H&M pay VAT increase themselves - on prices they didn't decrease
In the final days of 2009, we suggested you keep an eye on high street retailers and note how they reacted to the 1st January VAT increase. We suspected many retailers would absorb the increase themselves and crow about the fact to drum up sales. But would any retailer dare say they were absorbing the price increase for the customer's benefit when they didn't reduce them in the first place? They'd probably get away with it too; after all, it's 14 months since VAT was reduced - nobody would remember whether a high-profile retailer cut their prices in the first place, would they?
Turns out they would, actually.
Initially, high-street fashionmeisters H&M reduced their prices when VAT was cut in December 2008. It didn't last though, according to a memo faxed to all branches at the time. For the first couple of months, the cost of items was manually reduced when customers paid at the till - an entirely common practise at the time. H&M then decided to stop passing on the discount and continue charging full price:
The full memo is here. In other words, H&M stopped reducing their prices and told customers they could still receive the savings, but only if they spent their money on the promotional offers specified by H&M.
Flash forward to January 2010, and VAT returned to 17.5 per cent. This memo was sent by H&M's press office this week - you can see the full page here:
Should customers ask about the VAT increase, H&M staff have been told to say that H&M is bearing the cost themselves. The truth of the matter is that it's the customers who have been bearing the cost on H&M's behalf since last January. H&M wasn't the only retailer to stop passing on the VAT savings shortly after they were cut - Homebase did exactly the same thing - and it's entirely likely the the price of goods would have risen by a similar amount regardless. None of that is the point. The point is that profiteering by telling customers you're doing them a favour, when in fact you've done no such thing, is hardly the right way to go about business.