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A sales tax cut that took effect yesterday was expected to lift sales dramatically. But the increase was not as high as expected, in part because e-retailers had already begun offering the lower rate, says a retail consulting firm.
While Thanksgiving is not celebrated in the United Kingdom, the Monday after the U.S. celebration of Thanksgiving produced the highest one-day transaction volume in UK history-in part because of the government’s decision to lower the sales tax rate, or value-added tax as the UK calls it, from 17.5% to 15% as of yesterday. However, the value of sales was flat, reports retail consulting firm Interactive Media in Retail Group.
“Monday is almost always the biggest shopping day of the week, and Monday’s in December are usually huge,” says James Roper, CEO of IMRG. “It was widely assumed that yesterday’s fall in VAT, from 17.5% to 15%, would create a considerable shopping surge, due to pent up demand caused by shoppers waiting for the lower rate. But it just didn’t happen. Many of the smart e-retailers had already passed on the lower rate as soon as it was announced.” The government announced last week that it would reduce the tax effective Dec. 1.
Online transaction volume yesterday was 3% higher than last year’s peak day, but the value of transactions was about the same as the first Monday in December last year, according to Jon Prideaux, deputy chief executive of payments service provider SecureTrading.
The traffic increase over pre-holiday levels was not as sharp as in previous years, says Chris Russell, a director at web traffic measurement firm eDigital Research. “Yesterday’s traffic was just 32% higher than the average October day, compared to a rise of 45% for the first Monday of December 2007, and 83% on Monday 4th December 2006,” Russell says. “This year may be very different; we expect that if there is a continuation of the strong promotional activity that we saw last week by high street retailers, both in store and online, there may be a significant change in the overall pattern of online traffic for 2008.”