Friday 10 May 2019 6:11 pm

The Fragrance Shop: something stinks

You may have read about or watched the story of Sanjay Vadera, CEO of The Fragrance Shop, recently. He appeared on Sky News last week to talk about McArthurGlen, his landlords, who want to take away his six outlet stores and hand them to his rival, so he’s taking them to court. The case will be heard in the High Court on Monday. Full disclosure here: Sanjay’s a friend of mine, and he’s a client. So I have an interest. But the story is also, I think, about wider issues of trust, reliability, loyalty and fairness.

McArthurGlen’s outlet villages are shopping destinations for bargain-hunters searching for designer goodies at knockdown prices. Seemingly out of the blue, McArthurGlen cancelled the leases and awarded them – and, by extension, Sanjay’s loyal customer base – to The Perfume Shop. To say Sanjay was surprised by this move is an understatement: he was shocked, as was I when I learned more about it, because, on the face of it, there’s no reasoning behind what has happened.

Now, let’s nail one thing at the outset. Sanjay’s not afraid of competition. He’s a successful businessman who has worked hard to build his business up. Both retailers could have a presence in these villages and compete fairly for business. After all, two outlet brands going head-to-head is bound to lead to lower prices, so it’s a win for the shopper. And he’s fine with that, which I admire.

I’m not a property lawyer. I’m also not a landlord. But I am a businessman, and I’ve been around long enough and gone through enough to know how the world works. Relationships are important: between landlords and tenants, and between retailers and consumers. If you play things by the book, keep things flexible but honest, you can develop strong mutual relationships. That’s what I’ve always done with my clients. It’s what Sanjay has done with his customer base, and, as far as he knew, with his landlords too. But something changed on their side which (if you’ll pardon the pun) doesn’t smell right.

My view is simple: something stinks about this deal. There’s something badly wrong, something that McArthurGlen isn’t telling Sanjay and the public. This smacks for all the world of backroom deals, tacit understandings, nods and winks. Of course, McArthurGlen say it’s all Sanjay’s fault and they tried to negotiate, but they would say that, wouldn’t they?

It’s not a term really recognised in law, or really all that much in business, but this is just unfair. McArthurGlen aren’t playing by the rules, either the ones written down (which Sanjay is contesting in the High Court) or the unspoken rules of equity, of getting a decent shot at making a success of your business. I don’t like unfairness, and I don’t think the public does either. And The Perfume Shop need to be careful that customers don’t vote with their feet.

That’s the worst thing of all. Who’s losing out here? Well, Sanjay, yes, but, to be blunt, he can look after himself. Most of all, it’s the customer. The Fragrance Shop does good business and serves shoppers well, but the addition of another major brand to the mix can only drive competition. That’s pretty basic market economics. If Sanjay has to sell his CK-One at £5 less a bottle to compete with The Perfume Shop, then, frankly, that’s five pounds less that the customer is paying. Sanjay’s OK with that; he relishes the opportunity. Maybe, and let’s be generous, The Perfume Shop do too. But the landlords aren’t letting that happen – and we need to know why.

One last thing occurs to me. This is a really difficult time for bricks-and-mortar retailers. We need inward investment in our high streets – and our outlet shops – more than ever. What message does this kind of sharp practice send? Where’s the incentive for a new brand to come along and set up, if it knows that its landlord can just take its lease away a few years down the track without explanation? How does that stimulate the retail sector, and, importantly, create jobs? Simple answer: it doesn’t.

It seems that, in the perfume game, something definitely stinks.

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.