Online Retail Sales for 2012 Predicted to Grow 5.9 Percent, BDO USA Survey Finds

-- Potential Tax Reforms Loom Large as Retailers Prepare for the Presidential Election --

CHICAGO--(BUSINESS WIRE)-- As retailers continue to adjust to omni-channel platforms, there is still plenty of room for growth online. According to a new survey from BDO USA, LLP, retail CFOs predict a 5.9 percent increase in total 2012 online sales, compared to 4.1 percent and 4.5 percent increases in comparable store sales and total sales, respectively. While this year’s prediction is conservative compared to last year’s expectation of 11.9 percent online sales growth, the majority (51 percent) of CFOs say their company’s online sales will grow by five to ten percent in 2012. With holiday shoppers primed to take advantage of online exclusives and free shipping options, retailers expect an increase of 4.6 percent in holiday-specific online sales.

The looming presidential election may be tempering expectations for a strong holiday season. With the most important shopping period of the year coming on the heels of November’s election, retailers will be monitoring the race closely, as CFOs believe the election and unemployment are the two issues that will have the greatest impact on consumer confidence. In addition, the vast majority (78 percent) of CFOs say that they are concerned about potential tax reforms as a result of the election.

“Retailers are still seeing a great deal of top-line growth in e-commerce, and that is leading to optimistic expectations for the holidays,” said Stephen Wyss, partner in the Retail and Consumer Products Practice at BDO USA, LLP. “It’s a solid outlook, but you can bet that every online sales offer, every promotion consideration, and every hiring decision this holiday season will be made with careful consideration of the impact of the presidential election on consumer confidence levels and the general state of the economy.”

These findings are from the sixth-annual BDO Retail Compass Survey of CFOs, which examined the opinions of 100 chief financial officers at leading retailers located throughout the country. The retailers in the study were among the largest in the country, including 11 percent of the top 100 based on annual sales revenue. The survey was conducted in August and September of 2012.

Other major findings of the 2012 BDO Retail Compass Survey of CFOs:

Federal Income Tax Remains Top Tax Reform Concern. With the upcoming presidential election exacerbating worries over taxes, retailers are on high alert. When asked what aspects of a potential tax reform bill concern them the most, the majority (58 percent) of CFOs cite federal income tax. This is followed by employee-related tax (22 percent), internet sales tax (9 percent) and state income tax (9 percent). These responses align with retailer tax concerns in 2011, when 58 percent of CFOs also identified federal income tax as a top tax reform challenge.

Internet Sales Tax a Growing Concern for Large Retailers. Retailers in the top 100 by revenue have a different set of tax worries. Fewer CFOs in the top 100 (36 percent) cite federal income tax as their top concern. Instead, the largest retailers are divided over state income tax (27 percent) and internet sales tax (27 percent) as the greatest potential tax threat. When it comes to internet-specific legislation, this marks a considerable increase over 2011 when just 10 percent of retailers in the top 100 cited internet sales tax as a top concern.

“Retailers have been watching the online sales tax fight in California closely,” says Randy Frischer, tax partner in the Retail and Consumer Products Practice at BDO USA, LLP. “As businesses continue to expand their online strategies, potential changes to internet sales tax collection are a growing risk.”

Mobile Remains Key to Holiday Sales as Investments Hold Steady. Following a banner year for mobile traffic and sales in 2011, consumers can expect a similar level of mobile engagement this holiday season. The majority (77 percent) of CFOs report that they have maintained their investment in mobile commerce for the 2012 holiday season. Another 19 percent of retailers will increase their mobile investment this year to capitalize on or catch up to the growth in mobile commerce.

Retailers Are Undaunted by Showrooming. The supposed menace of showrooming may be making headlines in the hardlines space, but most retailers are not letting the practice throw them off course. When asked if they view showrooming as a threat to their business, the overwhelming majority (88 percent) of CFOs say no. Widespread confidence aside, retailers are employing a variety of strategies to keep shoppers in their store. When asked about their primary strategy for countering showrooming, one quarter of CFOs say they are improving their customer service model, and another 25 percent report expanded options for in-store pickups and returns. Other methods include product exclusivity (17 percent) and price matching with online retailers (17 percent).

Material discussed in this release is meant to provide general information and should not be acted on without professional advice tailored to your firm’s individual needs.

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Source: BDO