Retailers including Next, New Look, Peacocks and Matalan were among those planning to deduct the 2.5% VAT reduction at the till to overcome the “logistical nightmare” associated with Chancellor Alistair Darling’s tax cut as Drapers went to press.
The VAT cut, which will come into effect on Monday, has prompted a mixed response from retailers, who said the price cuts would effectively only save fashion shoppers “pennies” and that it would create huge operational challenges in terms of price ticketing and IT systems at one of retailers’ busiest times of the year.
On Monday, Next, New Look, Peacocks and matalan“>Matalan will all put posters up in store advertising that the reduction will not be reflected on the ticket prices but instead will be deducted at the cash desk and will show up on customer receipts.
New Look chief executive Carl McPhail forecast that the strategy would be widely adopted by fashion retailers given its closeness to Christmas. New Look will add a “discount button” to its tills on Monday.
New Look chairman Phil Wrigley said the retailer was committed to passing on value but echoed comments made by Next chief executive Simon Wolfson earlier in the week that the VAT cut would do nothing to “stimulate demand”.
Wrigley said: “We will be passing on the full benefit to customers at the till point. However, it is disappointing that the government hasn’t spent more time consulting with people on what will be in the best interest of the public. I’m not sure the move on VAT is the most financially efficient way to keep the UK working.”
Robert Kimpton, chairman of womenswear brand Viyella, added: “It is a waste of time. If you are buying a car a 2.5% VAT cut will make a difference, but on clothes it won’t.”
But Peacocks chief executive Richard Kirk said: “It might get people shopping in the short term because of the publicity it has created. The average reduction across our collections would be only 25p so I’m not sure of the long-term benefits.”