Unless you’ve been walking round with a slanket draped over your bonce, you’ll no doubt have had numerous conversations about Alistair Darlings ‘VAT announcement’ and how retailers are going to proceed.

Personally I’ve spoken to lots of merchants over the last 3/4 days and very few of them have a firm idea of how they are going to progress. But why is this causing so much trouble? Surely it’s just a case of taking 2.5% off your retail price. Well it’s not that simple. Why? I’ll tell you…

1) Normally we have prices at nice price points (for example £9.95). If we have to take the 2.5% VAT off then we’ll lose all of our nice price points and have weird price points like £9.71. This will look messy.

2) Prices may have already been rounded down anyway. Historically when we’ve been setting the retail price at Prezzybox we’ve ensured that we meet these nice price points. For example - when calculating the retail price of a product our calculations might say it should be £10.23. However as this is not a nice price point we’ll round the price down to £9.95. So if we take a further 2.5% off this we’re getting hit even harder.

3) RRP. Ordinarily if a product has an RRP of £X then we very often sell the product at less than £X because market forces dictate that we need to.

4) The strength of the pound. Recently the pound has been taking a hammering - especially against the dollar/euro. Consequently a lot of our suppliers have put our cost prices up. Because we’ve tried to maintain the nice price points (eg £9.95) we’ve actually been making less margin than we normally would.

5) Technical Issues. Changing the prices isn’t a problem for us at Prezzybox as it just means writing a simple script to change the prices. However, some merchants don’t have these capabilities and it will mean changing the prices manually. Not much fun if you’ve got 1000’s of products.

6) Point of Sale Material. Merchants who have high street presence will also have POS printed and possibly catalogues/brochures. What do these merchant do? Replicate everything at cost to themselves?

You see what I mean? It’s not just a matter of taking 2.5% off your retail price - there’s much more to consider. As of yet (and I know we’re not the only merchants in this scenario) I’ve no idea what we’re going to do here at Prezzybox. Part of me thinks we should deduct 2.5% from every retail price as this is the fair thing to do and is what the public will expect, whilst another part of me thinks we should just keep our retail prices as they are and reduce the VAT accordingly and thus in effect make an extra 2.5% on every order.

Answers on a post card folks!!!

Toodle pip.

Zak.

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