Consumers split over whether the VAT rise will affect how much they spend
A survey of 2,863 UK consumers has found that consumers are split almost 50:50 over whether the VAT rise will change their spending habits with more than half (52%) saying it wont affect their spending.
Nevertheless, over eight out of 10 shoppers will be more tempted by retailers that put a freeze on any VAT rise.
Simon Boydell, marketing manager for Retail Eyes explains, “It appears from our survey results that consumers haven’t made a conscious decision yet as to whether the VAT rise will change their spending. With recent news from The British Retail Consortium (BRC) claiming consumer confidence has fallen for the first time in a year this should come as some relief to retailers. But there is still a lot of uncertainty among shoppers so retailers do need to consider ways to entice consumer spending both before and after the rise on 4th January.
“Our results show there’s real opportunity for retailers to increase footfall and spend before the VAT hike with a high proportion of consumers planning to make a lot of additional big ticket purchases this year.”
Six out of 10 consumers claim the VAT rise won’t affect how much they spend this Christmas while 38% of consumers are planning on making additional purchases before the VAT rise. Of the 38%, most people (66%) plan to buy electrical goods such as TVs and radios and 24% will purchase white goods.
After the VAT increase, consumers appear to be less concerned with the price of luxury items or higher priced goods and more anxious over the cost of everyday living. Freezing or delaying the VAT rise on goods will remain a good way to attract consumers in early 2011.
For example, 22% of consumers still plan to purchase a car in the next 12 months, with the VAT rise affecting just over one in ten on their choice of purchase. In contrast, one in four shoppers are more concerned by the rising cost of petrol, with 62% planning to be more considerate over their car usage, while 26% are worried by the increase in grocery prices.
Simon Boydell continues: “While the jury remains out on the exact impact the VAT rise will have on consumer spending, one thing is pretty certain - the competition on the high street will remain high next year. It may be a bit early for consumers to decide whether the VAT will affect their shopping habits but delivering excellent service by improving your customer’s experience is a simple and cost effective way to boost sales, distinguish yourself from the competition and most importantly, create customer retention. Make sure all staff are briefed on the expected high standard of service and they recognise opportunities to cross and up-sell. Also, seek regular feedback from customers about their experiences and share this with your staff.”
• Consumers more concerned with the rise in everyday living than the cost of luxury or high priced items
• Petrol price increase is of most concern (one in four)
• The second highest concern (26%) is the rising cost of groceries
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