Suppliers supply. But should they continue to do so?
On Wednesday, Sir Keir Starmer, leader of the opposition, said in prime minister’s questions that the collapse of Arcadia threatened to “rip the heart out” of UK high streets. He called upon the prime minister to bring forward a comprehensive plan to save retail jobs.
Coming after the successive failures of Arcadia, Debenhams, Bonmarché, the comments are understandable. But alongside the retail jobs highlighted by Sir Keir, it is the case that suppliers have suffered a triple whammy this week.
Given previous history – and speculation (was JD Sports touted as a buyer of Debenhams in order to try and squeeze a higher offer from Frasers Group?) – it would be reasonable to ask why suppliers continued to supply to the fallen. Various commercial reasons would be put forward, and at the heart is the willingness to accept commercial risk.
But going forward, even suppliers that are prepared to take commercial risk should consider:
None are necessarily easy. The acceptance of any by a fashion retailer reflects how keen it is to contract with a particular supplier.
While credit insurance is dependent on the willingness of the credit insurer to accept risk, retention of title is dependent on:
Unfortunately, it is the case that in many instances retention of title provisions are poorly drafted, or even when properly drafted are not incorporated into the sale contract.
For a supplier to be able to retain title against a retailer, it is necessary:
But, however well drafted the retention of title provision is, it will have the aerodynamic qualities of an anvil if it is not properly incorporated into the sale contract. Often retailers will have terms and conditions of purchase, one objective of which will be to ensure that the supplier is not able to retain title to the goods supplied. This situation is often referred to as the “battle of the forms”.
Given what has happened to Arcadia, Debenhams, and Bonmarché, consideration should also be given to two other groups.
Brands with concessions in fashion retailers are a sort of supplier. The use of, for example, pro formas is not open to them. However, ring-fenced bank accounts to hold the proceeds of sale through concession may be capable of being negotiated.
Employees also are suppliers – of their labour. The reintroduction on 1 December 2020 of Crown preferences (deferred in 2003) means that the government is effectively favouring taxpayers over employees: something Sir Keir failed to raise…
This article was first published in Drapers.
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