The recent Budget announcement that VAT would be increasing to 20% was about as predictable as the demise of our national football team. Implementing the increase concerns me though, as I can change my epos VAT rate in one keystroke, but re-pricing all my stock is not so easy. Its not feasible to consider working through the early hours of January 4th 2011, recalculating all my prices, entering them manually into my EPOS and printing and replacing all my shelf edges.

 At this point in time I have no strategy in place and am waiting for all the trade bodies and trade press to start providing advice. I had considered putting an extra 2.5% on my margin now as I buy in new stock, so that I would benefit for the rest of the year and then simply pass it on to Mr Cameron next year. However with our current economic woes it’s not exactly the best time to try and squeeze any more out of my customers already shrinking disposable income. 

I am intrigued to see how the manufacturers respond and suspect that we may see many products resized to protect certain price points. Cadburys 99p blocks for example are a big seller for me at a fair margin, and I just hope they reduce the size and as a result the wholesale price to accommodate the VAT increase. Like many retailers I round up many prices to the nearest 5p or 9p, but will have to abandon this policy when I implement the VAT increase. A £1.29 product will increase to £1.32, but taking it to £1.35 is most probably not the best PR exercise, as eagle-eyed customer will notice.

Obviously a lot of concerns are about not incurring any unnecessary losses as a result of the VAT increase, but then I am sure I am one of many retailers that gained from last years reduction in VAT, so is it just a case of those good old ‘swings and roundabouts’?