Tesco in the UK has announced it is to reduce the price of nearly 100 private label and branded sanitary products such as pads and tampons. The five per cent reduction in price will cover the cost of the so-called ‘Tampon Tax’ or VAT on the items ahead of UK government proposals to remove this.
Just like in many other countries of the world, pads and tampons are not tax exempt like some other medical necessities in the UK. In 2000, the VAT rate was reduced from 17.5% to 5% in the country. As a response to huge protests and online petitions, the parliament created legislation to eliminate the tampon tax, effective April 2018.
Tesco is following a smart marketing move here. The VAT on sanitary goods is definitely to be removed anyway in 2018 in its home market. Tesco will already be prepared and its private label ranges will already be adapted once this becomes effective. This reminds us of the situation when retailers got rid of plastic bags just before the law on this was passed, helping them to appear as environmentally friendly companies. The concept is simple: There is going to be a new law retailers have to follow, they decide to do this a couple of months earlier and play their marketing drumroll to promote their ethical stance.
Lucky Tesco – the current Tampon Tax in the UK was already reduced from 17.5% to 5% – the lowest rate possible under the EU’s value added tax law. This means it only has to cut prices for its private label and branded goods by 5% for only around a year while the move will have a huge positive impact on its corporate social responsibility agenda and shoppers’ perception.
Most consumers – particularly those who need products to absorb their menstrual flow – regard the VAT classification of sanitary products as unfair, in case they are aware of it. Others insist that sanitary products also need to be affordable for homeless or poor people as menstruation is not a choice. As a result, the city of Aberdeen only recently decided to freely distribute such items amongst people on low incomes, making Scotland the first country in the world to give away these products.
It is only a matter of time before this topic creates a stir across other countries. In many markets including Russia, Sweden and Germany, tampons do not even have a reduced tax rate. They are classified as luxury items and not staple goods (like groceries) and thus a VAT of around 20% is added. France already reduced the tax drastically. Canada has removed the tax following online petitions, while protests have also peaked in the US. Clever European grocers and health & beauty retailers could make use of this situation. Now. They could already experiment with price reductions in the segment while educating shoppers of the unfair and sexist classification system. This could help them not only to be perceived as first-movers on this issue but also help them to benefit from being perceived as fair, transparent and ethical amongst soon-to-be loyal shoppers.