Low Value Consignment Relief (LVCR): “Show me the Money!”

6 May, 2010
5 min
Low Value Consignment Relief (LVCR) Show me the Money

Something tells me that Jersey and Guernsey just aren’t making the most of Low Value Consignment Relief (LVCR).  Yeah, sure there are a few select individuals that have set themselves up for a very comfortable retirement – Play.com, Moonpig and MyMemory being ones that spring to mind.  But, with the barriers to entry for creating an e-commerce store so low, there must be a number of niche areas yet to be explored. 

Selling low value requires high volume

The problem with LVCR can be the first two letters.  “Low value” has to balance with “high volume” to make an attractive business plan.  Say your average product sells at £10, on which you make a profit of £4.  This means you must sell 10,000 items per year to make up the average salary of a finance sector worker!  That’s more than one product per hour, every single hour of every single day.  It sounds off putting, and in many respects it is, but remember you are not just restricted to selling LVCR products on your website.

LVCR products as complimentary goods

complimentary-goodsWith the popularity of Google Merchant Centre and other comparison shopping tools, price is more important than ever.  If you can entice a customer to buy an ink cartridge because you sell it cheaper then anywhere else, and then go on to sell them a laser printer, then you’re on to a good thing!

We all know it costs a more to attract new customers than to retain old ones, so just acquiring an email address for marketing purposes has some worth.  Supermarkets sometimes sell baked beans and loafs of bread at ridiculously low prices.  Why do they do it?  Well, these “loss leader” products are thought to attract new customers and make them believe that all prices are this low.

LVCR itself might not make huge profits for you but are their products that you can sell for under £18 to draw in new customers and then cross sell to them your more expensive offerings?

New products to market

Channel Islands of MoneyThe channel islands e-commerce entrepreneurs should always have their ear to the ground for emerging products that might fit the LVCR model  (see my previous blog post).  Remember that a newly launched product is likely to have a higher price tag on launch than when it’s life cycle approaches maturity; The products to look out for might not necessarily have a selling price of under £18 to start off with.  Remember, ideally you want to be selling towards the top of the £18 mark to make the most of the VAT saving.  If a product launches with a RRP of £30, six months down the line you could be selling it for £18?  It certainly sounds like an attractive idea from a consumer point of view.

Idea Generation

Now… go forth and brainstorm!  Think of products that you could start selling.  Let’s give our islands an alternative to the finance industry!

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Author

Phil de Gruchy

Phil is the owner of Blue Llama, a digital agency in Jersey, Channel Islands. He has worked in digital for most of his career and has a wide knowledge of UX, web and app design and digital marketing.

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