Talking Shop - Summer 2009


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Editorial


Welcome to the Summer 2009 edition of Talking Shop.

The good news is that from what Olswang is seeing and hearing, the last few months have seen consumer confidence (and hence consumer spending) pick up resulting in encouraging trading figures across the sector.  The late Easter, the May bank holidays and warm weather have led to encouraging growth for many retailers, but it is worth pointing out that higher like for like turnover is not delivering higher like for like profit, due to the effects of aggressive discounting. 
Like most retailers, we remain cautious about the sustainability of this recovery. With spending by British households falling at the fastest rate since 1980 in the first three months of this year, it's going to take more than a few sunny days to boost sales and, more importantly, profits in the long term.

In this edition of Talking Shop, we turn the spotlight on:

  • CVAs.  Spring saw three failing retailers turn to CVAs as an alternative rescue vehicle to the often criticised (by unsecured creditors) pre-pack administration.  We discuss what a CVA is and comment on the CVA proposals, including what makes them more likely to succeed or fail.  The number of high profile administrations seems to have decreased for the time being but with the pressure of the next rental quarter date approaching, it will be interesting to see whether more retailers are following the lead of Miss Sixty and JJB Sports in pushing for a CVA;
  • Retail supply agreements.  With many stores slashing prices in response to aggressive discounting by competitors, it can be tempting for suppliers and distributors to pressurise retailers to set minimum retail prices.  We look at the ways in which resale price maintenance breaches competition law and the consequences of such breaches; 
  • Vouchers.  Retailers using vouchers, gifts, discounts and other promotions to drive traffic into their stores or online need to be aware of the VAT implications of incentives such as these.  We examine the effect on VAT of different discount methods and recent litigation which has put the tax treatment of loyalty schemes into doubt.
  • Opportunity for new top level domain names.  The expansion of the pool of top level domain names (such as .gucci, .dress, .shopping) next year raises a number of issues for rights holders.  We discuss how the new domains will operate and who the likely applicants will be. With application fees and legal costs of up to £1 million, in the current climate it seems unlikely that brand owners and retailers will be rushing to apply for one of the new generic top level domains to create .brand.

If you have any questions or would like to discuss any of the issues raised in this update, please contact a member of our retail team.

David Roberts
Partner
Head of Leisure & Retail Group  

CVAs - on trend?

The term "CVA" (Company Voluntary Arrangement) has recently received increased exposure in the press, with high profile names in the retail sector such as Stylo, Miss Sixty and JJB Sports all associated with CVA proposals, approvals or rejections. This article briefly talks about what a CVA is, where it has been used recently in the retail sector and comments on the industry view.
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Avoiding competition law breaches when negotiating retail supply agreements

In the current economic climate, retail suppliers and distributors are, more than ever, seeking ways to protect their revenue streams. Some may be tempted to do this by pressuring retailers to set minimum retail prices, however, competition law prohibits resale price maintenance ("RPM"). Businesses at all levels of the retail supply chain need to be aware that RPM is contrary to the competition rules and can potentially lead to the agreement being found to be void and substantial fines being imposed by the competition authorities.
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The Price of Loyalty

Retailers hit by the credit crunch are employing imaginative ways to get people through their doors. Vouchers, gifts, discounts and other promotions are all being used to stimulate trade.
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Expanding your dot horizons

A recent announcement by ICANN (the Internet Corporation for Assigned Names and Numbers) in October 2008 indicated an expansion of the pool of top level domains (TLDs) captured the attention of the world's media. Most front pages hailed the news as a complete overhaul of the internet system, and ICANN itself described the proposals as "a whole new way for people to express themselves on the net".
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The information contained in this update is intended as a general review of the subjects featured and detailed specialist advice should always be taken before taking or refraining from taking any action.