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Trade: Hypermarkets prepare for big VAT cuts
Big commercial networks inform their clients about the way in which they intend to reduce prices as of June 1 as a result of the 9% VAT drop for food.
An interesting consequence of price cuts generated by VAT reduction may be that of the disappearance of psychological prices of the xx.99 lei type.
Several commercial networks applied cuts of 12% before June 1, offering them to their customers in advance. Carrefour for instance, has VAT cuts for tens of thousands of products, applying price reductions since last Thursday. As of May 28 cuts have been applied to confectionery products, fish,ice cream, canned food and baby food, then on May 29 to cheese, chips, biscuits, waffles, cereals and muesli, frozen products and pet food. As of May 30, Carrefour price cuts continued with meat, meat products, eggs, chocolate and water and on May 31 prices dropped for juices, coffee and tea, basic food, dairy products, vegetables and fruit, the company announced.
Profi reduced VAT for food at the beginning of May, being the first retailer which applied the measure valid as of June 1. “We adopted this exceptional measure because we are sure that price cuts resulting from VAT reduction is a good decision for trade, a decision which will allow people to buy better quality products and will increase sales in general,”said Daniel Cirstea, the general manager of Profi stores. Products with lower VAT are marked by special yellow labels but the fiscal ticket for these products continues to have VAT of 24%.
At Auchan the “big full VAT cuts action”was applied to 1,000 products: fresh and frozen products, basic food, sweets, non-alcoholic beverages, canned food and other Auchan grocery products. Hypermarkets of this network offer the equivalent of VAT reductions from 24% to 9% to the basic price outside the promotion, which leads to a final cut of 12.1% to the sale price.
Kaufland also reduced prices in advance as of May 26. Cuts apply to chicken meat, fresh products, meat products, dairy products (except for those in the UHT category), eggs, cheese, fresh delicacies, fish eggs, fish salads and products.
In the second weekend in May, Cora announced card owners they could buy on May 9-10 food in the limit of 300 lei with 9% VAT.
Gains of big store chains could be up to 20% this year, following the VAT reduction^for food from 24% to 9%, according to a study made by a business service company. The authors of the study anticipate that chances of cheaper food prices will be short termed.
“We have seen price cuts in the case of VAT reductions for bread but results were contradictory. Some products got cheaper others didn’t. We estimate the same phenomenon after June 1. We will probably see price reductions on a short period of time, followed by a gradual price increase on a medium and long term, explained by operational reasons, like price increases for utilities and fuel,” analysts say.