Cataloguers come to grips with vat reduction

Cataloguers come to grips with vat reduction

If the government thought they’d receive a hearty thank-you from
merchants in response to its reduction of the vat, from 17.5
per cent to 15 per cent, it was sorely mistaken. The mass media
have by and large written off the cut as too small to boost
consumer spending. And direct marketers by and large agree. Even
so, some are working hard to make the most of the reduction,
which goes into effect 1st December.

At multi title mailer Scotts & Co, “our IT people are
working to ensure that all goods despatched-despatch being the
legal moment of sale for Scotts-after 30th November will be
debited to customers’ credit cards at prices that reflect a vat
rate of 15 per cent,” said chief executive Nigel Swabey.
“Cheque payments only will require refunds to be issued. If
it transpires that we cannot change all billing in time for
Monday, I suspect we will apply a universal credit of around
£2 per order.”

Swabey noted that Scotts-whose gifts and home goods titles
include Scotts of Stow, The Original Gift Co and Cucina
Direct-was in a better position than some other cataloguers
because it had not yet printed its January editions. But for
those that have, he added, “it would be a relatively simple
matter for even these companies to vary the price billed on their
direct sales”.

Those companies could use the fact that the printed prices may be
higher than the actual prices to their advantage, said Tony
Adams, managing director of agency TA Design. “Perhaps this
could be a great opportunity to contact your customers and
prospects with some really positive news for a change,”
Adams said. “You could send a postcard showing examples of
savings or an e-newsletter with a ready-reckoning table of
savings. Website prices are easy to change. And make sure your
call centre is briefed to give the good news-it’s all about

Some marketers are already using the vat reduction as a
promotional tool. Electricals retailer DSG International, the
parent company of Currys, Dixons and PC World, began offering
discounts reflecting the lower vat on 25th November, the day
after the reduction was announced. The home page of the Dixons
website, for instance, declares “Vat Savings Now. Use promo
code ‘VAT 15’ at checkout to get discount”. Fashion
cataloguer Boden wasted no time in sending a promotional email
that declares: “Gordon, if you’re going to cut VAT, cut it
properly: 17.5 per cent OFF all orders plus FREE delivery. (This offer
includes childrenswear which doesn’t actually have any VAT, but,
you know, what the heck?)”

Others, however, have yet to see a positive side to the vat
reduction. Anne Walker, a partner in cataloguer International
Dance Supplies said she was “shocked” by the
initiative. “Changing the vat rate at the busiest time of
the year can only bring more stress and expense to the already
hard-pressed retailers. And for what effect: 2.5 per cent, when
most retailers are not able to encourage shoppers with their
discounts of 20 per cent and more?”

“As ever with grand government gestures, it’s
pointless,” agreed Mark Dugdale, chief executive of
multibrand jewellery and collectibles cataloguer Compton &
Woodhouse. “Will a £2.50 reduction on a £100
product make any difference to spending patterns? I don’t think
so, but it does create a monumental amount of work for retailers
from all channels and disciplines to change prices, especially
for Christmas.”

For his part, Swabey who is also president of trade association
The Catalogue Exchange, said that direct marketers will be able to
incorporate the pricing changes more easily than
bricks-and-mortar retailers. “Conventional retailers will
need to reprice most of their stock on the shelves,” he
said. “In some cases, prices have been incorporated within
the packaging, and these cases will be difficult to rectify.
Direct retailers, being more agile, should be able to adjust to
the change more swiftly.”


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