Six months to save the high street

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I can see the adverts now: “Beat the VAT rise”, “Buy now, don’t pay later”, “Price plummet until 2011”.

The deferment of the VAT rise to 20 percent until 4 January 2011 is an opportunity that no retailer on the high street can afford to ignore.

The pain of paying down the national debt will mean there will be no dramatic upturn in the economy over the next 18 months, it will be a slow grinding recovery during which only the fittest will thrive.

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I have heard so much defeatism from independent retailers during these tough times. They can’t compete with the multiples, the supermarkets, or the department stores.

That defeatism is certain to be a self-fulfilling prophecy unless high street retailers act now.

I guarantee that this country’s greatest retail minds are plotting prices that will rise this year so that they can be cut next year when the VAT rise hits.

Picture a £100 basket of goods from Tesco or Marks & Spencer. We all know they are capable of increasing the price of that basket to £105 without any of us noticing or changing our shopping habits.

They can even go with the “Beat the VAT rise” marketing message because the slogan makes no false claims about their own pricing.

Come 4 January, they can freeze their prices so that the basket still costs £105, and roll out their new advertising campaign: “Prices frozen! We’ll pay the VAT so you don’t have to”

Their customers will not notice that their prices increased by five percent in July 2010 and stayed that high.

A quick glance at the financial markets today shows that M&S, Next, Home Retail, Morrisons, Tesco, Sports Direct all bounced yesterday.

Investors are betting that the next six months will be a golden period for retailers, but only those that grasp the opportunity will benefit.

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