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How We Got it Wrong

This may not be a popular opinion, but I believe that NY affiliates used the wrong approach to this whole tax situation; or at least I used the wrong approach. The first thing is I didn’t really get prepared. As soon as the law was made public and New York State Department of Taxation and Finance released their memo on May 8 I should have looked into it further. It really never crossed my mind that merchants would actually decide to drop affiliates over the sales tax issue. Being from NY, I am used to paying sales tax. I may complain about sales tax but I accept it and pay it. Paying sales tax is not really a part of my decison to purchase from any particular merchant. What is more important is convenience, customer service, availability and shipping costs.

Once I met with my accountants, I began to get a little nervous over the situation. Amazon’s lawsuit also created concerns, but since they were going to collect the tax while this whole issue was settled in court I was a little calmer. What I should have realized is that this issue was extremely complicated. It is also an issue that will take some time to be resolved.

In early May, I, like many affiliates, merchants, program managers and networks were relatively quiet – in public. We had a discussion or two on the subject but we really did not address the particulars. And then it happened, Overstock said good bye.

Overstock announced that they would terminate all NY affiliates while this was being decided in court. They said they were choosing customer first. Slowly a couple other merchants quietly followed. Some just dropped NY affiliates because “it is their right to terminate affiliates”. Others came out and credited the tax law as a reason for termination. Things were still rather quiet. There was silence from many and still no sense of urgency – in public. On a private level I was beginning to panic, unable to sleep at night.

As individuals we began to post at some forums asking merchants and OPM’s to check in. We also contacted them on individual, private basis. I think that was one of our biggest mistakes. What we should have done is ask each merchant or OPM/AM outright what was going on. We should have said in a public forum – “Mr. Smith as OPM of these programs what is our status?” We should have asked the merchant in public -“Might we have a problem?”. We needed to ask the question direct and in public. The lack of an answer would have given us a clue as to what would follow.

We never expected a definitive answer, but we did expect and deserve knowledge that our business affiliation might be at risk. If we could have at least been prepared for the last minute actions we could have better handled the situation. By not knowing ahead of time what might happen, it became not only a business issue, but also an emotional issue.

Many of the merchants that announced at the last minute were those merchants we had a stronger connection with. We respected them and were loyal. Somewhere along the way, a sense of friendship had entered into our relationships. Being told we were being terminated hit us hard. The lack of warning was the ultimate assault. We had in some cases less than 12 hours notice before our links were deactivated.

We got a sorry for the inconvenience, we need to terminate you. This was not a minor inconvenience; this was the start of losing my business. This is a business I have spent many hours building; a business that was finally really beginning to flourish; a business that I put my heart and soul into. While a program manager might have been upset over making the announcement it was not just an emotional issue for the affiliates. It was, and still is, a major setback in income. Affiliates are not affiliates as a hobby. We are affiliates as a business.

Large holes appeared in my sites. Pages I had created to specifically highlight a merchant category or product were now devoid of products for my visitors. Never mind the income aspect, my reputation with my visitors was at stake.

Now was the mad dash to quickly find replacements. We had no time to be choosy. No time to find a good fit replacement. We spent hours upon hours making changes, and we still are not done. Just as we think we are done another termination trickles in, sometimes for the very program we just added.

As time goes by we are seeking alternative merchants. When finally this tax issue is resolved we will be faced with the decision of whether to return to merchants who dropped us. The emotional answer right now is no. In all honesty however for most it will eventually become a business decision so the answer might be yes. I doubt any program will make it up to us by special offers. Affiliates are replaceable. What needs to remembered is that merchants are replaceable too. Sometimes we both just have to hunt to find the right fit.

There are other things we got wrong and we should have done differently. Hopefully we have learned.

There are at least few things I have learned. The first is that I must remember to put business first and to realize that others will do the same. Seize control of my business. Diversify even more and no matter how much I value a merchant or manager always have alternatives ready. Next is that I need to speak up and be heard. Don’t assume anything about any business relationship because business is business.

{ 2 comments… add one }

  • Paul June 10, 2008, 6:53 am

    You know at first I was suprized to think you thought affiliates were wrong. But now I understand what you mean. Your just looking at how we could have been better prepared and took more control right?

  • Melanie June 10, 2008, 7:08 pm

    Thanks for stopping by Paul.
    Yes, what I am trying to say is that looking back I could have done things differently. A different approach would have helped me be prepared. I also might have expected that a few merchants in particular would drop NY affiliates and been prepared with replacements.

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