UK mother and baby goods retailer Mothercare has launched a new business model following talks with its franchisees, that it says will be more sustainable and less capital-intensive.
The new model allows its franchise partners to pay for products directly to manufacturers, removing the timing mismatch Mothercare says it was experiencing with the reduction in its payment terms.
“We believe this new way of working will ultimately have the added benefits of improving pricing for franchise partners, which in turn should better incentivise retail sales growth and assist our manufacturing partners in reinstating credit insurance for future seasons,” the company says.
The move comes after Mothercare placed its UK stores into administration last year, closing all 79 shops and cutting 2,500 jobs. The group now trades online and through overseas stores.
The new business model will come into effect from the autumn/winter season and follows close discussions with both international franchise and manufacturing partners to modernise and improve the commercial relationships to mutual benefit.
In addition, Mothercare has signed a new 20-year franchise deal with Alshaya Group, its most significant franchise partner. It has also completed the deal to appoint Boots its UK and Republic of Ireland franchise partner for an initial ten-year period.
Mothercare branded clothing will be available in a large number of Boots stores across the UK and Ireland from autumn, with home and travel products available in larger stores, as well as online.
The retailer, however, says it estimates the shortfall from its UK administration last year at around GBP10m (US$13.1m).
In June, interim CEO Glyn Hughes announced his decision to step down, ruling himself out of the search, leaving the company to be run by the COO and CFO, with close oversight from the chairman.
A month later, Mark Newton-Jones stepped down as executive director. He had resigned from his position as CEO in January as the group moved through the final stages of its transformation plan to become an international franchise operation.