N.Y.’S TAX-FREE WEEK DRAWS RETAIL RAVES, SOME RESERVATIONS
NEW YORK — The stores were jammed, the mayor was all smiles, and while retailers agreed it gave sales a lift, some added last week’s sales tax abatement could have been more powerful.
Last Jan. 18-24, New York retailers had a windfall, when the sales tax was lifted on a wide range of apparel, accessories and shoes priced up to $500.
Last week, only apparel items priced up to $100 — and no shoes and fewer accessories — were exempt. The changes left many retailers with reservations, saying shoppers were confused about what items were exempt. But in some instances, they were granted breaks anyway because store owners didn’t want to lose sales.
Retailers also complained about the timing, coming after the heart of back-to-school selling, and some saw slowdowns in the week preceding the exemption.
Generally, lower-priced stores seemed to cash in the most, while more upscale chains were less than overwhelmed by the response.
“I think it was good, but nowhere near as good as January,” said Michael Gould, chairman and chief executive of Bloomingdale’s. “It wasn’t as encompassing.”
Last January’s experiment was “a huge success,” Gould said. “It’s a staggering amount of business we’re up against for next January.”
“We didn’t see a marked improvement,” said Selma Koch, owner of The Town Shop, on Broadway between 81st and 82nd Streets, which specializes in lingerie, innerwear and swimwear. “The timing was bad,” Koch said. “It started over Labor Day weekend where a lot of people were away or just coming back from vacation.” And it was after the swim season, she added.
Others were more ecstatic, particularly Mayor Rudolph Giuliani, who campaigned vigorously for tax-break week.
He said initial reports on the September tax-free week were so encouraging that he would try to push Albany legislators to increase the threshold on tax-free apparel to $500 articles, hopefully going into effect by December 1998. Legislation included in the current state budget will repeal the tax year-round on apparel costing less than $100 on Dec. 1, 1999.
“The increase in sales was quite dramatic,” Giuliani said Monday at a City Hall press conference where he announced that the 1998 Grammy Awards will be at Radio City Music Hall, but he also discussed the sales tax.
He said preliminary estimates by the Economic Development Corp. indicate sales of apparel rose by 40 to 70 percent during the tax-free week. Giuliani said a precise figure will be available in about one month.
“[On Sunday,] the stores were filled with people trying to take advantage of the tax-free week at the last minute,” Giuliani said. “Now we’re going to try to urge legislators to do it faster. I’d like to see a $500-or-less exemption taking effect toward the end of next year. That would move it up by a year.”
Giuliani maintained his position that revenues from other taxes will increase due to more store traffic and said 16,000 to 17,000 new jobs could be created for store managers, sales assistants and stock persons in response to increased sales volumes.
In Albany, Ted Potrikus, executive director of the Retail Council of New York State, the state’s key retail lobbying group, said, “As for the $100 threshold, we have to take a look and see what the state can afford. Our role is to be responsible about it.”
Potrikus said the lobbying group will also urge legislators to include footwear in future tax exemptions.
During the latest abatement, Potrikus said some stores outside of New York City reported sales increases in the 20 to 30 percent range.
“What retailers really need to do is find out if everyone front-loaded their shopping in one week or if people will still be coming in over the next few weeks,” Potrikus said. “It does take awhile; we really need to look at the bigger picture, but there was a lot of traffic.”
“There is no question that this was an impetus for people to shop,” said Edward Goldberg, Macy’s East vice president for government and consumer affairs, “We obviously think it was a very big success. Sales volume was greatly increased,” particularly in such categories as belts, children’s wear, shirts, ties, socks and underwear, he said.
“The 8 1/4 percent is a very regressive tax,” he added. In New York City, the sales tax includes a 4 percent state charge, a 4 percent city charge, and 0.25 percent levied by the Metropolitan Transportation Authority. Elsewhere in the state, taxes on apparel range from 6 percent to 8 1/2 percent, depending on local levies.
He also noted that retailers could have done a better job promoting tax-exempt items if they had more notice from the government. There was probably less than three weeks’ notice, he said, adding it was enough time to use the press for advertising, but not enough to produce advertising booklets featuring a wide range of items that qualified for the break.
“I think it had an impact, but, surprisingly, some people did not know that the sales tax was off,” said consultant Isaac Lagnado, publisher of Tactical Retail Monitor. “There was much less hoopla than last time. “In terms of the time period and the categories covered, it was a little problematic,” Lagnado said.
“There were some small specialty stores basically extending to it to items well over $100 price points when they didn’t want to lose a sale,” he said. “They ate the difference.”
“We found it to be better than the first one,” said Ethan Shapiro, ceo of Conway Stores, a 15-unit discount chain. “The timing was okay for back-to-school. Everybody was concerned it was a week too late, but it capped it off.”
Moreover, Shapiro said he believed consumers didn’t delay their purchasing for the tax breaks. “It did not take away from the week before.”
“Obviously, in New York it had positive impact,” said Doug Meyer, senior vice president of marketing at Sym’s, the off-price chain. “The last time there was a tax amnesty all the retailers ended up feeling they gave money back in the weeks that ensued. Over the long run, it’s not going to be any better for the retailers. People still shop primarily where it’s convenient. This won’t change their shopping habits that much.”
The tax abatement also had a negative effect on sales prior to the test week.
“I’m sure there was a certain amount of holding off during the weeks prior,” Meyer said. “Department stores are running 50 percent to 60 percent off sales every day, but then consumers get 8 1/2 percent off, and they’re busting down the doors. They perceive the 8 1/2 percent off as a real value.”
Giuliani has contended that $700 million in apparel sales in New York City are lost to New Jersey stores, where is no sales tax on apparel. However, New Jersey retailers said they did not lose sales last week.
Miles Johns, general manager of Kmart on West 34th Street, said the tax abatement “sure did help.” He added, “We were real happy with our sales.”
“Fabulous, fabulous,” is how Mark Costanzo, area manager for Strawberry, described the tax-abatement week. “I almost doubled my business. It was an excellent, excellent week. You name it, they bought it.”
At the store in the Empire State building, Strawberry offered an extra incentive during the week — a 12 percent discount.
“The week before the tax abatement there was a very deep lull,” he said. “But we have a large tourist trade, so they’re always buying.”
Strawberry’s New Jersey stores had a normal sales week, said Costanza, but in the New York stores, “You would think it was Christmas,” he said. “You would not believe the lines.”
“The customer really responded to the tax-free week,” said Ken Dall, district manager of J.C. Penney for New York, New Jersey and Connecticut. “We could see a softening of sales during the last 10 days of August prior to the tax-free week kicking off. But the sales we got during the seven days of the event exceeded our expectations.” Dall said stores showed gains in the high single digits.
“Most of our wear-now back-to-school merchandise is under $100,” Dall said. “Pretty much all of our assortments fell into the tax-free zone. The traditional back-to-school departments exceeded our expectations, including women’s juniors, young men’s, boys and girls.”
A Sears spokeswoman said children’s, men’s and women’s and footwear — even though it was not exempt — saw a lift during the week.
“Why not make it anything?” said Bloomingdale’s Gould. “Why not do it in a more meaningful way? Why not do it with shoes, so women can buy shoes to match their outfits?”