The recently announced increase in November retail sales have caused the National Retail Federation to revise upwards total holiday sales growth projections from 2.3 percent to 3.3 percent. According to the U.S. Commerce Department, November 2010 sales increased 0.8 percent over October 2010 sales, and were up 9.2 percent over November 2009 sales. Furthermore, ICSC-Goldman Sachs Weekly Chain Store Sales Index stated that same store sales grew 3.1% last week.
This is very good news for a retail industry that has struggled through two consecutive years of declining holiday sales, the time period in which most retailers move into the “black” on their P& L’s.
The sales growth was driven by three primary factors; deep discounts at brick-and-mortar stores, free shipping from online retailers and a consumer base that feels the economy might finally be improving enough to shop at Christmas like they used to.
The risk for retailers and suppliers alike is to read too much into this holiday’s sales increase and to project too rosy a forecast for 2011. The positive sales results come on the same week that Best Buy, the world’s largest consumer-electronics retailer, lowered its annual profit forecast for the year siting lower than expected U.S. sales.
November’s strong sales were helped with very strong “black Friday” and “cyber Monday” showing consumers desire to buy but only products that are deeply discounted. In addition, the ICSC also released data showing that the average holiday-gift completion rate is lower than it was last year at this time, indicating that perhaps shoppers are waiting to finish their Christmas shopping just before the holiday when discounts are even deeper.
The fact of the matter is that until the unemployment rate improves, the economy and thus, retail sales, will meander somewhere between soft and kind-of-sort-of-good. That being said there are strategies that manufacturers can take to make 2011 successful.
Don’t forget the majority
As we’ve learned from recent experiments, it is not wise to focus the majority of a company’s resources toward an affluent clientele during a protracted recession and a limping recovery. Walmart recently squashed attempts in this direction for a “back-to-the-basics” strategy that that reemphasizes value, selection and ease of shopping. Even as the economy begins to improve, sales the first week of each month, the period when people receive their paychecks and when millions of American’s receive their food stamp vouchers, are enormous.
According to the New York times, one in eight Americans receive their food from food stamps and one in four children. Recovery or not, there are still millions of Americans that are shopping for values on the most basic of items such as milk, bread and diapers just to make ends meet.
Price will continue to be the most important “P” in merchandising for a very long time.
Elegant value
Simultaneously, there is a modest recovery taking place and recessionary recoveries typically start with the middle-class. As more white collar workers and professionals that have been laid off in the past year begin to return to work and as the rest of us begin to feel as though things might be improving, shoppers will begin looking for elegance again, but at a value.
Middle-class and more affluent shoppers will begin to return to their favorite stores in 2011 as they have begun to do this holiday season, but the purse strings will still be tighter than before. Products and services that provide relaxation, entertainment and encourage family activities will be well received as long as the cost-value equation is strong.
Innovative solutions
During 2008 and 2009 millions of people were laid off meaning that those that remained employed saw their workload increase significantly. Meanwhile, children’s ball games and performances still go on and the house still needs to be cleaned. Time saving and convenience solutions are needed now more than ever and shoppers will be on the lookout for the next great product that will actually make their lives easier.
06 JunUptick in Holiday Sales – What Does It Mean for 2011?
30 JulMLM – Multi-Level Marketing, Also Called Network Marketing
Multi-level marketing (MLM) also referred to as Network Marketing is a business distribution model that allows a parent multi-level marketing company to market their products directly to consumers by means of relationship referral and direct selling.
Independent unsalaried salespeople of multi-level marketing referred to as distributors (associates, independent business owners, franchise owners, sales consultants, consultants, independent agents, etc.), represent the parent company and are rewarded a commission relative to the volume of product sold through each of their independent businesses (organizations). Independent distributors develop their organization by either building an active customer base, who buy direct from the parent company and / or by recruiting a downline of independent distributors who also build a customer base, expanding the overall organization. Additionally, distributors can also earn a profit by retailing products which they purchased from the parent company at wholesale price.
Distributors earn a commission based on the sales efforts of their organization, which includes their independent sale efforts as well as the leveraged sales efforts of their downline. This arrangement is similar to franchise arrangements where royalties are paid from the sales of individual franchise operations to the franchisor as well as to an area or region manager. Commissions are paid to multi-level marketing distributors according to the company’s compensation plan.
There can be multiple levels of people receiving royalties from one person’s sales.
It is sometimes difficult to distinguish legal and reputable MLMs from illegal pyramid or Ponzi schemes. MLM businesses operate in the United States in all 50 states and in more than 180 other countries worldwide, and new businesses may use terms like “affiliate marketing” or “home-based business franchising”. However, many pyramid schemes try to
present themselves as legitimate MLM businesses.
In the most legitimate MLM companies, commissions are earned only on sales of the company’s products or services. No money may be earned from recruiting alone (“sign-up fees”), though money earned from the sales of members recruited is one attraction of MLM arrangements. If participants are paid primarily from money received from new recruits, or if they are required to buy more product than they are likely to sell, then the company is a pyramid or Ponzi scheme, which is illegal in most countries.
A very reputable MLM company which was recently listed in the Inc500 magazine as the 37th fastest growing business in the US is GDI or Global Domains International.
Their product is website hosting which only costs $10.00 a month, and the first seven days are free. There are many members earning a 6 figure residual income plus bonuses with GDI. The very small $10.00 a month investment countered by the huge money making potential of GDI makes it a business that anyone can start and succeed in. Even people in very poor third world countries are making money with GDI.
In other MLM companies, new salespeople may be required to pay for their own training and marketing materials, or to buy a significant amount of inventory. A commonly adopted test of legality is that MLMs follow the so-called 70% rule which prevents members “inventory loading” in order to qualify for additional bonuses. The 70% rule requires participants to sell 70% of previously purchased inventory before procuring new orders. There are however variations in interpretations of this rule.
Some attorneys insist that 70% of purchased inventory should be sold to people who are not participants in the business, while many MLM companies allow for self-
consumption to be a significant part of the sales of a participant. The Federal Trade Commission offers advice for potential MLM members to help them identify those which are likely to be pyramid schemes.
Many companies have devised a variety of MLM compensation plans over the decades.
Stairstep Breakaway plans are the oldest and most popular. They feature two types of distributors — managers and non-managers — and three types of pay:
Baseshop overrides are overrides (commissions) paid to managers by their subordinate non-managers, collectively called a baseshop. This is the same as any other sales organization.
Generational overrides are overrides of managers from the baseshop of managers who were previously their subordinate. Most plans compensate at least three generations of such managers.
Executive bonuses are commissions for managers who exceed a sales quota. For example, 2% of the total company sales revenue may go to a bonus pool that is shared monthly pro rata to managers who exceed $10,000 in that month.
Unilevel plans offer unlimited width with a set number of levels in depth. Unilevel compensation is paid out based on a set percentage for each level in depth.
Matrix plans limit the width of each level in a distributor’s group, forcing strong distributors to pile (“spillover”) their recruits over people who did not sponsor them.
Binary plans limit the width of each level to two legs. Commissions are based on “cycles,” where a distributor is paid a fixed amount whenever both legs achieve a certain number of sales units each. Commissions are paid incrementally when the sales volume in each leg matches.
Elevator or Matrix schemes feature a board or a list on which each distributor pays in one or more product units to participate. When a certain number of units have been paid in, the structure splits and the earlier participant receives consideration. The Matrix scheme article discusses the legality of this plan.
Differential Pay Scale are compensation plans in which a person’s override is based on the difference in compensation level between them and the person that made the sale or the highest level person between them and the sale. In this model, if someone downline is at an equal or higher compensation level there will be no override since the differential would be 0 or negative. The plus side is that these plans can pay in unlimited depth and people get overrides from any leg in which they maintain a higher pay level than.
The Federal Trade Commission (FTC) issued a decision, In re. Amway Corp. in 1979, which indicated that multi-level marketing was not illegal per se. However, Amway was found guilty of price fixing (by requiring “independent” distributors to sell at the low price) and making exaggerated income claims.
The FTC advises that multi-level marketing organizations with greater incentives for recruitment than product sales are to be viewed skeptically. In April 2006, it proposed a Business Opportunity Rule intended to require all sellers of business opportunities including MLMs to provide enough information to enable prospective buyers to make an informed decision about their probability of earning money. FTC trade regulation rules usually take 1-1/2 to 3 years before a final rule is established.
Criticisms have been raised against MLM programs for being cult-like in nature. Many MLM programs feature intense motivational programs, which can be hard to distinguish from cult propaganda. Criticism of Amway as a cult have been regarded as largely baseless, though some of the “Independent Business Organizations” within Amway have been accused of operating as cults.
26 DecSpecial Alternative Minimum Tax Break on New Car Purchases Available in States with No Sales Tax
Under the American Recovery and Reinvestment Act, enacted February 17, 2009, taxpayers who buy a new vehicle this year can deduct state or local sales taxes paid on the purchase. Unlike any other itemized deduction for taxes, AMT payers also are eligible for this break.
A problem, however, is that individuals in states without a sales tax — such as Alaska, Delaware, Hawaii, Montana, New Hampshire and Oregon — get no benefit from this change, simply because they are not paying a deductible tax as defined in the law.
Now, in a major policy change benefiting folks in these states, the IRS has issued a notice allowing this deduction for “other fees or taxes” paid on automobile purchases. Here is the text of the notice:
WASHINGTON —The Internal Revenue Service and Treasury Department today announced that a tax break for the purchase of new motor vehicles is available in states that do not have a state sales tax. Under the American Recovery and Reinvestment Act of 2009, taxpayers who buy a new motor vehicle this year are entitled to deduct state or local sales or excise taxes paid on the purchase.
The IRS and Treasury have determined that purchases made in states without a sales tax — such as Alaska, Delaware, Hawaii, Montana, New Hampshire and Oregon —can also qualify for the deduction.
The IRS said today that taxpayers who purchase a new motor vehicle in states that do not have state sales taxes are entitled to deduct other fees or taxes imposed by the state or local government. The fees or taxes that qualify must be assessed on the purchase of the vehicle and must be based on the vehicle’s sales price or as a per unit fee. According to the IRS, Congress intended for these fees or taxes to qualify for this special tax deduction.
“This special tax break is available for people purchasing a new car this year, and that can include people in states without a sales tax,” said IRS Commissioner Doug Shulman. “This means that more people can take advantage of this deduction when they file their tax returns next year.”
To qualify for this deduction, the vehicle must be purchased after Feb. 16, 2009, and before Jan. 1, 2010. Taxpayers can claim this special deduction only on their 2009 tax returns to be filed next year.
The deduction is limited to the fees or taxes paid on up to $49,500 of the purchase price of a qualified new car, light truck, motor home or motorcycle.
The amount of the deduction is phased out for taxpayers whose modified adjusted gross income is between $125,000 and $135,000 for individual filers and between $250,000 and $260,000 for joint filers.
The special deduction is available regardless of whether taxpayers itemize deductions on their returns. Taxpayers who do not itemize will add this additional amount to the standard deduction on their 2009 tax return. The IRS reminded taxpayers the deduction may not be taken on 2008 returns.
George Bauernfeind is with AMT Individual – providing information on Alternative Minimum Tax Planning . He writes articles to help the tax payers to pay less Alternative Minimum Tax. He recommend to use Alternative Minimum Tax Calculator to reduce Alternative Minimum Tax.
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