Germany: Does price-leader reduce prices with an additional 2% or 3% on top of VAT reduction?
Discount Retail Chain Lidl is considering the elimination of the 9 cent rule. As of July 1st, VAT in Germany is to be reduced from 19% today to 16%. Supermarkets and discounters also want to pass this reduction on to customers. The changeover could turn out to be a mammoth task for Aldi, Lidl, Rewe and Edeka. The reduction could also bring a change for the customer: the so-called rule of 9 cent could finally be abolished.
The extra effort for retailers is not only to change the price tables and digital displays. Many branches also have to take inventory rounds, reschedule planned sales, and all of this shortly before the summer and holiday periods. Retailers also believe that customers pounce on certain products because they are now cheaper. These include drugstore items and coffee. This would also affect ordering processes and margins. Discounters Aldi and Lidl want to pass on the tax cut directly. Customers should benefit from all everyday products. Supermarket chains Rewe and Edeka have also announced that they will reduce the price in such a way that their customers can shop cheaper. While the supermarket giant Tegut is apparently considering withdrawing VAT at the checkout (a clever and efficient way, saving OPEX), Lidl wants to say goodbye to the 9-cent rule for the first time reports the "Lebensmittel Zeitung". Food prices should drop by 1.9 percent (lower tax rate). Promotional in & out products are down 2.5 percent (normal VAT). Rounding down would make many products 2 or 3 percent cheaper overall. It will be seen at the end of June whether Lidl will actually implement the concept in this way. Industry circles said that the idea had been positively received by the competition.
- The battle is on, will discounters or supermarkets gain most of these tax reduction?
- What retailer reduces its prices with an additional 2% or 3% on top of the VAT reduction showing its price-leadership?