Archive for March, 2009

The VAT Reduction – 4 months on

Monday, March 23rd, 2009

I was speaking to a friend who has a Sportswear business. From a single shop he has launched an on-line presence which now accounts for 90% of his sales and is the leading on-line seller for several product lines. He has not reduced any prices and the 2.1% VAT reduction has gone straight down to boost his ‘bottom line’. Coupled with the reduction in his bank interest he is doing ‘very nicely’ at the moment. He also stated that none of his competitors have reduced their prices either.

Perhaps it is time to take a view on the effects of the VAT reduction introduced at the end of November. I said at the time that I thought it was a very poor way to stimulate the market.

None of the restaurants I frequent have amended any of their prices (although there’s a plethora of special offers), neither has my dentist or hairdresser for that matter. Price reductions at the garage, pub and off licence have been offset by the duty increases.

I was in Comet recently buying a product which had reduced from £149 to £99. I negotiated hard to get a further reduction to no avail and eventually conceded to pay the £99. However, when I went to pay at the till I was given a £2.10 discount for the VAT reduction. I didn’t see this being offered anywhere, I was not made aware when I was negotiating and although it was a pleasant surprise it did not influence my purchasing decision.

I have been informed by ‘insiders’ at John Lewis that the VAT changes have cost them getting on for £10 million. Firstly they had to produce tens of thousands of signs and posters. Secondly every till had to be re-programmed to give the 2.1% discount. Thirdly, as JL sell principally in ’round pounds’ they’ve had to service each till on a daily basis with substantial silver and copper coins to be able to give the correct change and we all know how much the bank charges for handling coins in and out.

Nobody, as far as I’m aware, has repriced their spring collections as the operation was too far down the line when the change was announced and it is unlikely that the Autumn season will be any different as the VAT reverts back to 17.5% at the end of the year.

When the reduction is reversed in a few more months (although don’t be surprised if it’s implementation is ‘delayed’ until after the election) no doubt the retailers will be involved in more costs.

The VAT reduction may be influential in reducing the inflation figures but I suspect it’s had little effect, if any, on it’s original intention of boosting sales.

Tony Heywood – Gilcrest Services Ltd
Retail Troubleshooter
Rescue and Recovery Consultant

From BBC website 24/3/09

Rob Pike from the Office for National Statistics remarked that December’s cut in VAT from 17.5% to 15%, was being reversed.

A substantial number of shops which passed on the VAT cut in December seemed to have changed that by February, he told BBC News.

“We have seen many prices return to the previous selling price in November, or even gone beyond that. And that is quite widespread.”

London Sales up in February

Monday, March 16th, 2009

News from The British Retail Consortium (BRC) confirming today what we’ve been saying about ‘Tourist Shoppers’

London retail sales rose 5.9% on a like-for-like basis in February outperforming the rest of the UK, which recorded a 1.8% fall in like-for-like sales over the month.

The BRC said that central London footfall was hit by the snow in the first week of February but picked up later in the month, partly thanks overseas visitors taking advantage of the weak sterling against the strong euro. UK shoppers also boosted sales during the school half-term holiday week.

The BRC said that clothing and footwear sales in February had benefited from cold weather and extended discounts.

Over the three months ended February like-for-like retail sales in central London rose 3.5%, against a 1.4% decline across the UK as a whole.

BRC director general Stephen Robertson said: “Despite the recession and a poor start to February due to extreme snow, the capital’s retail sales outperformed the rest of the UK. London retailers benefited as the weak pound made shopping here more attractive for overseas visitors – especially those from eurozone countries. Half-term also helped. More families opted to stay at home this year rather than go on foreign holidays. Consumer confidence held up a bit better as London is proving slightly more resilient to recession than other parts of the UK.”

Tony Heywood – Gilcrest Services Ltd
Retail Troubleshooter
Rescue and Recovery Consultant

Don’t Stop ‘Til You Get Enough

Saturday, March 14th, 2009

So ‘The Man’ is holding his alleged ‘Swansong’ in London over the next year. Michael Jackson announced just over a week ago his final shows in London with a series of 10 concerts. With the uncertainty of any more concerts anywhere else in the world the demand was unprecedented. Additional dates have been released almost daily and with the sale to the general public today of the tickets we now have at least 50 dates. Don’t be surprised if even more dates are announced and presumably a new album. Since the O2 centre holds 20,000 we will have 1 million ‘bums on seats’.

There are already packages offered around the world to ‘See Michael Jackson in London England’. Don’t be surprised if at least half the tickets end up overseas, whether bought via the agencies or on eBay etc. We are talking about an extra 500,000 tourists coming to the UK.

 The last figures I could find claim that overseas tourists spend in excess of £500 per person. This will be spent on dining, entertainment and SHOPPING! We are looking at over £250m of additional spending (of which the majority may be in London) and I wouldn’t be surprised if this is comfortably exceeded when these visitors pack their bags full of UK bargains on the back of the ‘cheap’ pound.

So as I’ve said before, if you’re lucky enough to be in a tourist area then 2009 may not be so bad after all.

Tony Heywood – Gilcrest Services Ltd
Retail Troubleshooter
Rescue and Recovery Consultant

How Safe is your Supply Chain?

Monday, March 2nd, 2009

We’ve covered several aspects of your business recently but what about other businesses – in particular your suppliers. Have you considered what would happen if one of the links in your ‘supply chain’ broke? It’s time to set up a contingency plan.

OK, it’s not so terrible if one of your many product suppliers ceased trading, unless of course you’d paid them pro forma but supposing your IT maintenance supplier went out of business. What would happen if all your software and systems went down? You couldn’t operate tills, no card processing, no sales and stock information? That’s the type of disaster situation which could bring an efficient company to it’s knees.

Take some time out with your management and go through your supplier listing. Draw up a plan of what alternative arrangements need to be in place if they ceased trading with immediate effect. Check which suppliers may be part of the same group. What if the whole group went into administration? Speak to critical suppliers and ask them if they have any contingency arrangements in place.  A word of warning. Many years ago our software supplier offered us 3 years maintenance for the cost of 2 if we paid them now. Thankfully, we declined the offer as within a month they went into Liquidation.

As we’ve said many times – 2009 is going to be a difficult year. There are dangers to businesses from all directions and as the well known saying goes ‘Fail to Prepare then be Prepared to Fail’

Tony Heywood – Gilcrest Services Ltd
Retail Troubleshooter
Rescue and Recovery Consultant

Footnote on the last post ‘Prepare for the Invasion of Tourist Shoppers’

Just in case you didn’t see the additional comments

Here’s the HM Revenue & Customs link for Tax Free Shopping (where overseas customers get the VAT refunded)

This may also be useful

Global Refund