Mike Jones on retail

We all know the best things in life are free, but maybe some things have been stretched on that point in the past. The government is faced with some of the biggest challenges any modern government has had to face, with the level of the national deficit at the top of the agenda. It was inevitable that some tough decisions would have to be made and some of you may remember Margaret Thatcher's famous words that 'any woman who understands the problems of running a home will be nearer to understanding the problems of running a country'.

Over the past two years most retailers have had to run their 'homes' in a way that has tested the very core of their businesses due to the cuts and economies of scale that they have had to impose due to the downturn. Now this chalice has been passed to the government. It has to find where it can make savings that can reduce the debt.

Soon, this will include a hike in VAT by 2.5pc that will start on January 4 and generate �13bn a year in extra revenues. But it will not be applied to VAT exempt items, such as food, children's clothing, books or newspapers – for the time being at least. This move, added to the spending review, may cause a vacuum in retail sales after the New Year. Before that happens, there is another factor that will take the heat out of sales this Christmas and that is the effect of sales through the internet and the ever-expanding supermarket tills. I expect this year to show upward growth in both markets, spurred on by people looking for ways of saving money, and the other major factor of spending, convenience. How I remember trawling the shops at Christmas with my mother through snow, wind, hail and rain, only to get home to hear her saying that she would have to do it all again next week as there might be 'things' reduced next week. Those days are gone. Modern retailing has to include a multi-channel approach with the internet playing a vital part. Market research shows just how the majority of consumers now 'click before they buy', doing research on the internet before they make decisions. In nearly every review that you see in a magazine there will be a website given where the item being reviewed can be purchased. None of these habits will change and will probably accelerate until we get to the point where nobody goes out to buy anything. No money changes hands and everything is paid by electronic payment. Christmas cards are a thing of the past and 'e cards' are sent via the internet with your family singing a Christmas carol as an attachment. How nice it will then be to sit down and hear 'Hark The Herald Angels Sing' coming from the microwave to let you know the Christmas meal is ready and all you have to do is switch on the fake candle and pull a silent (health and safety) cracker.

Mike Jones is managing director of electricals chain Bennetts.