Zavvi Goes Into Administration.

So, Zavvi have also gone to the administrators : BBC NEWS

  • For FAQ’s regarding the administration, including what to do if you have Gift Vouchers (you can no longer redeem them for goods or services) or wish to return/exchange items going forward – CLICK HERE for the administration notice on Zavvi’s website.
  • What does putting a company into “administration” mean? BBC Article.

Personally, I find that quite surprising/a shock, mostly because I think that it shows a prime example of creditors bankrupting companies.

In this case, EntertainmentUK/the Administrators had no choice but to demand payment for the £106 million to cover the stock already in Zavvi, and so of course they couldn’t pay it (they were still struggling to make a reasonable profit as it was!) and have had to go into administration. This could have happened as quickly as an invoice landing on their Accounts Payable clerk’s desk, and a frantic meeting with the board before deciding that they needed to call in the administrators, though in reality was probably known for a few days and with talks between Zavvi and EUK’s administrators (as they won’t have wanted to force Zavvi into problems either!).

Yes, everyone knew that EUK was going to go under – it’s been drawn out for long enough – however I don’t think anyone expected it to have this big an impact. The precedent is also quite worrying… especially for Zavvi’s creditors and those to whom had business agreements/dealings with Zavvi!

In hindsight, even if Zavvi had been able to pay the £106 million, would they have been able to find a new distributor to keep the stock on their shelves…? That in itself is unlikely, and so perhaps the writing has been on the wall for some time for Zavvi… it’ll be interesting to see how it all gets disected in the coming weeks.

On a wider note, companies are very cash rich just after Christmas and aren’t holding much stock – therefore, I think we will see a lot of companies toppled by their creditors as those creditors will want to do this kind of thing when assets are already liquid as opposed to tied-up in stock (which is why Woolies are having to take their time over closing and brand it as a “sale”).

Once again, we’re back to this idea of “doubt”… if a company doubts that another is creditworthy and demands all outstanding payments are made, chances are that the company is going to struggle. What started with the banks being ‘silly’ has now turned into a serious problem hitting the high-street and people’s lives in a more direct way – and of course the Government will not underwrite shops as it does banks!!

Virgin Megastores / Zavvi was a failing brand, no doubt about it, however I’m surprised that the competition commission haven’t had much to say about this yet as it leaves HMV as a pretty monopolistic high street leader in the personal entertainment retail sector.

An alarming total of 3 brand-name administrations have been announced in the last 24 hours… right before Christmas… January is predicted to be a lot worse :o(

About Gari

Northern lad; living out in the Peak District and rediscovering life after having had a brain tumour.

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