Bundle Up For Winter, and Your Business!
Now that October has passed, it’s clear the holidays are coming (we’re so excited), and with it comes the big push to earn the extra moola associated with them. When deciding the best way to leverage this season, there are lots of options to consider. One of which is upselling—suggesting complementary products to customers.
The Ins and Outs of Bundle Fulfillment
In fact, this technique is particularly well suited for eCommerce. After all, your ability to track your customer’s shopping preferences makes it easier than ever before to make suggestions for additional purchases. One simple way to upsell is to “bundle” two or more products together. This provides customers with a faster, more convenient way to purchase items they might already need, in addition to steadily increasing your sales volume.
But before you jump on the bundling bandwagon, there are a few fundamentals to keep in mind. We’ve outlined some general rules to follow, best practices for bundling on Amazon, plus ways to ensure you’re collecting the correct amount of sales tax for ole Uncle Sam.
Now that you’ve decided to sell grouped products on your site, it’s important to understand what actually constitutes as a bundle.
A bundle is not multiples of the same item—a 12-pack of batteries, for example. A bundle is two, or even three, products that complement each other: A Christmas stocking, a Christmas tree skirt, and Kenny G’s latest Holiday album is an example of a bundle (we really can’t wait for the holidays).
Whether or not you give your bundles a clever marketing name, you must offer the consumer some sort of value by purchasing a bundle. The bundle can either save them money by purchasing all of the items, or time if the items aren’t available separately.
Consumers are more likely to purchase bundles if they include something they need anyway, or if there is a discount when purchasing multiple products together.
Amazon’s Bundling Guidelines
Perhaps no other e-retailer has perfected the art of upselling online more than Amazon. If you’re a business selling bundles through an Amazon store, definitely check out their Product Listing policies to get started on the right foot.
Amazon allows sellers to bundle products in all categories except:
- Video Games
But while you can’t bundle two action flicks together, you can bundle an exercise video with a set of weights, because the weights are in a bundle-approved sales category. (We think this bundle is best left for New Year Resolutions.)
Additionally, bundles can:
- Only be listed in a single category
- Can’t contain any separate warranty products or extended service plans
- Must have their own unique identifier such as UPC, EAN, GTIN or Manufacturer Part Number
Lastly, Amazon reviews all bundle submissions with the benefit of the consumer in mind, so you’ll also want to be sure you offer consumers the value we mentioned previously. (Though, anything bundled with Kenny G has clear value in our book.)
How Bundles are Taxed
Like all products sold online, bundles are very likely going to be subject to sales tax. Things can get tricky, though, when one of those products you’re selling is taxable (or taxed at a special rate) and the other isn’t. Of course, if you separately price and itemize each item in the bundle—no worries. The worries come when you combine items and offer them for a single price.
Let’s say, for instance, you’ve bundled together a box or two of gourmet tea with a cozy lap blanket as a holiday gift for your mom (she’s going to love it!). If you are selling in a state where tea isn’t taxed because they offer an exemption for home consumption, the question becomes, how do you determine the correct tax due? Is it based on the regular retail price of the taxable blanket, your wholesale cost for the blanket, or something else? The answer, as you might have guessed, is generally “something else.”
In most states, when a bundle includes one regularly taxable item as well as other items that are either exempt or taxed at a special rate, the total retail selling price of the bundle becomes taxable at the standard rate, regardless of the other products. Simply put, while bundling provides you all sorts of marketing advantages, it does not necessarily provide any sales tax advantages!
Sales tax rules vary from state to state (that’s what makes sales tax compliance a challenge!) and there are any number of exceptions to this general rule. According to our army of tax experts, you should consult the tax laws for each state in determining the tax impact of your particular bundle.
Bundles can be a great tactic to increase both your revenue and your customer’s value, but there are some things to consider (like sales tax). It can get complicated, but doing the research before making bundling decisions can save you some headaches down the road.
Want more information on taxes and your eCommerce business? Download The State of Sales Tax Report, or better yet, subscribe to get biweekly updates to your inbox!
Have some more questions? Let us know! We’re happy to help, and we love talking taxes.
Are you an Amazon seller? Check out our Amazon site!