Warning / Price hike , VAT

[Fromey]

I was watching the news last night about the VAT increase and suddenly the penny dropped. Not only do the companies have to add on the VAT increase for all that they sell, but most/all of their costs are also going up due to the VAT increase. Their accountants have probably modelled the new business costs for them and they have therefore raised items accordingly. Thus, prices go up by more than the 2.5% expected. I don't claim that there is no opportunistic price increases in there, but the price rises are probably not all that insidious.

 

[woodbloke]

The Jet 260 p/t which is what I'm after has just gone up from £999 (iIrc) to £1149.50, a rise of near enough £150, 15% give or take. If 2.5% is the VAT price rise, that means Ax have stuffed up the price on this item by around 12% if me sums is correct. I know stuff like fuel oil and the price of bowl of rice are going up all the time, but 12% seems steep to me. T'would be interesting indeed to hear a comment from Ax - Rob

 

[Steve Maskery]

The other factor which I don't think has been mentioned is the Exchange Rate. Ever since BOB came on the scene the US dollar has slowly but steadily risen in a way that Sterling has not. Most chinese goods are priced in USD.

Whereas it's not so long ago that we were all enjoying getting American tools at nearly 2USD to the Pound, It's now less than 1.5. Even if nothing else had changed, that alone makes a big difference to our buying power.
S

 

[Toolrack]

The other factor which I don't think has been mentioned is the Exchange Rate. Ever since BOB came on the scene the US dollar has slowly but steadily risen in a way that Sterling has not. Most chinese goods are priced in USD.

Whereas it's not so long ago that we were all enjoying getting American tools at nearly 2USD to the Pound, It's now less than 1.5. Even if nothing else had changed, that alone makes a big difference to our buying power.
S

Russell mentioned the exchange rate a few posts back.
Last night they mentioned on the news that vat had caused everything to go up by 14%, so that 12.5% by Axy looks about right.

 

[innesm]

Not only do the companies have to add on the VAT increase for all that they sell, but most/all of their costs are also going up due to the VAT increase.

Except VAT registered businesses don't pay VAT on their purchases; it's intended to be a one-off tax paid by the consumer. And if a business isn't VAT registered, they dont charge VAT.
Actually, I'll bet there are others on this forum who know much more about it and can correct me if I'm wrong.

 

[Steve Maskery]

Except VAT registered businesses don't pay VAT on their purchases; it's intended to be a one-off tax paid by the consumer.

Well they do, but they claim it back again each quarter. So a VAT-registered business pays VAT to his supplier on everything he buys, and charges VAT to the consumer on everything he sells. Each quarter he writes a cheque to HMRC for the difference between the two (because he's already paid some of it). Every VAT business is an unpaid tax-collector for the government.

But the thrust of your point is correct.
S

 

[tomatwark]

Every VAT business is an unpaid tax-collector for the government.

[/quote]

The only advantage is that you do get the VAT back on capital purchases such as machinery and also things like rent and telephone etc which means these items are cheaper for a VAT registered business.

The downside is your labour costs also attract VAT so here we lose out to a non VAT registered business.

But you are right we are unpaid tax-collectors and we don't even get the pension benefits.

Tom

 

[kirkpoore1]

The other factor which I don't think has been mentioned is the Exchange Rate. Ever since BOB came on the scene the US dollar has slowly but steadily risen in a way that Sterling has not. Most chinese goods are priced in USD.

Whereas it's not so long ago that we were all enjoying getting American tools at nearly 2USD to the Pound, It's now less than 1.5. Even if nothing else had changed, that alone makes a big difference to our buying power.
S

Just wait until Chinese stop pegging their currency to the dollar. Everything coming from them will go up 20-40%. Of course, a few years after that some jobs might actually come back to you (and us) as a result.

Kirk

 

[Fromey]

This reminds me why I have never been interested in going ito any form of business.

 

[Steve Blackdog]

The other factor which I don't think has been mentioned is the Exchange Rate. Ever since BOB came on the scene the US dollar has slowly but steadily risen in a way that Sterling has not. Most chinese goods are priced in USD.

Whereas it's not so long ago that we were all enjoying getting American tools at nearly 2USD to the Pound, It's now less than 1.5. Even if nothing else had changed, that alone makes a big difference to our buying power.
S

Just wait until Chinese stop pegging their currency to the dollar. Everything coming from them will go up 20-40%. Of course, a few years after that some jobs might actually come back to you (and us) as a result.

Kirk[/quote

Sorry to add to the gloom, but if the Chinese economy keeps growing at this rate they will satisfy their supply from internal Chinese demand. That will mean it will be no cheaper to buy Chinese goods.

We've been very spoilt over the last few years. My Chinese ccsl perform lathe was so cheap it was almost free. That has given us a false feeling of wellbeing that - at best- was only temporary.

You never know we may end up being manufacturers ourselves again one day.

 

[innesm]

Perhaps we'll be buying cheap Vietamese lathes.

 

[beech1948]

Just a few thoughts,

EXCHANGE RATES
Exchange rates are always dragged out and used as a scapegoat..its laughable.
During the late 2008 early 2009 credit crunch meltdown the pound dropped like a stone to about $1.29 per GBP. Axminster at this time cleverly blamed this for major price hikes.

The pound now stands at $1.55 per pound and Axminster say not a word. Even given this level of increase since March 2009 I would have expected them to hold or even drop some prices. I can only conclude that either they are a set of chiselling B*****ds or their buying/acquisition price is so high that they need to learn some new negotiation skills.

PRICE POINTS
The thought that £24.99 is a price point to aim at from the current price of £19.99 because £20.40 is not a real number is very damaging. I am quoting Steve Maskery and before you all get on your high horses I respect him and am not going to rubbish his thinking. I can see the drivers for Steve's point very well. There is no reason to go to £24.99 other than the general and false marketing assumption that a PRICE POINT has merit. Its just a con. Its the mugs price. It allows retailers/manufacturers to charge much more than the item is worth. Real value is lost to some artificial construct aimed only at removing cash from the wallet.

I would be quite pleased to see a price of £20.99 from Steve or even £21.99 as his products are good value. A rise from £19.99 to £21.99 may give Steve what he needs as well as a bit of extra profit and some uniqueness.

I saw today a pile of windscreen scrapers in Tesco. £2.50 each. Material costs probably 35p, labour costs about 5p, packing and containerisation and transport across the globe 10p so a max of £0.5 at a FOC port somewhere in Asia. Leaving £2.00 to shared out by the UK distributor and retailers. The thing is worth about £1.25 to me ( + or - 20p) but the search for large profits is is so intense that greed has overtaken the delivery of items to the end consumer at a reasonable price.

PROFIT and DIVIDENDS

Profit is whats' left over after all costs and wages have been paid. The endless headlines for the past 10 years of Tesco's next record surge to major profit would be laughable if it were not achieved by over charging the punters in there. Replace Tesco by Glaxo SK, BP or any large company and it is obvious that rampant price inflation is caused as much by companies overcharging for the value of goods they offer as it is by those who pay the prices.

The same with "record" dividends. High dividends are seen as a god given right too have come hell or high water. During the Credit Crunch how many companies dropped their divi to zero. NONE. Yet dividends are the discretionary distribution of whatever is left over in a company after all forward plans are funded and taxes paid. Its not the " right " it has become.

SOLUTION
1) Just stop buying
2) Argue about the price with the retailer and the distributor. Go on negotiate and ask for better deals
3) Remember that good service is NOT the retailer doing you a favour it is to be expected as the price the company pays to retain customers. Ask for more.

Rant over
regards
Have a great year.
Alan

 

[Blister]

And , How do Axminster fund the nice BIG FLASH SHOWROOMS ?

out of the pockets of me and you :?

 

[Benchwayze]

There's no conspiracy.

It's just what you expect in 'Rip-Off' Britain. Prices do tend to rise New Year anyhow, which is why the Government might have been more considerate and delayed the VAT increase until the new 'financial year'!

Ooo look. A flying pig!

I would vote with my feet too, but there are things you just have to buy.
The only real way to avoid the tax is to look for good used bargains.. But with no guarantee on the goods being ok...?
Well you takes yer chance folks!

Thank Gawd that by now have most of the tools I need !

Grumpy ol' Grand-Dad!

John

 

[Escudo]

Look on the brightside fellas, now that prices have gone up all our existing tools are worth more!

 

[Ateallthepies]

So all the stock a retailer bought at last years lower prices is now being sold at this years higher prices?

Nice little earner there on all the old stock?

Steve.

 

[OPJ]

On a slightly more positive note, at least the Makita Plunge Saw has only gone up by £10 - and, you still get the second rail, connector and storage bag as part of the deal. Might still be able to afford one, after all. ;-)

I would've expected Festool's prices to have increased more, as well (I'm sure they did twelve-months ago...). The basic Domino jointer was only £37 cheaper before Monday, if I remember correctly.

 

[Steve Blackdog]

So who is going to join me and go and live in a commune then?!!

 

[srp]

I'm a bit disappointed to read the posts which talk of January price rises as being 'normal' or 'to be expected'. Why is this? Have we all been brainwashed by the likes of Festool and Axminster in the space of a few short years?
I'm also disappointed that no-one from the major tool companies have jumped in on this thread to explain why their prices have gone up. Or are they just a little bit too embarrassed to come onto to a public forum and explain themselves?

The next time I buy I will definitely be ringing around asking for discounts (and yes, that includes Festool as well). And I think that everyone else should as well - if you don't tell them their prices are too high they'll continue to take us for mugs.

As Beech says:

2) Argue about the price with the retailer and the distributor. Go on negotiate and ask for better deals

which is exactly what these companies do with their own suppliers, so why should they not expect us to do the same?

 

[matt]

January just tends to be the time when assortments and prices are reviewed. Same occurs about six months later for some assortments and more frequently for those with shorter shelf lives. Some assortments are in a constant state of flux but prices are held with the suppliers taking the hit on margin as things ebb and flow.

Companies are receptive to customers purchasing significant volume to negotiate on price. Some even operate trade accounts. By contrast, the majority of a retailer's customers are not making bulk purchases so there is very little scope to negotiate on price nor (given the low volume of punters) is there any value in advertising (and therefore having to cover the cost of such advertising in margin) of raising awareness of volume purchase discounts (would you want to pay the cost of advertising in the cost of your low-volume purchases? Clearly not...)

Retailing is a cost intensive and delicate business to be in where cash flow, footfall, and loyalty are crucial commodities. Not all retailers realise all of the areas where they can make their business a success, however, few will conspire (I use the word deliberately) to charge unnecessarily high prices. I'm not surprised retailers have not joined the thread to explain themselves - they don't really need to and to try would require some belief that they were being honest and un-biased when it's clear from the tone of the thread that ain't likely to be the case.

Retailing is NOT a cash-cow. Open your eyes and take note of the first businesses to fail/suffer when the economy is under pressure. Currently there is only one major high st retailer that is consistently performing well in the current trading conditions and that can be attributed to expertise at attracting customers rather than repelling most of them through high prices whilst making a few extra quid from those that continue to shop with them - the latter does not sustain a business!

It's not a conspiracy.