New Look Turns a Blind Eye: New Look suspends payments to its suppliers
April 29, 2020
3 min read
What's going on here?
New Look is “indefinitely” suspending payments to its suppliers for existing stock.
What does this mean?
The retailer has stopped payments to its suppliers, telling owners that they can collect their stock. It has also cancelled its Spring and Summer lines and will not be paying costs towards these.
Despite New Look stating that its actions are “a matter of survival”, the move has been met with criticism. An unnamed supplier argued that this move was “totally out of order”. Although the supplier was not owed money by New Look and did not have any existing orders with the company, they stated that this would place risk on the supply chain, as it would “devastate smaller companies…at a time when they need help the most”. It called for greater responsibility throughout the supply chain, by large retailers paying deposits upfront. New Look’s Chief Executive Nigel Oddy acknowledged the impact that the pandemic is having on its suppliers and urged them to look towards government support schemes and to “pursue any options that are available”.
New Look has been facing trouble since before the pandemic, having closed numerous stores in 2018-2019. The retailer stated that it has not been able to place new orders with suppliers and that they are “actively identifying opportunities where they can hold products for use for autumn-winter this year or spring-summer next year”.
What's the big picture effect?
Lawyers will be guiding retail clients on the best option to safeguard their business, adhere to contractual obligations and preserve commercial relationships. Retailers may look to repurpose or postpone orders to honour contractual commitments and relationships. Some retailers, such as Monsoon and Debenhams are seeking an extension of payment terms.
Many retailers are now relying on force majeure clauses to justify actions such as withholding supplier payments and cancelling orders as a result of the pandemic. This clause serves to protect parties where they cannot comply with contractual obligations owing to an event outside of their control. Whether this is in the favour of retailers such as New Look will depend on the individual wording of clauses, measures they could have taken to mitigate consequences of their actions and how difficult the virus actually made to honour commitments. Retailers, therefore, must review their contractual rights and obligations in regards to these issues.
The pandemic and the subsequent actions of large retailers will have a devastating effect on smaller suppliers who are further down the global supply chain. Many of these are located in developing countries such as Bangladesh, which depend on the high demand for fast fashion. This has increased criticism that retailers benefit from the cheap labour available to them when demand is high, but fail to deal with the consequences when things do not go to plan. This ethical dilemma must also be taken into consideration by businesses and lawyers advising them, particularly in light of the scrutiny of high street retail shops and their practices.
During this difficult time, retailers will become dependent on concessions, such as tax breaks and reduced or suspended rent payments. New Look has requested a three-month holiday from landlords to cope with the economic impact of the pandemic. If such steps go ahead, it is likely to result in legal issues and disputes between landlords and tenants.
Although many retailers continue to operate via online sales, it is likely that we will see the collapse of further businesses under the strain of coronavirus.
Report written by Laila Khan
Share this now!
Check out our recent reports!