Retailers plan Sales to capitalise on VAT rise

Nearly half (42%) of the retailers asked in the Industry Sentiment survey for the British Council of Shopping Centres (BCSC) said they were planning to run promotions to attract shoppers to their stores before the VAT rise to 20% in January. 58% said they were reviewing their costs to improve margins ahead of the increase, while 19% said they were considering absorbing the tax rise to avoid passing it onto customers.

BCSC president Neil Varnham said: “With consumer confidence still shaky, and while occupancy costs remain high, it is clear that retailers are having to review their business strategies. Many are looking to see where they can make any kind of short-term gain from the imminent VAT increase by offering incentives in the second-half of the year, as well as reviewing their own supplier costs and product pricing to ensure they can keep margins at a reasonable level.”

The survey found that most retailers and property professionals believe there remains a role for the same number of stores despite the rise of online retailing, with 59% expecting the number of shops to remain roughly the same in five years time. However, 27% said they expected to see fewer stores.

Varnham added: “Even in a multichannel retail world with increasing importance on investment in online and digital technologies, there is still a clear desire from retailers to have a physical presence on the high street.”

However, the lack of new retail development coming through will have an effect on retailers’ ability to find “the right kind of space”, according to 66% of respondents. But a third felt there would be “sufficient” supply coming through to meet future demand.

Varnham said the drying up of the development pipeline “could mean that retailers will struggle to find the kind of space they need in the next five to 10 years, as new centre openings remain at an all-time low”.

There was a response from 245 retailers, landlords, agents and architects for the BCSC survey.