Losing your main competitor is, it turns out, quite a strange place to be, and the demise of Paperchase has left me in a reflective mood.
It's important to acknowledge that the Paperchase business has many great people who care deeply about the company - and the industry in which they work. I know this because over recent years I have interviewed and employed a few of them in Paper Tiger. For many years, Paperchase led this industry, and I have many suppliers who have very fond memories of the good times, and have often had good things to say about the good people within the organisation. Those good people deserved better than the leadership team(s) that have led the company to this point, and they are very much in my thoughts at this time.
Unfortunately, as this familiar situation unfolds, it is clear - yet again - that the main losers are those employees. We must not forget the unpaid suppliers, some of whom have been left significantly out of pocket, and the landlords with soon to be empty shops and unpaid rents. It is also highly possible that this will cost all of us as taxpayers and local ratepayers, as we may not see a penny of the VAT, NI contributions or business rates that will be owed to national and local governments.
I think we can also be reasonably sure that the directors of the various iterations of Paperchase ownership vehicles are not concerned about putting food on their tables in the coming months, or whether their rent cheque or mortgage payment will bounce. Administration seems to be an opaque operating model for some businesses that sits somewhere between immorality and illegality. From my perspective, it reeks. There are some honourable exceptions, but it seems that the directors of many of these PE/VC companies who engage in this model are vampires, sucking blood from businesses like Paperchase. That business turned over around £125m annually prior to the pandemic, that's a lot of blood to spill on the boardroom floor.
Of course, the issues that are facing High Street retailers (large and small) are numerous and they have been addressed at length in many places and on many occasions by people who are far better qualified than I am to pass judgement. There are also sector issues with greetings cards and stationery due to the changes in how we communicate, technological changes, social media, etc. All of those issues have undoubtedly been factors in the decline of Paperchase. The ‘material uncertainty’ emanating from Ryman suggests that there is more pain to come. Nevertheless, there is still a huge demand for this product category (just ask Tesco). In my view, the failings at Paperchase are due to a loss of direction and an absence of experienced retailers in recent years.
From my perspective as an independent competitor, I have been increasingly mystified (and absolutely bored) by their strategy. Even prior to the 2019 collapse their ranges were visibly weaker, their stores were looking de-stocked and thin on inspiration, and the calibre of product was moving ever down market. By the time Timothy Melgund conducted the first CVA back in 2019, it was clear that the company had lost purpose and direction, and the subsequent sequence of events and various ownerships were merely steps along the way to the situation in which Paperchase finds itself today. I don't doubt that Tesco have made a smart move - all that data for starters - but if they can manage to do what Sainsburys have done with Habitat, then the integration ought to be a success.
All of this will leave 106 shops and 820 people without meaningful employment. The labour market in the UK currently favours the job seeker, and I would be optimistic for the majority of the team. Whether they find work as interesting, or work that they are passionate about is another matter.
Despite my views on their recent ranges, Paperchase will leave a ‘creativity gap’ on our High Streets. For their team and for their customers, the absence will be keenly felt, and I hope that both of these groups are able to find gainful employment and rewarding product selections in the independent sector. I also suspect that there are businesses like Scribbler, The Works, Hobbycraft and CassArt who are busy sizing up some of those empty sites. This will also help His Majesty’s Revenue and Customs, who might be grateful for the tax take from legitimate retailers who, you know, actually pay their taxes.
In the meantime, there is an opportunity for independent retailers to take a slice of, perhaps, a £100m chunk of the market previously taken in the Paperchase tills. That is a lot of cards and stationery, a great opportunity to grow businesses within current footprints, and a chance to recruit some experienced retail staff who are passionate about paper products.
For the UK market, many of the businesses that I saw at Top Drawer, Spring Fair, etc in recent weeks ought to be running hard and fast right now to ensure that they can pick up some new accounts and expand their business in existing locations were Paperchase will cease to exist. There are also several publishers who have been left short by Paperchase, or have been left with pallets of stock, and they would certainly appreciate the business. There is a cascade effect for the wider home and gift industry if we get this right.
For publishers, makers, printers and retailers, I do think that this is an opportune time to take a deep breath and look at how greeting cards remain (in every sense) a sustainable business in the coming years. I firmly believe that the opportunity for growth is there for publishers, illustrators and makers who can produce commercially successful designs, right here in the UK.
Customers also need to see the benefits of shopping with independent businesses whether they are large or small, on their local High Street, or online. I think that the shift to supporting independents and campaigns to shop local may have played a small part in the Paperchase story, especially when the divergent quality and choice of products became more apparent to our customers. In economic terms, money spent in local businesses circulates back into the economy. Those PE vampires are also draining your local High Street of choice and variety.
We are an industry that is literally driven by sentiment, by the desire to celebrate, to make a fuss about big events, and to positively mark the passing of time. I do know that the vast majority of the people involved in the industry are thoughtful and considerate people, who are an absolute pleasure to work with, but I don't think that people in the trade - with some notable exceptions - do enough to celebrate that.
I am sure that some of these empty sites will remain empty for some time, but I also hope that some are reborn as locations for fellow travellers in the worlds of creativity and stationery. The shops won't move, they are stationary. But the opportunity is up for grabs.
Great stationery can move customers to spend their money on great product in great stores.