Zavvi falls victim to credit crunch

TROUBLED high street store Zavvi became the latest victim of the global financial meltdown today when the ailing music and games retailer was plunged into administration.

Zavvi, the heir to Virgin Megastore, has a branch in Ipswich's Westgate Street.

Company bosses said the collapse of its main supplier, Entertainment UK Limited, had meant sourcing stock had become difficult.

Shoppers using the Ipswich store today told of their shock at the news.

Richard Waugh, 55, of Gymnasium Street, Ipswich, said: “I'm surprised because it's as busy as I've ever seen it.

“I suppose people are buying music online more these days. That coupled with the credit crunch and people not having as much disposable income are contributing factors.”

Gary Taylor, 26, of Reynolds Road, Ipswich, said: “It was not long that Zavvi took over from Virgin.

“I buy most of my stuff online.”

Emma Harrington, 32, of Bramford Lane, Ipswich, who bought a Wii computer game, said she thought bigger stores such as Zavvi would weather the economic storm.

“I'm shocked - you hear about the lesser stores struggling, but I would not expect HMV or Zavvi to suffer.

“But you can get everything cheaper in the supermarkets now.”

Alan Fulcher, 35, from Hadleigh, said Zavvi's demise had come as no surprise to him.

Mr Fulcher, who bought two videos, said: “You hear in the news that there are ten to 15 high street brand name stores that are going into receivership in the next month.

“People are buying more stuff on the internet where there is more competition.”

Tom Jack, Simon Allport and Alan Hudson of Ernst and Young were today appointed joint administrators of Zavvi.

The Zavvi Group is the UK's largest independent entertainment retailer trading from 125 stores across the UK, employing 2,363 permanent staff and 1,052 temporary staff.

The group was formed from a management buy out of the Virgin Megastore division of the Virgin Group in September 2007.

On November 27, Zavvi's main supplier, Entertainment UK Ltd (EUK), went into Administration.

Since then, the group has struggled with new trading arrangements.

Joint administrator Mr Jack said: “Since EUK went into administration, and perhaps before, the impact of problems at EUK on the Zavvi Group has been significant.

“Minimal deliveries, no returns and worse trading terms are just some of the areas impacted.

“In the absence of a buyer for EUK, and with dire trading conditions on the high street, the Zavvi Group has seen a material fall in sales and the directors have now been forced to place parts of the group into administration.

“The administrators intend to continue to trade Zavvi UK with a view to selling all or part of its business as a going concern.

“We are grateful for the continued support of all employees during this difficult time and would like to thank everyone at Zavvi for their commitment and hard work as the business continues to trade.”

Simon Douglas and Steve Peckham, the group's founders, added “We would like to thank all of our employees for their commitment and support since the launch of Zavvi.

“We have done all that is possible to keep the business trading, but the problems encountered with EUK, and particularly its recent failure, has been too much for the business to cope with.”

All stores will open as normal on Boxing Day.