Why this VAT thing isn't going to work!

IP2 · #1 01-12-2008, 10:54 PM

Online I press a few buttons and hey presto, I have odd prices but everything has been reduced!

In store is a totally different matter, my average store carries over 5000 different product lines, each individually priced, so we take off the 2.1% at the till (yes 2.1% I will explain if I have too)

Now what would happen if I started introducing stock on the shop floor that was correctly priced for the new VAT level? Yep, customers would expect a 2.1% discount on it when they got to the till and my staff would get not only very confused but also a lot of hassle if some items attracted the discount and others didn't....so it makes no sense to price thinks at the new lower rate and mix them with the other products.

Basically at retail level...it just does not work at all and in just over a year the rate goes back up, and I can assure you, people will not accept a 2.1% additional charge to the listed price at the checkout.... I have spoken to many retailers and basically the agreement is, the cost of implication totally outstrips the potential sales increase...

So in basic terms...very few retailers are going to change anything, the whole exercise was totally pointless.

Peter W · #2 01-12-2008, 11:00 PM

I agree entirely.

I bought a couple of small items today, they were both at round-sum amounts. I suspect the price was unchanged from last week.

I read that it cost ASDA £10 million to deal with the change in VAT. Money down the drain.

Chubster · #3 01-12-2008, 11:04 PM

We havent changed our prices and not one customer has said anything.

So what are you going to do when you do introduce new stock John?

IP2 · #4 01-12-2008, 11:17 PM

Well if you look at Legend Cookshops (Kent) High quality cookware for your kitchen you will see our prices are now all over the place, we have totally passed on the saving online and tried to explain to our customers what we have done. I have done the same on all my online businesses...

Quote:

So what are you going to do when you do introduce new stock John?

The only sensible thing to do is to price them at 17.5% VAT and offer the discount at the till, it will be impossible to mix them in and with just a year of this, the timescale is ridicoulous at retail level.

Shoppers are not going to suddenly understand that the prices marked are plus 2.1% in Jan 10 and pay more at the till than an item is marked.

What this Govt has shown is that they do not understand SME's at all...

Cathy · #5 01-12-2008, 11:24 PM

As I've said before, idiotic, short-sighted headline grabbing move which will have no other effect than to push this country into ever higher amounts of debt.

I read that one smallish chain had calculated that it would cost £40K to reticket. And of course this government would of course insist that any staff doing the re-pricing be paid at least the minimum wage they have set.

They (the government) simply have no idea of the real world. They live in their ivory tower and make their pronouncements and expect everyone to be ever grateful.

I notice the VAT rate will be changed back in time for them to collect their 17.5% VAT on the Olympic Games - now how ludicrous is that...the government is charging itself VAT.

I'm sure someone much cleverer than me could work out why that's a good thing but in my simplistic world it makes about as much sense as a chocolate teapot!

Peter W · #6 01-12-2008, 11:27 PM

Interesting that one business has passed on the VAT saving, while another has kept it.

What caused you to reach that decision?

Are you looking at what your competitors are doing?

Do you think you might change your mind at any time?

Peter W · #7 01-12-2008, 11:31 PM

Quote:

Originally Posted by Cathy

I notice the VAT rate will be changed back in time for them to collect their 17.5% VAT on the Olympic Games - now how ludicrous is that...the government is charging itself VAT.

I'm sure someone much cleverer than me could work out why that's a good thing but in my simplistic world it makes about as much sense as a chocolate teapot!

VAT works by each business recovering VAT and then charging the next business VAT, all the way down the chain until it reaches a person who cannot reclaim it... theoretically, the consumer.

In this way, the tax burden is the same whether an item passed through a dozen different businesses on its way to the shop shelf, or just through 1. Which is how it should be.

IP2 · #8 01-12-2008, 11:34 PM

Quote:

Originally Posted by Peter W

Interesting that one business has passed on the VAT saving, while another has kept it.

What caused you to reach that decision?

Are you looking at what your competitors are doing?

Do you think you might change your mind at any time?

Personally I have looked at everyone of my businesses and passed on the saving wherever I possibly can. Some are easier than others. I really don't see making a profit from this as an option, but it is a great chance to lower our prices under the right circumstances at zero cost...

Cathy · #9 01-12-2008, 11:37 PM

If you take an online store where chanigng the VAT is 'relatively' easy, then I see no reason not to pass on the VAT cut. After all you should have set your margins correctly in the first place and if you have then you don't *need* the extra 2 point whatever percent.

Bricks and Mortar is a whole different bal game and while you might wish to pass on the savings to the customer for the same reason as I've stated, the practicality and cost of doing that is a much greater chalenge.

I also suspect it makes a difference in what you're selling - after all the VAT change on a car makes a reasonable difference - someone I think quoted about 500 pounds. That's enough to buy a weekend or two away or even a cheap foreign holiday. But if you're buying a product that costs £9.99 are you really going to be bothered about the 20p saving you would/could/might have made?

Peter W · #10 01-12-2008, 11:43 PM

Quote:

Originally Posted by Cathy

If you take an online store where chanigng the VAT is 'relatively' easy, then I see no reason not to pass on the VAT cut. After all you should have set your margins correctly in the first place and if you have then you don't *need* the extra 2 point whatever percent.

Interesting - as a retailer, do you base your prices on your own margins, or on external factors (what competitors charge for the same items, what competing items cost, time of the year, etc)?

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