Enterprise and Regulatory Reform Bill

Memorandum submitted by bluesuntree limited (ERR 29)

I have been involved in furniture for most of my working life and I am passionate about good design, which is why I chose to start the business. We have a turnover of nearly £6 million and employ 20 staff.

This submission concerns clause 55 of the Enterprise and Regulatory Reform Bill (the repeal of section 52 of the Copyright, Designs and Patents Act 1988) and the effect it will have on businesses such as bluesuntree, which manufacture and sell classic furniture designs which are outside the current 25 year protection period but (following the repeal of section 52) will fall into the extended copyright protection period of artist’s life plus 70 years and therefore become unlawful.

We would like Parliament to ensure that an adequate transitional period is introduced to ensure that furniture retailers such as bluesuntree are given an opportunity both to adapt their business models and to clear existing stock.

If businesses aren’t given sufficient time to clear their stocks, those stocks would have to be destroyed which would of course have a devastating effect on those businesses.

Furthermore, if businesses aren’t given sufficient time to adapt their business models they will most likely fold, with the consequent effect on local economies through the UK. In our own case, without our classic ranges (which account for over 80% of our sales) we could not continue if the law came in without an adequate transitional period allowing us to change our business and create new designs.

This document outlines the issues we have in changing our business model and sets out our case for an adequate transitional period.

So the problem we have is we have to change what we sell, but what does that involve?

1. New suppliers

Our current suppliers make designer classics, so we have to find new suppliers, this will involve extensive research into what products we can and cannot sell, finding new suppliers, travelling around the world, all time and expense. We will need to visit trade fairs, visit factories and carry out manufacturing and environmental audits to ensure they can make the items in a consistent quality and have measures in place to ensure this.

Things we have to look for,

Do they inspect the raw materials before starting?

Are they tested for the correct moisture content?

Is the wood kiln dried?

Are there sufficient controls over the process through production to ensure the components are being manufactured to the correct tolerances?

Is the final inspection against a signed off sample and do they inspect the packaging to ensure it’s labelled correctly.

That’s just product, we also have to ensure there are no ethical reasons for not working with the factory. Records need to be inspected to ensure that there is no forced or under age labour used, does all machinery have sufficient guards in place, is the correct protective wear available etc. etc.

2. New Products

If we take the likes of the highly popular plastic chairs and look at making a new version of these chairs, they will require a significant investment on our behalf to firstly;

Have a designer come up with a new design,

We then pay to have that modelled in auto cad, at least £5,000

Pay for expensive moulds to be made at least £10,000.

The products will then need to be tested for strength and stability and any fabrics are tested for UK fire regulations, another £5,000.

If everything passes, then we buy and ship the stock, a further £30,000 (based on just 1 container load)

Then we have to market the chairs, photograph them, Google adverts placed, website developed for the item, trade fairs paid for, magazine adverts, samples given to all dealers, blogs etc. another £40,000+.

Already we have spent a minimum of £100,000 and this is based on the best case scenario that people love the new chair and it sells quickly, if it doesn’t as some will not, we start all over again, money and time permitting.

3. A new product is born

Many of our products are large items of furniture and in most cases are well considered purchases.

Not everyone will require a new sofa as soon as we release our latest model, and it will take time to realise sales from new products as people become aware of them.

So the life span of a product can be up to 1 – 2 years to develop test and ship, we need to photograph, market the items and people need to weigh up if it’s for them.

So in my opinion it takes at least 3-4 years for new lines to go from drawing board to any sales of profitable quantities, if indeed they get that far, not every product sells.

It’s only after 4 or 5 years that we will then be associated over a large audience for this item of furniture and people will actively start to search over the internet for the name of this item, if we are lucky enough to come up with the winning design that is?

4. Google

Around 80-90% and in some cases 100% of the businesses receive their sales via the internet, and if the sale was in the showroom, it’s more than likely it was internet driven before they came to the showroom.

How does that work?

Quite simply at the moment if you want to buy an item you type into Google "Barcelona chair", then our adverts will appear, you click on them and we get a sale.

Going forward we will not have any well-known names for people to search for these items, unless we have the time to develop and market them for a sufficient period.

In short, we will be left with putting money on campaigns for words like dining chair, sofa, pendant light etc. and the competition in this area is immense.

We will have to try and outbid adverts from major high street stores that quite simply we can’t afford to do as our turn over is now much lower than before.

5. So what do we do with all of our stock?

Why don’t we have a Mega sale?

Most of us are holding quite substantial stocks and have many orders already in place with our suppliers, in my case as of this moment, we are holding around £1.5 million in stock and a further £1.5 million in orders that are either in production or made and in transit to ourselves.

If we were not given sufficient time i.e. we are asked to sell this within 12 months, that will have the effect of flooding the market with extremely cheap reproductions as we all try and beat each other’s prices to ensure we call sell the stock off.

In my opinion we would very quickly all start selling the products for less than what we paid for them just to recoup as much money back as possible.

This will also have a knock on effect of how our customers and the banks perceive our businesses,

Are they closing down?

Can I get all of their other products at a huge discount now?

Will they honour our warranty period?

Quickly faith in our brand will be diminished and everything we have worked for over the last 6 or 7 years will be gone.

If there is any stock left after the sale and after the transition period is up, this will have to be written off, when the bank sees this on our balance sheet it is going to be reluctant to lend any further money and may require assurances for the loans we already have.

It is imperative that we are allowed to sell off the stocks naturally,

So maintaining the brand through keeping the market price where it should be

Allowing all of us to concentrate on new products and bringing in new designs whilst selling the designer classics stocks we have.

I believe that if we were given 5 years to allow us to continue to import the products, at which point all designer classic imports should cease,

Then we are allowed to naturally sell off the products we are holding, that will give us sufficient time to continue the business at the same levels whilst investing in new items and bringing them to the market place to replace the classics we a holding.

This will ensure that traffic driven to site remains healthy whilst we showcase our new products over a sufficient amount of time to allow the public to take to them, and dealers to start pushing them through their channels.

6. Time to change

One issue we have is length of leases and cost of rent, with a smaller turn over we could not afford the rents we are paying for the large premises that we will no longer need.

If we are given the 5+ years to sell off any stocks, hopefully all of us can honour our contracts, rental agreements etc.

And over the period we will see how the new style business is working and at the time those contracts expire we will have sufficient knowledge of the new product sales and are able to cut our cloths accordingly.

July 2012

Prepared 5th July 2012