Retail Week Knowledge Bank’s newly added profile for The Hut shows that the online retailer’s rapidly expanding coverage has given it some form of protection against the decision by the Government to scrap VAT tax relief for low value shipments from the Channel Islands in April 2012.

Retail Week Knowledge Bank’s newly added profile for The Hut shows that the online retailer’s rapidly expanding coverage has given it some form of protection against the decision by the Government to scrap VAT tax relief for low value shipments from the Channel Islands in April 2012.

While in 2007 some 80% of The Hut’s turnover was generated by operating websites on behalf of other retailers, typically sites specialising in entertainment products such as CDs and DVDs that benefit from the tax loophole, this proportion declined to just 20% in 2010.

In the meantime, the business has developed a number of its own websites and in the process has diversified its offer into health and beauty, gifts and fashion – product categories for which the company depends less on VAT relief for its price competitiveness.

More recently, the attention has shifted towards acquisitions, which include IWantOneOfThose.com (gifts) and the Lookfantastic Group (health and beauty).

In addition, international sales are becoming a fast growing component. They only accounted for 12% of overall sales in 2009, but this has risen to more than a third in the first half of 2011. Overseas turnover has been bolstered by the launch of some of its sites abroad and looks set to increase further as a result of the recent acquisition of MyProtein.com, an online supplement store that has a substantial following in continental Europe.

While it would appear inevitable that prices for certain products will need to rise following the VAT change, many of The Hut’s online competitors such as Play.com and even Amazon itself will be forced to do the same, while the growing scale of the company should ensure that it remains price competitive both in the UK as well as internationally.

  • Philip Wiggenraad, Analyst, Retail Week Knowledge Bank

Retail Week Knowledge Bank

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