Premium and mainstream indies are bracing themselves for a drop in sales in 2013 as middle-income parents bear the brunt of cuts to their child benefits.
The coalition Government announced last week that from April 2013, families where one parent earns more than £44,000 a year will no longer be eligible for child benefits. The benefits are worth £20.30 a week for the eldest child and £13.40 for subsequent children.
The payments are intended to help parents provide for their children but, in middle and high-income families, are often used as additional disposable income for the household.
Tanya Sarne, owner and founder of premium womenswear brand Handwritten, told Drapers: “A middle-class lady [with one child] gets about £80 a month in benefits, so in three months she has enough to buy one of my dresses. It’s in effect her spending spree money, and that’s who I sell to.”
Deryane Tadd, owner of premium womenswear indie The Dressing Room in St Albans, said the cuts would have a direct impact on her customer base. “I have a lot of stay-at-home mums coming in. Their husbands work in the City so they stay at home and look after their children. Now there will be a loss of income [for them].”
Both Tadd and Sarne are planning to combat the squeeze by increasing the amount of product at the lower end of their price ranges.
However, Nick Brown, managing director of indie department store Browns of York, said he would rely on “promotions and prices” to stand out. “The cuts aren’t until 2013 so people have time to adjust. But they could be psychologically worrying now.”
Luxury brands and retailers are unlikely to feel the squeeze to the same extent because child benefits represent a smaller proportion of the disposable cash of the rich. Value retailers will be partially immune due to the fact that lower-income shoppers will still be entitled to child benefits.