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'CVAs are unexploded bombs for indies'

Large retailers entering into CVAs can have an unfair and heavy impact on independent retailers, says Martin Brighty, owner of central London menswear independent Peckham Rye.

It feels as though not a day passes without the dreaded three letters CVA – company voluntary arrangement – being touted, alongside the name of another large-scale retailer. Most recently Arcadia Group, before that Debenhams – and so it goes on.

It scares most independents – not just because of the potential loss of high street anchor stores smashing down the footfall, but also the likely fallout as we await our own rent and rates reviews. The old adage of “someone’s got to pay, so it might as well be you” comes to mind as these big retailers get away with negotiating as much as 30% off their rent and put reducing business rate bills next on the list – something an indie can’t do because it lacks the “critical mass”.

For independent owners, someone else’s CVA is our unexploded bomb. We realise that landlords cannot afford to allow their own revenue to decline – they have businesses to run as well, bank managers to comfort, shareholders to fend off, pension funds to feed, hedge funds to owe money to, and anyone else in between to appease. Yet, indies will be the ones who foot the bill as landlords seek to recoup their losses elsewhere.

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It’s ironic how big retailers have knowingly sat back and watched their sales decline, and their cost base creep up to the point where the downward line intersected the upward – only then do they do something. Indies watch the numbers hourly, not quarterly. Most of us struggle from one week to the next, as we see the big retailers mark down prices heavily.

CVAs might give retailers a bit of breathing space, but the problem runs much deeper and requires more than just clever corporate footwork to allow big retailers to dance their way out of trouble.

There are many reasons why these larger retailers are banging the CVA drum, but initially you have to look at the management. In many cases the board’s experience is irrelevant to the business, and its members do not understand how the business is functioning in today’s retail environment.

Ultimately, the retailer that is about to launch a CVA has become far too corporate for its own good, and lost track of what it was about: selling, what it was selling, how it was selling and who it was selling to. Under-investment, poor project management, lack of skills and a demoralising culture led by boards of directors far removed from the reality of retail is a recipe for insolvency, and I am not at all surprised that “CVA” seems to be this season’s must-have label.

Meanwhile, indies go out of their way to get to know their staff, their customers, their suppliers, their ranges and, above all, the capabilities of each member of the supply chain.

Indies don’t have corporate baggage weighing us down. We can move faster and our drums, although smaller, play just as loudly when we engage our niche audiences. We don’t need augmented reality, virtual reality and facial recognition programmes – we learn about our customers and keep in touch.

“We engage in a way that’s relevant, whether it is by a card or a phone call. We remember when we last met and talked, and we give time to people. We are not just cash and wrap – we are cash and care.

We don’t get rent reductions and rates rebates. Like all indies, at Peckham Rye we firmly believe we are providing a valuable service to our customers and communities, all the while watching the big retailers wriggle and writhe their way out of their commitments.

I’m not surprised that landlords are a bit unhappy these days. But from the indie perspective, we are the ones who now sit on the unexploded bomb of rent and rates increases – and when it goes off, who would want to be an independent retailer?

Martin Brighty is owner of menswear independent Peckham Rye in Carnaby, London


Readers' comments (4)

  • darren hoggett

    Good article. The reality is most Independents live within their means, whereas many large retailers don't - and use CVA's as a get out of jail card for their incompetence and mismanagement.

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  • Well written, Martin. A bleak but accurate picture. I can't think of a positive comment with which to counter your argument.

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  • Martin Brighty is spot on...for too long and too often, the large retailers use the CVA route as an escape route whilst the management remain untouched. Many indies have hit hard times and simply been innovative, worked hard and learnt to adapt and get through the difficulties...

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  • Spot on Martin.

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