It should have been the start of a growing retail chain operating in Belgiumand the Netherlands, where music lovers could go for their guitar, keyboard orloudspeaker. But three years after Keymusic’s relaunch, the curtain has fallenagain.
The court in Amsterdam declared bankruptcy last week about the Dutchactivities that were left, at the end of last month the Belgian activitieswere already placed under so-called ‘judicial reorganization’ by the court inAntwerp, a kind of deferral of payment.
Jan ‘t Hoen took over Keymusic Nederland in the summer of 2019 and alsoacquired the shares in the Belgian branch. His idea: to increase the number ofbranches so that the chain would generate enough turnover to become viable.
Keymusic generated a turnover of 20.3 million euros in Belgium and theNetherlands last year, together with seventy employees and a number offranchisers (for comparison: competitor Bax had a turnover of 125 millioneuros in the Netherlands). That made the retail chain with its own onlinestore not viable enough, says ‘t Hoen now.
Too early
According to Duco van Dongen, curator of the Dutch branch of Keymusic, it isstill too early to identify the causes of the bankruptcy. “Several parties areinterested in a restart, that’s what my focus is on in the first instance.”
According to ‘t Hoen, there are several causes. The most important is theoutbreak of the corona crisis, six months after he received the keys to thecase. In the first year and a half, the crisis managed to survive thanks tothe deferral of taxes and the government’s wage support. “That allowed us tokeep our good staff with music knowledge.”
In Belgium, however, the shops remained closed for a long time to snoopingpublic – people were only allowed in with a purchase appointment. The webstore was running well – people started making music at home en masse duringcorona – but according to ‘t Hoen, the margins online are so low thatinsufficient money was earned with it.
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In addition, many suppliers no longer accepted orders on credit from Keymusicafter the difficulties at the end of 2021. Because there was little cashcoming in, it was difficult to keep sufficient stock. Orders that could beplaced then took a long time to deliver due to a general crisis in the supplychain. “There was a lot of demand for musical instruments, but we oftencouldn’t meet that demand from our stock,” says ‘t Hoen.
Nothing right
The plan to grow to forty stores ultimately came to nothing due to all thecash flow and turnover problems. Private equity parties that were interestedin financing the growth therefore dropped out, according to the now formerowner.
The lockdown at the end of last year turned Keymusic’s neck down, according to’t Hoen. In the first instance, an attempt was made to continue in a muchslimmed-down manner. The chain went from 27 own and franchise stores inBelgium and the Netherlands last year to three own stores in Belgium and threeown stores in the Netherlands this summer. Some of those music storescontinued under a different name, but most closed their doors permanently. Theturnover of what remained under the flag of Keymusic remained too low to payoff the debts, after which ‘t Hoen eventually filed for bankruptcy itself.
Bankruptcies Golf expected
Where a wave of bankruptcies was expected at the start of the coronacrisis, the number of bankruptcies has remained very low in recent years.That could change in the coming months. From October 1, companies must startpaying off their deferred taxes.
In the retail sector, 114 stores went bankrupt up to and including August.Last month the number of bankruptcies was twenty, the highest in a month sofar this year. In August a year ago, ten companies were declared bankrupt.
According to retail expert Henk Hofstede of ABN Amro, many stores sufferfrom a “mix of events”: inflation is at an all-time high, causing consumerpurchasing power to decline. Consumer confidence is at an all-time low,causing people to postpone their larger purchases. Stores are with excessstocks due to the coronalockdowns. Deferred taxes due to corona must berefunded from October 1. And fixed costs are currently skyrocketing: energybills are high, many rents are rising in line with inflation, and collectivelynegotiated wages in the sector are rising sharply. The fact that interestrates are currently going up also makes it expensive to finance stocks. “Allthis puts pressure on the retailer’s profitability.”