DEAL IN
CARS, BUT WHAT DO YOU SEE THE
IMPACT ON RETAIL FOR PEOPLE WHO
SUDDENLY GOING TO START SHOPPING
IN NEW HAMPSHIRE MORE-- NOT TO
SAY THAT EVERYBODY IS GOING TO
START DRIVING TO NEW HAMPSHIRE
BUTTA I LOT OF PEOPLE HEADING
NORTH FOR VACATION CERTAINLY
WILL STOP AND PERHAPS MAKE BIG
BUYS IN TAX-FREE NEW HAMPSHIRE
OR THE INTERNET WHERE PEOPLE CAN
SHOP IN A LOT OF CASES TAX FREE.

>> I THINK IT WILL CONTINUE.
PEOPLE HAVE ALWAYS DONE IT AND
WILL CAN DO.
I DON'T THINK IT'S GOING TO BE A
GIANT INCREASE.
IT'S ALL GOING TO SETTLE BACK.

>> Jared: WHAT DID YOU FORESEE
WHEN YOU FIRST HEARD THIS IN
TERMS OF MARKETING? DID YOU SEE
A SORT OF DEATH KNELL FOR RETAIL
CONCERNING THE STATE OF THE
ECONOMY AND HOW MANY RETAILERS
ARE ALREADY ON THE VERGE OF
GOING OUT OF BUSINESS.

>> I DON'T AGREE WITH THISTITION
TO DO IT.
I DON'T THINK THIS IS THE WAY TO
APPROACH THIS, ESPECIALLY IN
THIS ECONOMY.
IF THINGS WERE FINE, MOST PEOPLE
WOULDN'T TAKE NOTICE.
THIS IS A TERRIBLE, TERRIBLE
ECONOMY, AND THOUGH-- ERNIE AND
I WERE TALK BEFORE, PERHAPS THE
FUNK SO FAR.
YOU KNOW WHAT?
I DON'T SEE ANY SMOOTH SAILING
IN SIGHT ANY TIME SOON.
THIS IS JUST A TERRIBLE TIME AND
I DON'T THINK THE WEST OF
DECISIONS TO MAKE.
I THINK IT'S GOING TO BE HARD
FOR RETAILERS AND A LOT OF OTHER
ORGANIZATIONS AS WELL.

>> Jared: CASH FOR CLUNKERS
STARTED ON MONDAY, AND THAT'S
GOVERNMENT GIVING UP TO A $4500
REBATE TO GET THE CARS OFF THE
ROAD AND FULT ECONOMY.
WHAT HAVE YOU SEEN SINCE MONDAY?

>> A TREMENDOUS AMOUNT OF PEOPLE
ARE TRADING IN THOSE CARS.
AT MY HONDA STORE, WE DID 65
SALES FOR THE DAY, 26 OF WHICH
WERE CASH FOR CLUNKER TRADES.

>> Jared: AGAIN, YOU MUST HAVE A
SENSE PEOPLE COME IN, THEY'VE
DONE THEIR RESEARCH--

>> ABSOLUTELY, ABSOLUTELY.
MY FEAR IS BECAUSE OF THE RULES
AND REGULATIONS OF THE PROGRAM
THAT WE MAY NOT GET PAID ON SOME
OF THESE.

>> Jared: THAT'S GOOD MARKETING,
PEOPLE COMING IN KNOWING WHAT
THEY'RE DOING.

>> OH, SURE.
I MEAN, I LIKE TO BELIEVE THAT
ON AVERAGE CONSUMERS ARE SMART,
AND NOWADAYS, WITH THE
AVAILABILITY OF INFORMATION WITH
THE INTERNET, PEOPLE ARE AWARE
OF THINGS AND HAVE DONE THEIR
HOMEWORK, AND ACTUALLY, I THINK
IN MANY RESPECTS-- ASIDE FROM
HOPEFULLY YOU DO GET YOUR
MONEY-- THAT HELPS OUT THE
DEMOCRAT.

>> ABSOLUTELY.

>> WHEN SOMEBODY DMMZ EDUCATED
IT'S MUCH BETTER ALL AROUND.

>> IF WE GET THE MONEY.

>> Jared: ERNIE BOCH AND BRUCE
WEINBERG THANK YOU SO MUCH FOR
COMING.
ONLY A FEW HOURS LEFT UNTIL
MIDNIGHT ON FRIDAY.