Has anyone really researched the £9.99 nonsense recently? I’m guessing that, like “up to 8MB”, magazines dated two months in the future and volume controls that go up to 11, the punters have got wise to it by now!

I think Rakesh has it right – ikf a customer is going to choose £9.99 products over £10 ones (and John, I have to say that I think many, many people still do), then changing the price to £10.99 will probably be a better bet than £10.64.

I remember that in all of the pubs and clubs I worked in as a student, whenever duty on alcohol increased, the establishments always added a few extra pennies on for themselves. It always seemed like the accountants were saying “one for the taxman, two for us”.

And it wasn’t like they rounded them up to the nearest 5/10p – I remember Boddingtons increasing from £2.04 to £2.18, but the duty increase was only 4p of that. But official company literature was still to blame it on the government. Obviously changing all of the prices on the tills cost almost 2.5% per unit price….

It would be good if you could second guess what your competitors are likely to do. Get it wrong and you could slide down the price comparsion lists. A better strategy might be to decide on an indidual item basis which are price sensitive and therefore accept the lower profit and which are not and increase to the next price point. If you have a good selection of these you may be able to mitigate the overall affect on your bottom line without appearing to be too expensive overall. You could find out what products ‘lead’ customers to the site and price at the lower cost and then price the options and add on’s at the higher price. If you get this right customers may accept the convinence of buying from one site.

VAT isn’t rising by 2.5%. It’s rising by 2.5 PERCENTAGE POINTS. In other words, the amount of tax we pay is rising by 2.5/17.5, or just over 14%. Strange how the government prefers not to mention that.

We have seen many of our suppliers raise their prices too, which has a knock on effect; the saving grace being that we work to RRPs for many products so competitors will arguably be in the same boat.

One issue that may be harder to swallow is the companies selling the same products online from the Channel Islands, charging no VAT. We any now even less competitive online.

We issued a message through our Facebook Page to our customers and most of them were very supportive. I guess if you are an independent retailer and create a valued relationship with customers, they are much more likely to remain loyal with cost being very much a secondary consideration.

hpoom – we’ve corrected the penny pricing error, too. Apologies.

@johnahind I have indeed tested various price points including those with .99 in them. The fact is that going from single pounds to double figures has an effect one way or the other (usually to reduce sales). 9.99 is still “less than 10″. There’s no logic to it, except that I think people use it to justify their purchase even though, rationally, they know it’s nonsense.

On the plus side, I’ve just checked my new HMRC flat rate scheme percentages which take effect from 4/1/11 and, much to my surprise, while the amount of VAT I have to charge customers is rising by two and a half percentage points the amount *I* have to pay Mr Vatman is only rising by one and a half percentage points.

Result.

And no, Barry, I will not be reducing my charges to PC Pro by one percent to account for this bit of good fortune

Consumer X – you might not be aware that for small businesses the administrative costs to drop the VAT to 15% and then put it up a year later were greater than the saving in VAT. This was beacause VAT is worked out and paid quarterly and for three quarters of the businesses they had to calculate VAT in two parts – and I don’t suppose many small retailers have computerised tills that do it all for you. If they do -they still have to pay someone to make the changes – and pay their accountant/book-keeper fot the extra work in doing the VAT calcualtions twice. I know I had do do the calculations manually for one of the retail schemes.

For small businesses, what would be the best way around to keep business running as ‘normal’ when the VAT increase kicks in?
Should you leave prices as they are but slowly increase them or flood the shop floor with special offers?