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VAT fails to drive bigger sales and traffic online

VAT cuts failed to drive bigger sales values and traffic volumes for online retailers on Monday, according to industry body IMRG.

IMRG said that although Monday saw the UK's largest ever online shopping volumes, sales values and traffic volumes were flat.

IMRG chief executive James Roper said: "Monday is almost always the biggest shopping day of the week, and Mondays in December are usually huge. It was widely assumed that [Monday's] fall in VAT, from 17.5% to 15%, would create a considerable shopping surge, due to pent up demand caused by shoppers waiting for the lower rate. But it just didn't happen. Many of the smart e-retailers had already passed on the lower rate as soon as it was announced."

Jon Prideaux, deputy chief executive of payments service provider SecureTrading, added: "[Monday] was the largest day for UK e-commerce ever in terms of transactions, but value was flat. Transaction volumes were 3% higher than the 2007 record but value is almost exactly the same as last year. The size of the general Christmas peak is smaller: normally it’s 85% above an average day, this year it’s only 68%."

Readers' comments (1)

  • Daniel MITCHELL

    The VAT cut has had big implications, large companies have already commented on the logistics nightmare of this change, but for small businesses the implications are huge, particularly for those that have little in house bookkeeping resource. Accounting software companies and EPOS providers have been inundated with support requests on how to make changes, resulting in one major provider closing down completely to “regroup” on Monday of this week, small businesses with less standardised or bespoke systems have been suffering terribly, with at least two of our clients having to have major rewrites to databases to cope with these changes.

    Small companies involved with e-commerce are in a number of cases having costly changes made to websites and some of those involved with affiliate schemes have expense in rapidly modifying websites.

    Whilst many small businesses are choosing not to re-ticket merchandise or reprint literature and catalogues, a number have no choice, such as those operating concessions in larger retail outlets, again this carries significant cost.

    A further cost to business has arisen with the fact that VAT reductions on vehicle fuel have been replaced with duty, which in fact means an increase in cost to VAT registered businesses, since while VAT is reclaimable, duties are not.

    I have more in depth thoughts on this at http://danmitch.typepad.com

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