The Fragrance Shop: something stinks

You may have read or watched the story of Sanjay Vadera, CEO of The Fragrance Shop, recently. He appeared on Sky News last week to talk about McArthurGlen, its owners, wanting to take down its six factory outlets and hand them over to its rival, so he is suing them. The case will be heard in the High Court on Monday. Full disclosure here: Sanjay is a friend of mine, and he’s a client. So I have an interest. But the story is also, I think, about broader issues of trust, reliability, loyalty and fairness.

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

Now, let’s nail one thing up front. Sanjay is not afraid of competition. He is a successful businessman who has worked hard to grow his business. Both retailers could have a presence in these villages and compete fairly for business. After all, two POS brands competing against each other are bound to lead to lower prices, so it’s a win for the shopper. And it suits him well, which I admire.

I am not a real estate lawyer. I’m not the owner either. But I’m a businessman, and I’ve been through enough and enough to know how the world works. Relationships are important: between landlords and tenants, and between merchants and consumers. If you play by the rules of the game, keep things flexible but honest, you can develop strong mutual relationships. That’s what I’ve always done with my clients. This is what Sanjay has done with his clientele and, as far as he knows, with his owners as well. But something has changed on their end that (if you forgive me the pun) doesn’t smell good.

My point of view is simple: something stinks in this agreement. There’s something seriously wrong, something McArthurGlen isn’t telling Sanjay and the audience. It sounds like everyone else is secret business, unspoken understandings, nods and winks. Of course McArthurGlen says it’s all Sanjay’s fault and they tried to negotiate, but they would say that, wouldn’t they?

It’s not really a recognized term in law, or really much in business, but it’s just plain unfair. McArthurGlen does not follow the rules, whether the written ones (which Sanjay is challenging in the High Court) or the unspoken rules of fairness, to get a decent chance at your business success. I don’t like injustice, and I don’t think the public likes it either. And The Perfume Shop needs to be careful that customers don’t vote with their feet.

It’s the worst thing. Who loses here? Well, Sanjay, yes, but, to be honest, he can take care of himself. It’s mostly the customer. The Fragrance Shop does good business and serves shoppers well, but adding another big brand to the mix can only spur competition. It is a fairly basic market economy. If Sanjay has to sell his CK-One for £5 less a bottle to compete with The Perfume Shop, then frankly that’s five pounds less than the customer is paying. Sanjay is okay with that; he relishes the opportunity. Maybe, and let’s be generous, The Perfume Shop too. But the owners aren’t allowing that to happen – and we need to know why.

One last thing comes to mind. It’s a really tough time for bricks and mortar retailers. We need foreign investment more than ever in our shopping streets and factory outlets. What message does this kind of sharp practice send? Where is the incentive for a new brand to come in, if it knows that its landlord can simply withdraw its lease a few years later without explanation? How does this stimulate the retail sector and, above all, create jobs? Simple answer: it is not.

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