Negotiating the new normal
Updated: Sep 29, 2020
Georgina McManus (Global GC at Manolo Blahnik) and Ashleigh Hegarty (GC and Privacy Officer at Charlotte Tilbury) spoke to Kate Wilkinson (Head of Group Legal at Mulberry) about the issues they have faced in negotiating the new normal. All three incredible women have clearly had a busy year. They demonstrated how they have successfully adapted and helped their respective businesses reshape and regroup so that they remain on the path toward success.
How did they survive the pandemic?
Both focused on the need to be human-centric as far as employees and suppliers were concerned and remaining agile to adapt to the businesses' needs. Each provided more details around what they meant by this in their discussions around contract amendments and the adaptations they have had to make to online sales.
At Manolo Blahnik, they were working from home a week before lockdown which meant that they were much better positioned to adapt to the fast pace of change.
Georgina highlighted the importance of thinking commercially. Whilst you might be in a good contractual position, force majeure doesn't reflect the wider commercial context. Ashleigh pointed out that many people quoted force majeure and frustration without understanding what the terms mean both legally and in practice.
Businesses such as Manolo Blahnik with small and longstanding business relationships focused more on reaching a fair balance which didn't necessarily reflect the letter of the contract but protected everyone to a degree.
The commercial relationship was the key – understanding the importance of the relationships was key to reaching a resolution. Georgina pointed out that in luxury you have a small supplier base and the relationship is key so you have to find a solution that works for everyone. The contract is less important than the commercial relationship.
Under normal circumstances, you don't negotiate all contracts in a supply chain at once. I can only imagine how stressful it must have been to manage and review the renegotiation process. You’re not planning for a pandemic when you’re negotiating a contract in the usual way! Georgina noted that second guessing the risks when negotiating contracts is going to be particularly challenging in the future. Inevitably businesses will change their processes and there will be more detailed review processes going forward but spotting and planning for black swan events is notoriously challenging.
There are many other contractual issues to consider beyond the supply chain such as leases, employment contracts and technology licences. Rent was a major issue and smaller suppliers were forced to close which could have created a problem if there wasn’t sufficient stock in reserve.
Ashleigh explained that Charlotte Tillbury has seen a huge amount of conversion on digital compared to bricks and mortar. This isn't hugely surprising but it does bring some benefits. Such as the access to customer data and ability to maintain far more stock than is possible in store. She noted that there are less issues with returns on makeup than many other products - unused or "gently used" products are accepted as returns but in most cases, customers keep the products. Often it is because they already know what to expect when they make the order.
Influencers have helped to increase sales but do bring their own variety of problems.
Georgina noted that the stores are the life blood of the Manolo Blahnik brand. It’s a shame to temporarily lose that channel. Moving to e-commerce is challenging but as a small and privately owned brand it’s been much easier to pivot. For example, the decision to hold an end of season sale online was a huge step to take. Bringing people off furlough to help with this process proved to be a winning move and helped to integrate retail teams. They are now conducting the market for wholesale products virtually as well. The only down side of this of course is that it's not possible to touch and feel the products in this way.
Main priority/prediction in next 12 months
Charlotte Tilbury is moving to an omni-adaptable workforce. In essence this means that staff now have more variety (and more hats to juggle). For example, makeup artists are now also social ambassadors. They may offer online consultations and assistance with customer care. This is a great example of how brands are adapting in order to meet new customer needs due to the change in sales channel. A digital clientele has different needs and offers different brand building opportunities. Understanding what customers need in a digital world is the key to survival.
Finally, we couldn't end without some mention of Brexit which Georgina acknowledged is going to be a big issue but like many it is has fallen very far down the agenda thanks to Covid. One silver lining (if it could be called that) is that after the pandemic, "Brexit feels like it will be more survivable"!
The forward momentum for both brands clearly comes from balancing digital with the return to in store. It concluded with an optimistic hope that by next year there will be some good news stories to share! Fingers crossed.
To find out more contact Rosie Burbidge, Intellectual Property Partner at Gunnercooke LLP in London - firstname.lastname@example.org