City Link collapse will impact channel

Christmas Day is not exactly the best time to find out that you are likely to lose your job.

But unfortunately, that is exactly what happened to nearly 3,000 City Link staff, when the courier firm's owner Better Capital placed the company into adminstration on Christmas Eve. This comes just over a year after it injected £40m into the company to turn it around.

The news was leaked to the media ahead of a planned announcement after the festive season.

According to a statement given to City AM, talks between adminstrator Ernst & Young, and union officials were held at the weekend, where it said it is likely to make 'substantial redundancies'. However a smattering of employees will be kept on for 'up to three months' it said, adding that it was 'cautious' of finding a buyer for the company.

City Link had warned in its last financial report that it was experiencing a 'continued lack of profitability'.

The firm has suffered setbacks in the past, with severe weather affecting deliveries in 2010 and the increase in online shopping making Christmas a particularly challenging time.

However it is not just Christmas deliveries that will suffer as a result of the firm's collapse.

As CRN discussed in a City Link commissioned Special Report back in May 2011, many IT distribution firms use third party companies to fulfil orders, and at the time, City Link was frantically trying to recruit more channel partners, to ensure he had as many as possible on their books.

In this era of increased competition and the privatisation of the Post Office, along with the meteoric rise of online shopping - the number of delivery firms vying for the same business is growing and other reports suggest a poor IT system played a large part in City Link's failure.

Other reports suggest there are over one million parcels that have been undelivered, and the firm is urging people to track their parcels locally if they can, and collect them, themselves. I hope nothing perishable is in them. The same must also apply to commercial customers, and the implicatios for them if a major order gets 'lost' is extremely serious.

It is not a pleasant situation to be in at this time of year, and the proliferation of courier firms similar to City Link, probably will mean finding a buyer will be difficult. 

So with City Link's demise, it means either there is more room in the marketplace for the existing players, or a space in the market for a new player to come along and clean up.

 

 

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• Topics
• Distributor
• insolvency