Taxing times

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By: Jeff James

Listed Under: Top Story

Published: Monday, December 13, 2010

The increase in VAT to 20 per cent will raise around £13billion for the Treasury, but how will it affect independent sport retailers? And will they be passing the increase on to customers?

Nicky Donbavand of Run To Live told Sports Insight: “We’re not sure how it will affect business, although I suspect after the initial excitement the world will go on just as it did when VAT was reduced to 15 per cent.

“We will not initially pass the increase on, as it will cost me more in staff time to change everything on our website and in-store than it will to take the hit on the VAT.

“With that in mind, we’ll turn it into a positive and initially run a ‘all prices at the old VAT rate’ promotion and then gradually increase the prices as new stock comes in.”

POINT OF DIFFERENCE
James Evans at Rugby Heaven is adopting the same tactic. “It will promote a point of difference between the multiples and the specialist independent,” he says.

“I think that if you show a little empathy and not pass on the VAT rise customers will be drawn to your offer.”

David Bugg at Birdseye Sports won’t be passing on the VAT increase in some instances. “It will be about finding the right price point relative to the competitive position and, where we can, making the full margin, but if not going for the best price point,” he says.

“It’s very hard to say how it will affect the business because it will all depend on the relative competitive position.

“I think sales in the overall economy will drop a little for a while, but there will be winners out of that because some will take it as an opportunity to look more competitive.

“That will only last a short while and the prices will then creep up a little.

“So I think we’ll see the full impact in six months to a year.

“I suspect that the smaller retailers closer to sports superstores will suffer most because I think the price difference could look even greater.”

OPTIMISTIC
Simon Millet, managing director and founder of Millet Sports and fast growing e-tailer Activinstinct, doesn’t think the increase will affect his business’ turnover: “We are really optimistic about 2011, especially on the back of a really strong last quarter.

“Our margins may be hit while we sell through some stock purchased last year, but the indications are that the brands have increased the margin going forward to take the increase in VAT into account.”

NO ADVERSE EFFECT
Samantha Hale, managing director of Advance Performance, is among the retailers that will be passing on the VAT rise and doesn’t think it will have an adverse effect on the running specialist, which has shops in Peterborough and Cambridge.

She says: “We are continually growing and while some leisure activities are being cut or reduced to save money, running we feel has been seen as an alternative that is relatively low cost and can be carried out even within the smallest lunch break.

“We are now coming up to our busiest months, and are excited for new opportunities that may arise.”

FURTHER RETAIL FEEDBACK
“As we deal mainly with teamwear and trophies, we will not be passing on the increase at first, but wait until new catalogues come out in April when the increase will be included in new price lists.”
Jane Rogers, Don Rogers Sports

“We are increasing our prices in line with the VAT increase, but many of our items are zero rated so we will not be as affected as most. We will always offer the best possible price, which is often lower that the RRP.”
Brian Murphie, The College Tailor