The Future of Consumer and Retail - A Tax Perspective

Transformative forces are urging consumer and retail businesses to adopt new strategies

Amidst the disruption of an evolving marketplace, consumer and retail businesses are forced to revisit their e-commerce strategies, and more broadly their business models, to keep consumers engaged and improve their experience — while controlling pricing and maintaining margins.

Critical tax implications

The emergence of new categories of assets and business processes critical for the success of e-commerce and D2C strategies creates several tax considerations:

• Are new intangible assets being developed?
• Are these assets relying on different development, enhancement, maintenance, protection, and exploitation (DEMPE) functions?
• Is the value of legacy intangible assets (brands, customer and marketing intangibles, technology) being enhanced because of e-commerce initiatives?
• Are new high value functions being performed (for example, digital marketing, advance data management and analytics, supply chain and e-commerce inventory management)?
• Ultimately, do all the above constitute new value drivers that increase existing revenue, generate new revenue streams, or create cost efficiencies?

Looking ahead today

All consumer and retail companies investing in e-commerce should revisit their operating models and structures to help ensure they are properly addressing the relevant tax implications and potentially unlocking tax value.

How KPMG can help

KPMG is helping companies effectively design and implement e-commerce and direct-to-consumer operating models that help drive significant financial benefits and help to ensure against unexpected costs. From a tax perspective, KPMG is assisting companies on a range of plans starting from defensive tax planning mostly focused on transfer pricing positions to a more comprehensive approach that looks at the entire operating model with the goal of unlocking operational and financial value in addition to addressing critical tax positions. A simple place to start is to ask:

• Where is my organization in its e-commerce and direct-to-consumer journey (for example, growing online sales, development or license of e-commerce platform, use of artificial intelligence, hiring data scientists/ technology officers)? 
  
• What impact do these initiatives have on my company’s overall value chain (for example, creation of new roles and responsibilities, or creation of new intangibles)? 
• What is the maturity scale of e-commerce strategies and what are my organization’s overall tax considerations?