Zavvi goes into administration

In what we sincerely hope will not be a monthly feature of this newsletter, there has been yet more music retail gloom as we roll into 2009.
This time, it was entertainment chain Zavvi that fell into administration on December 24th 2008.

While numerous other retailers launched themselves into a hopeful post-Christmas sales offensive, the board of Zavvi called in administrators Ernst & Young to take charge of the firm's UK operations.

In a formal statement, Tom Jack, joint administrator at Ernst & Young said: "Since EUK went into Administration, and perhaps before, the impact of problems at EUK on the Zavvi has been significant. Minimal deliveries, no returns and worse trading terms are just some of the areas impacted. In the absence of a buyer for EUK, and with dire trading conditions on the high street, Zavvi has seen a material fall in sales and the directors have now been forced to place parts of the group into administration."

Zavvi's rival HMV group, is currently understood to be interested in acquiring a small number of stores.

Zavvi UK is in administration while Zavvi Guernsey has been placed in liquidation. Zavvi Ireland is not subject to any insolvency proceedings.

It is expected that all customers who purchased Zavvi gift vouchers from stores dating from 27 November 2008 will receive a full refund in respect of the unredeemed value of the gift vouchers. However, the store are no longer redeeming vouchers in stores or taking any online orders.

The administrators, who said they would keep Zavvi's 125 stores running while they searched for a buyer, blamed Zavvi's collapse almost directly on the failure of Woolworths. Its distribution arm, EUK, supplied Zavvi with DVDs and CDs - until Woolworths collapsed, as reported by The Gen last month. This apparently left the former Virgin Megastore chain short of stock as it entered the vital Christmas trading period.

Have your say - Will HMV soon be the only music and entertainment chain store to have a presence across the UK? What would this kind of monopoly mean for consumer choice of music and access to cds and vinyl on the high street? What will it mean for the independent sector?