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VAT freeze promotions help give online retailers a strong start to the new year

Promising start to the year for UK e-tailers, with strong January sales resulting in an estimated 29% like-for-like growth in comparison with the first half of January 2010.

GENERAL MERCHANDISE

VAT freeze promotions help give online retailers a strong start to the new year

Promising start to the year for UK e-tailers, with strong January sales resulting in an estimated 29% like-for-like growth in comparison with the first half of January 2010.

ReD’s figures, which are based on real-time sales estimates from leading online retailers across the UK from 1st January to 16th January, show that over 16 million transactions took place in the first half of the month, accounting for £2.9 billion worth of purchases online.  The busiest day of the year so far has been 4th January - the day the standard VAT rate increased - when £263 million was spent online in one day.  The day before the VAT rose by 2.5%, the country’s online shops saw their sales soar by 86%, compared to the same day last year according to ReD’s forecasts.

Carl Clump, CEO of ReD, commented: “Sales in the first seven days of the New Year were particularly strong, up 38% on the same week in 2010, as shoppers snapped up bargains in the January sales. People were keen to purchase items before the government’s VAT rise kicked-in, and obviously wanted to beat this deadline.  But in the end, many retailers froze VAT as part of their January promotions, and shoppers took the opportunity to buy bigger ticket items such as consumer electronics, household appliances and furniture, which is reflected in the average transaction value, which rose to £172, compared with £154 in January last year.”

Many major retailers postponed passing on the new 20% VAT rate until 16th January, when they ended their January sales, which helped growth to continue throughout the first half of the month. ReD predicts that there were on average 1 million online transactions per day in the first half of January, with average daily sales of £182 million.

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