Retail Resilience - Strategies for Stability Amidst Uncertainty

Welcome to The Fixer Focus, where we share insights and retail industry updates from our Fixer team of experts. In this issue of The Fixer Focus, our Founder & CEO, Nicole Marra, and COO & Executive Advisor, Brooke Bulan, provide some useful steps to mitigate the risks associated with retailer bankruptcies and other non-payment situations. We dive into several ways for brands to protect themselves from the impact of these scenarios.

We can all agree that the retail and luxury environment is far from stable right now. With so much uncertainty surrounding the fate of luxury e-commerce retailers and traditional brick-and-mortar establishments alike, it is imperative for brands to take proactive measures to minimize the risk associated with industry-wide collapses. 
 
Brands often find themselves navigating complex relationships with retailers, where leverage may not always be evenly distributed. It's not uncommon for brands to extend favorable terms to retailers in an effort to move product, including offering discounts or allowing deferred payment arrangements. However, these practices can expose brands to significant risks if the retailer is unable to fulfill its financial obligations.
 
For emerging and established brands alike, these are several proactive steps that can be taken to enhance resilience and mitigate the risks associated with retailer bankruptcies and other non-payment situations:

  • Retain Title: Incorporate a robust retention of title clause into the brand’s terms of sale. This clause empowers the brand to retain ownership of merchandise even after delivery until specific conditions, such as full payment, are met.

  • Diversify the Retailer Portfolio: Relying too heavily on a single retailer exposes a brand to heightened risks in the event of their financial collapse. By diversifying distribution channels and working with multiple retailers, both online and offline, brands can spread their risk and minimize the impact of any single retailer's bankruptcy.

  • Perform Due Diligence: Before entering into any agreements with retailers, conduct thorough due diligence to assess their financial health and stability. Review their financial statements and credit ratings (if available) and industry reputation to gauge their viability as a business partner.

  • Obtain Purchase Order Insurance: There is specific purchase order insurance available that provides coverage in the event that a retailer fails to make payment on orders.  These policies can provide significant protection for brands. However, certain retailers may be excluded from coverage based on their creditworthiness or anticipated financial stability, so this option should be explored prior to signs of distress at key accounts.

  • Monitor Performance and Payment: Stay vigilant and monitor the performance of retail partners closely.  Keep track of sales data, inventory levels and payment history to identify any signs of financial distress or non-compliance. Establish clear payment deadlines and follow up promptly on any overdue payments. Early detection of potential issues allows a brand to take proactive measures to mitigate risks.

  • Maintain Accurate Records: Keep detailed records of all transactions, communications, and agreements with retailers. This includes invoices, purchase orders, delivery receipts, and correspondence related to payment arrangements. Having comprehensive documentation will strengthen the brand’s position in the event of disputes or legal proceedings.

The Fixer team has deep expertise in these areas and can assist you with implementing and executing on these strategies, with tailored legal and operational solutions to safeguard your brand's interests. Don't wait until it's too late—take proactive steps today to fortify your brand against the uncertainties of the retail landscape.  Together, we can navigate these challenging times and ensure the continued success of your brand.

© Fixer Advisory Group LLC 2023.  The Fixer Focus is for informational purposes only and does not constitute legal advice or establish an attorney-client relationship. Fixer Advisory Group LLC and Marra Law Group PC assume no liability in connection with the use of this publication. Please contact us if we can be of assistance regarding the subject matter of this publication.