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VAT rise could boost online sales

Kathleen Hall

Online retailers could benefit from VAT price hikes as consumers look to the internet for better deals, analysts have predicted.

Online sales could get a boost as the internet provides a platform for price comparisons for cash-strapped consumers, said Neil Saunders, consulting director at Verdict. "I suspect online could do quite a lot better than the high street," he added.

According to the British Retail Consortium (BRC), online have consistently outperformed the rest of the sector at between 13% and 19% year-on-year, a trend it said that is likely to continue.

"Certainly online has given customers easier access to more price and product information. The VAT increase and other factors such as the effect of public sector cuts is likely to make consumers more price conscious, which may encourage them to make more use of the internet," said Richard Dodd, spokesman for the BRC.

Brian Hume, managing director of retail consultancy Martec International, agreed that the VAT increase will encourage people to do more research on the web, especially for big ticket items.

"My general view is that the VAT rise will scare people off for a few weeks, but everyone will get used to it very quickly and in just a few weeks," he added.

According to Saunders, online sales over the Christmas period are likely to be about 10% down because of the effects of bad weather. The BRC originally predicted sales for the fourth quarter of £8.1bn.

However, internet sales post Christmas have been strong, with consumers taking advantage of bargains as early as Christmas day, he said. "Online sales will resume stellar growth following the Christmas blip. This has in part been due to pent-up demand over the Christmas period," he added.

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