First Lidl preferred to lower the price by more than a week. Now Aldi and Rossmann are fighting back and adding a one percent discount to the tax reduction on many products. And maybe that’s just the beginning.
The VAT cut is already there – at least at Lidl. The discounter has reduced prices since the beginning of the week – far before the actual cut-off date on July 1. Since then, on the shelves in the branches, a large red sign with the old and the new price and a striking “cheaper!”
Specifically: canned tomatoes now cost 38 instead of 39 cents, fish fingers 3.42 instead of 3.49 euros. But Lidl had not yet said the last word in the price war in the German food trade.
The rest of them follow suit
► Because the arch-rival Aldi has announced that he will go a step further. From this Saturday, the discount inventor will not lower food prices by just two percent, but even by three percent, as prescribed by law. This cost Aldi a three-digit million amount, the company emphasized. But the group apparently wants to strengthen its price image.
► And the drugstore chain Rossmann announced less later to follow this example. “The reduction in VAT should be clear and uncomplicated for our customers, so we go for a 3 percent discount and do not differentiate between the normal and reduced tax rates,” says Raoul Roßmann, Managing Director Purchasing and Marketing.
The other large grocers are also on the move to implement the VAT reduction. Everyone has announced that they will pass them on completely to customers. And everyone tries to cut a good figure. Edeka, for example, plans to cut prices from Monday. For a large number of products, the retail prices – after deducting the tax benefits – are rounded off in favor of the customers, explains the retail giant, and the Edeka discount subsidiary Netto even rounds all prices in favor of the customers.
Competitor Rewe has also announced that the VAT reduction will be passed on in full, but is still reluctant to provide details. Aside from the food trade, Germany’s largest shoe retailer Deichmann and the electronics chains Media Markt and Saturn also want to pass on the tax reduction one to one to customers.
That’s what experts say
It is not surprising for the trade expert Stephan Rüschen from the Baden-Württemberg Cooperative State University in Heilbronn that the price war in German trade is now coming to a head. He warned early on: “The reduction in VAT increases the risk of a price war in retail.” Because it offers retailers an almost unique opportunity to distinguish themselves.
The fact that the price is suddenly a hot topic again in the food trade is not only due to the reduction in VAT. “Retailers are moving the price back to the fore, because they expect consumers to pay more attention to the cent soon due to the economic turmoil when shopping,” explains Robert Kecskes of the Gesellschaft für Konsumforschung (GfK).
Actually, it is not a must that retailers, hairdressers, craftsmen or restaurateurs pass on the VAT reductions to customers. “As part of the usual pricing, companies, service providers and business people are free to maintain their prices and thereby increase their profit margins,” admits the Consumer Advice Center North Rhine-Westphalia.
However, fierce competition, especially in the food trade, leaves the large chains with little choice. However, this is not the case everywhere.
In a survey by the retail consultancy BBE, in which mainly small and medium-sized companies outside the food trade took part, around a fifth of the retailers surveyed stated that they did not want to pass on the tax reduction or only partially to customers. Another fifth was still unsure about how to proceed.
Basically, in the textile, sports and shoe trade the reluctance is greatest to pass on the VAT reduction completely, reported BBE. However, BBE expert Sebastian Deppe sees great risks in this approach. Because customers expected movement from dealers on the subject of VAT. “Otherwise, the danger is that people will feel cheated,” he warned.
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