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As part of the 2010 UK emergency budget given by Chancellor George Osborne, it was announced that VAT would rise from 17.5% to 20% on 4 January 2011. Other VAT rates aren't affected such as zero-rated items (such as children's clothes, foodstuffs, and books) and reduced rate items (such as safety items, sanitary products, and household fuel and power).

 

If you haven't already considered how your business will handle the VAT increase, now is the time to do so. While it may mean a difficult time to come over the next few years, those who come out on top may have bigger profits to come in the long-term.

 

 

It is expected that this move will create £13 billion extra revenue for the government every year. However, it will undoubtedly also hit consumer spending and retail jobs.

 

The Centre for Retail Research have predicted that 9,480 stores will close in 2011, and a further 5,000 in 2012. If that wasn't bad enough, 47,000 staff will lose their jobs, accounting for 1.6% of the available labour force.

 

This is gloomy news to be sure, but this isn't the case for all sectors. Discount stores are actually expected to increase, as more people try to pick up bargains.

 

 

Richard Dodd, from the British Retail Consortium, and Maureen Hinton, from retail analysts Verdict, have both suggested that the VAT increase might bring a rise in consumer spending on e-commerce websites in 2010. A short-term increase in e-commerce may occur due to consumers bringing forward their purchases to avoid the increase. 

 

In the midterm, customers may turn to the Internet for cheaper prices than they can find on the high street. However, in the long-term all retailers are probably going to have to work harder to make consumers part with their money.

 

 

The big question facing businesses is whether to absorb the increase, to pass it on to customers, or to take the middle way.

 

eBay surveyed 600 of their top sellers regarding the VAT, and 25% of them said they would absorb the entire increase. The Centre for Retail Research, mentioned above, suggest that the extra VAT will be passed on in full to the public as increased prices. Their survey found that 64% of retailers would pass on most of the increase to consumers within the first month.

 

The VAT increase will affect both consumer demand and the profitability of your business. If you don't want your income to be affected by the increase, you must consider how to streamline your business -- to lower your costs and increase your revenue.

 

You can read a detailed guide concerning the VAT increase on the HMRC website.

 

Selling to 2% of the people who visit your site instead of 1% might seem negligible, but in the world of conversion rates that means a doubling of your number of sales. And when you consider that making that jump to 2% might mean making one small tweak to your store, you will realise how worthwhile improving your conversion rate could be.

 

Below are a number of suggestions on how you can improve your e-commerce store's conversion rate.

 

 

Nobody wants to be ripped off. Anyone visiting your store for the first time, in order to make a purchase, must be satisfied that you aren't going to run off with their money. They want to know that you are a real company with ordinary and friendly people behind it.

 

Anything you can do to overcome that nagging doubt will improve your conversion rate. And if you make them feel comfortable enough to purchase from you once, then you will also have more repeat customers.

 

This could mean using making sure your website is secure and letting people know about it with things like a secure payments logo, having an About Us page that lets your customers get closer to you, having a contact telephone number, and having a professional-looking website generally.

 

 

Making it easy to navigate your store is deceptively difficult. This is because your site must cater to several different types of visitor: there are those looking for a particular product; there are those that wish to browse through a particular category of product; and there are those who simply wish to browse randomly.

 

Amazon typifies great e-commerce navigation. Realizing the your store must help visitors with different objectives is key to creating more sales. 

 

 

People don't want to buy something they will later regret. When reading copy, the customer may fear that the product is being exaggerated in order to create more sales. You want your description to be authoritative, and your customers to trust rather than doubt. 

 

Customers want to make an informed decision, based on what they want. By telling the customer the features and the benefits of a product in a compelling yet understated way, they will be much more likely to buy.

 

 

After customers have made the decision to buy, it is critical that you put them on a greased slide towards purchasing. This means that pages should load quickly, nothing should take the customer out of the shopping cart, customers should only have to type in their details once, and the process should be easy. 

 

A small stumbling block between the time the customer decides to buy and when they actually make their purchase can lower the conversion rate of your e-commerce store considerably. But on the bright side, identifying and removing such a stumbling block will instantaneously increase your income.

 

 

There are many things you can do to improve your conversion rate. For many, the amount of things that could be done is daunting. When you already have the day-to-day running of the store to contend with, such things get put on a to-do list and then never get done.

 

Implementing changes like those mentioned above can significantly increase your revenue. Even if you already have a busy schedule, it is worth finding time to make these changes. Your bank balance will thank you for it.