December 13th, 2010

Looming VAT Rise Means Crunch Time for Retailers

The VAT change of January 2011 is looming and I think we will see a last minute price push as retailers make the most of the current 17.5 % VAT. After the 4th of January VAT will rise to 20%, which could potentially push prices on the high street up by 2%. Despite a 6-month warning period, the VAT increase is being identified as a potential threat to retail employment, as well as a downturn in consumer spending, and could ultimately slow the pace of the economy’s recovery.

I believe many will fear the potential impact of a tax rise in the post Christmas sales period, as customers rush to beat the increase.

For the high street, a blanket price increase is no small matter, with the potential cost to retailers weighing in at £90m*. Changing store pricing itself is no small task, and the worst hit will be catalogue stores, who incur the cost of reprinting as well as the change of in store pricing and systems.

I believe that many high street stores will be swallowing the VAT rise and not pass it onto the customer. One sector which can avoid these fees is the online etail sector, who will be able to use services such as our Feed Manager to automatically updates costs and availability, saving time and cost, ensuring a superior service to the consumer. Inaccuracies in online listings can be damaging to businesses, as they fail to deliver what the customer expects: an up to the minute listing avoids disappointment, while encouraging customer loyalty.

With the average household set to lose £425 a year**, it will be another tough year of feeling the pinch, which is why money saving technology will be ever more important. Price comparison websites will continue to gain momentum, as customers are ever more price sensitive, yet continue to demand an excellent online shopping experience. The repercussions of the new Budget in the New Year are bound to see cutbacks, and it is crucial to ensure spending continues that businesses continue to remain innovative.