How customers pay and what they can be charged is evolving and it’s important for your business to understand and respond to issues as they develop. Providing customers with more choice in relation to how they pay for goods and services or book holidays, either in-store or online, will be key to providing the best customer journey possible.

There are a number of key developments which you should be aware of including:

• an absolute ban on surcharges for retail payments
• new ways of paying
• how a customer can approve a payment

You’ll need to consider getting the most from your pricing strategy now surcharging has been banned, and to work with your merchant acquirer and payment gateway partners to create contractual relationships that work for you. We’re also seeing a number of large retailers looking to become licensed to provide payment services themselves to avoid interchange fees and get paid more quickly.

These opportunities and challenges come from the changes in legislation and it’s important to navigate the new regulations seamlessly.

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Our international Payment Services team has considerable experience of working with businesses to set and implement pricing or payment strategies. If you’d like to discuss how we can support your business please contact Richard Jones or Ruth Fairhurst.

The post Helping you unlock your potential appeared first on Consumer Law Hub.

Jigsaw, the iconic UK fashion brand founded by John Robinson and Malcolm Webster in 1972, currently trades from more than 80 stand-alone stores in the UK with concessions in John Lewis, Fenwick and House of Fraser. International locations include owned businesses in the USA and Australia, and concessions including Arnotts, Dublin, and Robinsons, Singapore.

Corporate Partner Alistair Cree and Corporate Senior Associate Elizabeth Tindall led the multi-jurisdictional Eversheds Sutherland which included legal advisers from the UK, US, Hong Kong and Australia.

For more information please contact Alistair Cree.

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This last year we have seen a growth in the number of retail matters we have dealt with.

In the first two months of 2018, there has been the downfall of 11 retailers, most notably Toys R Us, Berwin’s, Maplin and East. This affects nearly 400 outlets and 6,500 employees, which is already more than half the 12,225 employees affected in the whole of 2017. These figures don’t include CVA’s for the likes of Byron Burger or announced restaurant closures like Jamie’s or Prezzo. Even more recently Moss Bros and Conviviality have sounded warnings.

So what is eating retail and will there be more?

Even my 78 year old mother has noticed it’s hard to find a bank branch that isn’t a restaurant or bar and the plethora of high street charity and betting shops.  Sadly I think there will be more failures given a combination of headwinds and a paradigm shift in the traditional selling route to consumers combined with rapidly changing shopping habits.

1.Brexit and foreign exchange

When Article 50 was triggered the immediate consequence was foreign exchange turmoil. Great for exports and cheap for visiting tourists, expensive to import. Now that the majority of currency exchange hedging arrangements that existed at the time and which helped cushion the blow for businesses have now run off, it is a challenge to afford foreign supplies. The unsustainable import cost of ethical ingredients cited by Jamie’s as one of the key reasons for financial difficulties and restaurant closures. You can’t help but remain cautious about the yet to be unveiled “agreed” exit plan.

2. Rents and business rates

Traditional retail trade models need outlets in key locations and with that commonly comes inflexible high rent and overheads locked in. Against a backdrop of changing buying habits to online and declining footfall across the high street, out of town and shopping centres, ever harder to afford and justify. This coupled with the government’s new business rate policy, harder still to afford.    

3. Living wage 

From April 2016 all employees older than 25 were to be paid a minimum £7.20 per hour (phr) (it was £6.50) and will rise to at least £9 phr by 2020. There is also the knock on consequences to working hours, levels of remuneration, jobs and store numbers, not to mention increases in NI and pensions contributions to add. This continues to hurt the retail sector and it is argued reduces jobs and stores.    

4. Inflation

Reportedly the UK economy is currently facing the longest fall in living standards in 60 years. In the last two years there has been an increased squeeze on disposable income showing a 1.5% YOY decline. It is worth noting however that this probably masks even slower volume growth if you compare like for like sales between food and non-food. Comfort eating at Christmas aside, which contributed to solid food sales for the supermarkets (despite food inflation of 3.7%), non-food sales measured a loss of 1.9% (Oct – Dec ave.) and for some retailers, a massive 4-5% or more. The beast from the east prolonging the pain.    

5. Consumer credit

Consumers have done a sterling job contributing to UK plc efforts to balance the books, but consumers are under pressure with a weaker pound, inflation up and slow wage growth, albeit hopefully levelling off this year. This has come at a cost with unsecured credit up 9.6%, so no wonder big ticket items like furniture and new car sales are suffering. With 60% of the UK economy driven by private consumption, the Bank of England concerned about consumer debt levels and recent household spending levels having almost halved, is it as simple as people are spending less.

Anyone can now sell directly to the consumer – this may seem an odd thing to say, but the traditional retail route to the consumer requires:

1. a manufacturer

2. an importer or distributor

3. a retailer

4. the consumer.

Largely with the advent of online sales and development, you can forget steps 2 and 3. Anyone can now sell directly to the consumer and without shops. Online sales increasing (again YOY) by 7.6% compared to (non-food) in-store sales falling 4.4% this Christmas period. This has caused some department stores pain, making them sit up and take note.

Omni-channel operations – no, not a new hospital reality series, but the breadth by which a retail business now needs to consider serving its consumers beyond outlets to include experiences, additional added value services, online, through social media or otherwise. Additionally the ability to sell anytime and anywhere encouraging the trend of buying smaller more frequently. The role of the retailer has and continues to change with some accomplished online retail operators reporting 20%, 30% and exceptionally 100% growth over the Christmas and New Year peak period.

Corporate governance – ethical and health agendas, combined with social trends and the power of social media are demanding attention in a thriving business strategy. Transparent, accountable and adhered to or as fast as you can tweet “Kylie Jenner and snapchat”, it will #cost #business #£.

Data – feedback is essential to improve service. With technological advances comes the ability to capture greater amounts of information about consumers which can better inform and refine sales strategies to drive profitable growth. Essential to this process however is not just the ability to capture the data, but to interpret it effectively. In this technology driven and social media age, data analytics and then investment and managing the actual implementation of that required change must be part of a thriving retail business strategy. By the way this needs people.

Arguably the technologically advanced have a competitive advantage and are more likely to thrive than just survive or as a client said to me recently… “if you have no digital strategy, you have no strategy.”

With data comes cyber security issues – it is estimated around 46% of businesses in the UK have suffered some form of digital attack. With c.5 million businesses, that’s c.2.5 million hits. This last year or so has seen data breaches at Debenhams, Wonga, 3, NHS, Tesco, Yahoo and of course Facebook. It costs money to protect data and arguably more to rectify damaged reputations and share prices.

Operational restructuring will need to be considered if it hasn’t already, revisited if it has. This includes the traditional measures of headcount, store and cost reductions, buying and distribution efficiencies. 

Corporate simplification may be appropriate if within a group structure and divestiture of non-core business(es) whether through traditional merger, sale and acquisition or joint ventures. This may also include more efficient tax driven structures such as use of s110 (insolvency Act 1986) divestiture, solvent liquidation through use of members voluntary liquidation where all creditors are repaid in full within 12 months, or accelerated merger and acquisition processes. Even debt for equity swaps. 

Financial restructuring might be an option. There is still a great deal of liquidity offering alternative sources of funding whether P2P, challengers banks, invoice or asset financing, to the more traditional debt or equity investment. This may provide a solution to immediate and longer term cash and investment constraints for the right business, provided you have the expertise to fully understand the terms and manage the finances. Let’s not forget debt for equity swaps and often in retail, engaging with credit insurers.  

More formal regimes may also be a consideration, such as corporate voluntary arrangements which have been much used in retail and casual dining again recently where there are large and arguably burdensome property portfolios. 

What has not changed is that any plan stands a greater chance of succeeding the sooner you get advice and engage all stakeholders. What is difficult however, particularly for directors, is balancing the often sizable demands of doing the day job whilst formulating and implementing a plan with key stakeholders, often against a background of financial difficulties with the legal constraints of directors powers and duties to all creditors.

An unenviable job, but one which we can help prioritise and successfully implement.

For more information or to discuss how we can help you please contact Paul Dutton.

The post What’s eating retail? appeared first on Consumer Law Hub.

The SBL will apply to Sugary Beverages that are listed in the Customs and Excise Act 1964 read with Section A of Part 7 of Schedule No.1, and will be calculated at a rate of 2.1 cents per gram of sugar content that exceeds 4 grams per 100ml beverage. However, the first 4 grams of sugar per 100ml beverage is levy free.

Sugary Beverages produced by commercial manufacturers with a total annual sugar content in excess of 500kg per year need to be licensed and are liable to pay the SBL. Non-commercial manufacturers are required to register with SARS but will not be subject to the SBL.

The sugar content of Sugary Beverages liable for the SBL, is calculated on:

• the sugar content stated on the labelling
• the sugar content indicated on a test report obtained and retained from a testing laboratory recognised by the National Regulator for Compulsory Specifications of South Africa
• the deemed sugar content of the Sugary Beverage that is assumed to constitute 20 grams per 100ml

However, products that contain only intrinsic sugars, that is natural sugar such as unsweetened milk and 100% fruit or vegetable juices are exempt from paying the SBL.

Manufacturers and importers of Sugary Beverages may also apply for a specific tariff determination from SARS to determine whether a particular product is subject to the SBL.

For more information please contact Greg Shapiro.

The post South Africa to introduce Sugary Beverages Levy from 1 April 2018 appeared first on Consumer Law Hub.

Potential for harm

Presently food and beverage products are traded freely within the EU Single Market.  Any bilateral trade agreement, as may be agreed between the EU and the UK, will contain Rules of Origin i.e. criteria applied to determine the “economic nationality” of goods for the purposes of assessing whether they may be subject to tariffs, quotas, safeguards and other restrictions of free trade. 

Many food and drink products are susceptible to falling foul of such rules as they consist of foreign-sourced ingredients that call into question their national origin.  Often this foreign sourcing is borne out of necessity, as is the case where certain raw materials required to produce the good are not available in the UK at all, or are only available in limited quantity or at certain times of the year.  The FDF report highlights that, unless sensible rules are agreed, producers of these products will be hard-hit with consequences ranging from costly restructuring of their international supply chains to de facto exclusion from the EU market altogether.

Report recommendations

The stakes are high, given that over 70% of UK food and non-alcoholic food exports are sent to the EU.  For this reason the report proposes solutions designed to minimise the impact on UK food and drink manufacturers.  Among the eight proposals made by the report include:

• A de minimis allowance for non-local content of 10% by value in all goods should be agreed, in addition to other product-specific allowances.
• Origin requirements should be “cumulative” in the sense that goods originating in either the EU or the UK will be treated as originating in both e.g. French wheat used in a UK biscuit should be treated in the same way as UK wheat in a UK biscuit.
• Consideration should be given to measures which protect the global supply chains of both the EU and the UK producers from disruption, particular where these include exporters from the Least Developed Countries.
• The rules should fairly account for unique forms of value added by premium manufacturing, rather than adopting methodologies that can be more crudely applied based on pure composition of the goods.
• The rules should simplify the administrative burden of compliance through measures such as self-certification and exemptions for low value shipments.

Commentary

It would be simplistic to conclude that these are all sensible suggestions which ought to be adopted in a reasonably balanced trade agreement to address an issue which impacts parties from both sides.  Rules of Origin have legitimate aims e.g. to prevent veiled access to a market by third party actors.  On the other hand they can be used to disguise protectionism.    Straightforward solutions are often difficult to find, especially in the context of the complex international supply chains required to manufacture many food and beverage products.   In our view the FDF is thus rightly concerned about a “hidden hard Brexit”.

If you have any questions and would like to discuss the possible arrangements and the impact on your business please contact David Young or James Lindop.

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