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Is it Really Cheaper to Buy Online?

Did you know I can get this cheaper online? I get this question a lot and it is one of the bigger struggles plaguing independently owned businesses today. Everything is online these days; sometimes it is "cheaper" and sometimes it's not.  The perception is that you will pay more at independently owned businesses like Natural Dawg Cuisine. I see it perpetuated online frequently. It is probably one of the biggest misconceptions about small business along side the thinking that owners are all rich. The price difference is often minimal and can even be cheaper in small stores than online. There are also hidden costs to buying online.  It seems like a great deal but the hidden costs from ordering your products online add up quicker than you think. 
I see the "small businesses are overpriced" statements all the time online, most recently on the Fromm Facebook page when they chose to no longer be sold through Chewy. The person stated, "Why would I want to pay $80 for the same bag I can pay $50?" Clearly this person had never even done a price comparison because a check at his local store would have shown that it was simply not true. This idea is decades old but still gets backing online and many people will simply take it as fact. It's an unfortunate aspect of social media. People tend not to investigate things themselves anymore and statements made with such confidence are often taken as fact. Even our main stream media will adhere to these practices, not verifying information before disseminating it, so it's not surprising that the common person would do the same. Now I'm not saying prices won't be different but this is true for any retailer. We all have different expenses therefore causing different prices, but it is rarely more than a few cents to few dollars difference. I had a recent incident where this happened actually in my store. Someone said they could get it cheaper from Chewy and it was true, but only if they did autoship and the savings.........$1.70. Autoship is a funny thing though. I often get customers that didn't receive their food in time, shipped the wrong item, didn't ship at all, or receive it too often. If you don't do autoship it actually was $1.01 more than what we charge. Convenience can be a factor and we understand that so, we now have FREE local delivery within 12 miles (we can probably work something out if its a little further). There are not very good ecommerce solutions for small businesses just yet but we are working on making our online store much nicer and more user friendly. Many other small stores are following suit because you have to evolve with the times. Writing independently owned businesses off because of the "overpriced" misconception would be a disservice to you and the community you live. 
Now, lets dive into what these online business do in order to offer these prices. I will use Chewy as an example because they have been in the news lately and they are usually the company that gets mentioned when I get this question. Most companies go into business to turn a profit. As a matter of fact you have to or you are no longer in business. Oddly, many of the most well known online businesses have figured out a way around this essential aspect. Take Chewy for instance, they have been in business for 7 years and have never turned a profit. They have operated at a loss their entire existence and even the founders have no answer to turn a profit under their current model.......because they can't. Free shipping across the US isn't free and the only thing keeping them in operation was the hundreds of millions in venture capital money and tax breaks given to them for having a bad business model. Things that small businesses simply aren't afforded.  
So this next part is where the consumer starts to pay more than the price tag they see online. Lets talk taxes.  Online stores typically have a central warehouse allowing them to escape charging sales and property tax in many states. Laws are slowly changing but for now in most states unless they have a warehouse or are incorporated there, these taxes are forgone. They also get away with paying very little if any other types of taxes because they operate at a loss. You can't pay taxes on a net negative income which is what they operate at. This loss accumulates over time and can be used for future taxes as well, giving these businesses even further advantage. It would actually be less beneficial to them to turn a profit. They will pay themselves hundreds of thousands of dollars, even millions, even though no profit is made. 
Why is this important? This is important to highlight the true cost of the food past the sticker price. Even if the price is lower, it doesn't actually save people as much as it might seem. When money flows out of the local community, that shifts the burden to the people that live in the community. The more money that stays in a community through shopping local establishments, the healthier that local economy stays. Being an independently owned and operated business the overwhelming majority of the money spent at our store stays in the community not only through taxes but purchases as well. We live locally, we hire local residents, we get our supplies from local vendors, we shop locally, and we support local schools and charities. 
Taxes are important because we pay property taxes on everything we have in our store, especially the inventory we carry. The more we sell the more inventory we carry. The more inventory, the more taxes we pay. The more taxes we pay the more the community thrives. Those taxes go toward schools, emergency services, community improvements, etc. etc. Online stores don't pay these taxes. Chewy doesn't have a warehouse in Cypress so no taxes come to the community. The more taxes businesses pay means fewer tax increases on the people. One of the big talking points in this years election was taxes and who does and doesn't pay their fair share of taxes. Independently owned and operated businesses are never mentioned in this argument because we pay taxes and at a much higher rate than online companies or multinationals. Show me a community with thriving local small businesses and I show you a community that is far healthier than the average city/town. Economies thrive when small businesses thrive. Shifting your purchases online, although may have a lower sticker price, often costs far more when considering the economics. 
Sales tax works the same way. If the operation is not in state then they don't have to charge sales tax giving them an advantage for price that local small businesses just can't compete with. Sales tax is one of those necessary evils unfortunately. One that local businesses can't escape. Many states are doing away with this provision because it does give online stores a competitive advantage and takes money out of the local communities and state. This no tax concept actually gives online stores incentive not to open new operations in states. Sales taxes are an overwhelming source of income for your state and communities budget. The less sales taxes collected means the more money that has to come from other sources. This can cause a rise in sales tax percentages, the addition of an income tax, taxes on items that are otherwise not taxed, among other options. These are all going to end up hitting residents finances and can result in a higher percentage than what you would have paid at your local store to begin with. It's easy to see the savings when you are making the purchase but not always easy to see the cost on the backside. A cost that can often end up more than the sales tax you might pay at the counter of your local store.  
There are way more complexities to this but that is the gist of it. The reason this information is important is because most people don't see the true cost of buying online at places like Chewy. I'm hoping to at least start a conversation. I'm hoping to bring a little more awareness to what it's like as an independently owned business trying to compete against online competition that doesn't have to make money to stay in business. To make people aware of what it is really costing them when they purchase online. And to end the misconception that independently owned stores are outrageously priced. It may seem cheaper, and the sticker price might be, but the cost is quite large in the grand scheme of things. 

1 comment

  • The belief that you can get it “cheaper on line” is absolutely false For years I order my dog food on line and also my sweet potatoes dog treats until one day by accident I discovered “Natural Dawg Cuisine” and found out I could save quite a bit of money by ordering from them". They offer free delivery and since they are local it is a lot faster than on line. I am so happy I found them and will order from them from now on.


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