Now that VAT has increased to 20 per cent, you’re probably checking price tags a little more carefully before parting with your hard-earned cash. The problem is that shops are fighting back. According to Philip Graves, author of Consumer.ology, a study of the psychology of shopping, retailers are using their knowledge of the human mind to turn the VAT increase to their advantage.
“Thousands of people are being manipulated into actually spending more,” he says. “Many shops are claiming that they are not increasing VAT, and that is encouraging people to spend. But there is more to this than meets the eye.”
Behind the price tag, Graves explains, lie a variety of psychological tricks. For example, research has shown that people are more inclined to buy an item when it has a “charm price” of .99 on the tag. The VAT increase, however, would demand strange prices such as £32.20, which are not attractive to the consumer. So the shops are taking a two-pronged approach. “On the one hand they are keeping some items at the original charm price, and highlighting the fact that the VAT is staying the same,” Graves explains. “With other items, however, they are raising the price even higher than the VAT increase demands, from £34.99 to £39.99, for example. Amazingly, people will buy something for £39.99 more readily than £32.20. So overall, the shops come out on top.”