with contributions from Louise Barlett
 on November 25, 2008

LONDON — British retailers and the U.K. government are offering a raft of incentives to entice reluctant shoppers during the holiday period.

British Chancellor Alistair Darling on Monday announced a 2.5 percent cut in value-added tax, to 15 percent, as part of his prebudget report. The cut, one of several measures the government launched to stimulate the U.K. economy, is effective from Dec. 1 to the end of next year and applies to most nonfood products, excluding children’s clothes. It represents a discount of about 2.50 pounds, or $3.75, off an item that costs 100 pounds, or $150.

“It can’t be hurtful,” said David Stoddart, an analyst at Altium Securities in London. “If it lowers prices, it should increase demand…but it’s a pain administratively at a time when retailers should be at their busiest.”

The country’s retailers are providing significant discounts in addition to the government’s action. Last week, Marks & Spencer offered a 20 percent discount on all its nonfood merchandise for one day only, weeks after the retailer announced a 43.6 percent dip in its first-half profits. The last time the retailer ran a similar promotion was in 2004.

Stuart Rose, chairman of M&S, said customer response to the sale day was “a riot. It seems to have hit the spot.”

The sale was held the same week Britain’s Office of National Statistics reported a 1.1 percent decrease in sales volume at nonfood stores in October, compared with September.

A spokeswoman for M&S said the company hadn’t decided whether it would offer more promotions in the run-up to Christmas, aside from its 20-percent-off partywear and “three for two” offers in the store’s Christmas shop. Another M&S spokeswoman confirmed that the retailer would pass on Monday’s cut in VAT to its customers.

Debenhams, the British department store chain, last week ran a three-day promotion with as much as 25 percent off its products across the store. A spokeswoman described the retailer’s Oxford Street store as “packed.”

Gap in the U.K. and France is offering 30 percent off its merchandise from Wednesday to Sunday with the presentation of an e-mailed voucher, which a spokeswoman said was sent to “a limited number of friends and family.” Karen Millen e-mailed a friends-and-family voucher that offered 30 percent off merchandise from Thursday to Sunday.

House of Fraser, another British department store chain, also will offer discounts of as much as 25 percent on its normal trading prices on Thursday and Friday, along with a 40 percent discount on its private-label brands during the two-day period. “House of Fraser is confident it will continue to fare well in the marketplace,” the company said. “However, in light of numerous discount events this week, we have decided to offer our customers similar opportunities.”

George Wallace, chief executive officer of the Europe-wide retail consultancy MHE Retail, said: “Nobody wants to get left behind. If you go on sale later, the fear is you’ve missed the boat. It’s a game of poker, in a way.”

Wallace said it was debatable how much the discounts would benefit retailers. “There’s a chance that people will cherry-pick the bestsellers and [retailers] will be left with what’s not so good,” he said. “[But] it may be better to sell something now at 20 percent off than to be stuck with it on Dec. 25 at 50 percent off. …Retailers made their commitment to inventory before the financial crisis.”

Stoddart at Altium Securities added, “The longer retailers are left holding surplus inventory, the deeper the discounts will get.”

London’s higher-end stores also are adopting incentives. Selfridges is taking 20 percent off the majority of its merchandise this week through Sunday as part of its Christmas Comes Early voucher promotion. The store also offers a 10 percent discount on fragrance and beauty purchases with the presentation of a voucher during the period. A Selfridges spokesman said the retailer does the promotion “every year.” Selfridges’ winter sale will begin Dec. 26, the spokesman said.

And, at Anya Hindmarch’s Sloane Street and Bond Street stores, customers can partake of complimentary Chantecaille makeovers without having to make a purchase in the store, during the week beginning Dec. 8. “It’s something fun and festive that customers don’t have to pay for,” said a spokeswoman. The makeovers are the latest in a series of pop-up projects that Hindmarch has unveiled at her London stores, including manicures with the Cowshed spa and a temporary florist.

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