Retail Operators on the Ropes
As Congress reconvened after Easter, retail operators had a tremendous amount at stake. The industry is in an unprecedented state of strife with major legacy brands announcing large-scale closures.
If that’s not enough, here is another one to consider: Roughly 80,000 retail workers lost their jobs in the past year, a total that is greater than the number of workers in the entire coal industry. Clearly the disruptive impact of the online economy is quickly and permanently taking its toll on traditional retail operators.
If Amazon and Alibaba do not put traditional operators out of work, it could be Congress that ends up doing the job for them. Lawmakers appear to be piling on instead of understanding the threat to Main Street businesses that exists. Congress is failing to do everything it can to relieve pressure on retail businesses and restaurant operators and the critical, entry-level jobs they create and foster into careers.
The retail industry continues to find itself in a precarious political position. For example, businesses need real relief from many of the demands of the Affordable Care Act. Yet the first attempt at that was nothing short of a political debacle. The same type of scenario could easily play out if and when Congress turns serious attention to corporate tax relief.
As we all know, one of the big “pay-fors” in the Trump/Ryan tax plan is the “border adjustment tax,” which includes a potential 20% tax that would be assessed on a wide variety of imported goods. If Congress really wanted to crush the retail industry, I cannot quite think of a more effective weapon than the border adjustment tax.
Interchange fees
We have another big battle on our hands that specifically targets retailers as well — interchange fees. Many in Congress, along with their allies in the banking and financial sectors, would like to repeal Dodd-Frank, which includes a cap on fees that credit card processors can charge retailers.
In a low-margin industry with low profit per employee, an industry that is already undergoing fundamental change, a critical few percentage points can dictate whether a business survives or fails. Remove those caps and you get the picture.
The retail industry’s political position is not at all secure. By and large, we have overwhelmingly supported Republicans, and with good reason. For longer than I care to remember, the vast majority of Democrats have demonstrated little regard for our business model, the value of the jobs we create and the role we play in the overall economy.
Politically, they are so connected with the labor community that they cannot even reach out and try to learn the truth. These days, however, our problem lies with our “friends” in the GOP. Our so-called friends are now using our industry as a poster child for more vigorous immigration enforcement, as a revenue source and trade battle pawn with the border adjustment tax, as a roadside casualty as they potentially repeal Dodd-Frank.
We are caught in the middle of an ongoing struggle with the establishment, traditional business stakeholders, the Chamber of Commerce wing of the party on one side, and the insurgent, tea party, anti-establishment, and social conservatives on the other. The suits versus the boots. And the suits are losing badly.
Retailers and restaurant operators need to fight back like their lives depend on it. The survival of their business does depend on it. They have to force both themselves and their industry representatives to take a stand and stop supporting candidates who are clearly punishing our business just because they have an “R” on their chest. Otherwise, half of the Republicans, along with Democrats, fighting the collective weight of Amazon and Alibaba will ultimately turn the bricks-and-mortar retailer into rubble.
Joe Kefauveris managing partner of Align Public Strategies, a full-service public affairs and creative firm that helps corporate brands, governments and nonprofits navigate the outside world and inform their internal decision-making.