Retail told to pass on VAT increase

Major UK distributors have advised games retailers of new SRPs to accommodate next month’s VAT increase, confirming that trade prices will not be lowered.

Earlier this month retail pleaded with suppliers to lower their trade prices so as to remove pressure to lower margins. If this isn’t done, retailers may be forced to up ticket prices on consoles and games to preserve the little profit made on each sale.

However, one platform holder has now directly advised its official distributor to freeze trade prices. Another has confirmed to MCV that it will be doing to the same shortly.

This puts retail in a tricky position. If store prices remain the same then retailers could face making less than 10 on each console sold – an especially bitter pill considering the risk incurred in putting money into such high value stock.

However, an increase in price will likely irritate consumers and further reduce specialist’s ability to compete with their already brutal supermarket rivals.

One retailer told MCV that he will be forced to increase prices in the New Year.

We’ll sell fewer of the consoles with a higher price but at least we won’t be losing money and we’ll also need to hold less low margin stock,” the manager told MCV.That cash can be used for higher margin product that does sell.”

For example, the price of a 160GB PS3 could jump from 249.99 to 255, with the 320GB model climbing from 284.99 to 291. It’s likely that many games will also see around 1 added to their price.