Thursday 7 February 2013

HMV suppliers resist cut-price deal, the downside of administration…

According to the FT, HMV’s administrator Deloitte is attempting to pay rock-bottom prices to buy up the CDs, DVDs and video games provided to it under a loan arrangement, a move being resisted by some suppliers.

Before HMV went into administration, the entertainment retailer had agreed more favourable terms with suppliers, which meant it only had to pay for stock after it had been sold in stores. As a result, HMV is now stocking many thousands of video games, DVDs and CDs on consignment, where the content owners – music and film companies – still retain ownership.

Deloitte first offered to buy up this stock – which runs to hundreds of thousands of music CDs and films – at 12p in the pound, allegedly still significantly lower than standard retail deals of between 65p to 70p in the pound.

Given the large number of retail chains now in administration (see details), this negotiation stance by administrators presents issues for brand owners in many other categories.

Whilst every little sale helps in unprecedented times, the combination of low revenue and the low sell-on price by retailers in administration for prolonged periods, means brand value is suffering the same damage as an item on perpetual BOGOF.. 

Experienced NAMs will also appreciate that goods sold on consignment and based on scanned sales, means that the supplier is taking over the shrinkage problem. In other words, if a supplier delivers 100 items, and the retailer is paid for 98, two having been stolen, the suppliers absorbs the 2% loss.

A  final thought, have you ever tried to actually retrieve unsold consignment goods...?

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