VAT-freeze promos largely lukewarm

In November 2008, Chancellor Alistair Darling announced a temporary reduction of the VAT rate, from 17.5 percent to 15 percent, until 1st January 2010. At the time the media and retailers argued that the rise would do little to tempt consumers to spend more and that updating prices at the busiest trading time of the year would mean more work than reward. For some retailers, particularly those with a bricks-and-mortar presence, a systems change at Christmas couldn’t be more ill-timed.

Despite their complaints, retailers launched some innovative promotions to drum up business and awareness of the discounted rate (see “VAT reduction triggers flurry of promotional activity”, December 2008 issue). A similar wave of creativity hasn’t heralded the return to the 17.5 percent rate, however. 

Low-key leads the way
Plenty of emails in early January referenced the VAT rise, but few made a fuss of the change. That’s not entirely surprising, given that the increase is hardly good news for consumers.
The merchants that made the most of the increase were those that decided to delay raising the prices. For instance, a full 10 days after the VAT hike went into effect, eco-friendly goods marketer EthicalSuperstore.com was still displaying a link on its emails to a web page with details on the VAT-freeze offer.

In an email sent on 8th January, womenswear retailer Dorothy Perkins included a PS in its email to reassure concerned customers that its prices wouldn’t go up. Department store chain John Lewis did something similar, letting customers know on 11th January that as it was committed to “offering the best value on the high street”, it would “delay” adding the extra 2.5 percent VAT to most of its products.

Apparel cataloguer Boden used the VAT rise as a hook to promote its January sale, declaring, “The VAT’s gone up but our prices have come down”. One of the more creative promotions came courtesy of White Stuff, which not only held prices but also pledged to donate 2.5 percent of January’s revenue to charity.

VAT promotions weren’t limited to emails. The front cover of catalogues from fishing gear mailer Fishtec, seed and plant merchant Unwins, apparel cataloguer Lands’ End, and general merchandiser Argos were among those promising they would absorb costs and hold, or even lower, prices.