HMV will close its Guernsey warehouse and now run its website from the UK.
It follows the end of Low Value Consignment Relief (LVCR), which has allowed online retailers to sell goods tax-free into the UK. As of April 1st, there will be no tax advantage to having a warehouse in the Channel Islands.
HMV has opposed LVCR for years as it feels it gives an unfair advantage to online shops such as Play.com, The Hut Group and Amazon. However, it opened its own warehouse out there in 2005 in a bid to stay competitive with its online rivals.
CEO Simon Fox even told MCV last month that the tax loophole was 'idiotic'.
The closure of HMV's Guernsey warehouse could result in 46 redundancies, although the Group may redeploy some staff to other areas of the business.
There are also 11 temporary staff working at the facility. These contracts will be terminated.
The Guernsey warehouse will officially cease operations on July 27th, 2012. HMV.co.uk orders will now be fulfilled from its existing distribution base in Birmingham.
HMV remains concerned that some of its rivals may relocate its warehouses to other tax havens.
HMV's Statement in full:
Whilst we understand and share recently-expressed concerns that some retailers may simply seek to relocate their online and digital fulfilment centres to other non-EU locations by way of circumventing the Government's decision to end Low Value Consignment Relief (LVCR) - and to this end we reiterate our call for a genuine level playing field, we also have to accept and respond to the fact this ruling will now definitely come into effect.
Clearly this will have a number of implications - not least in our case given the lease on our fulfilment centre in Guernsey expires in a few months time - so we were having to review our options in any event. It also means that for our online offer to remain viable and attractive to shoppers in what will continue to be a highly competitive market – particularly at a time when we are looking to develop a much stronger multi-channel offer, we need to seek greater business synergies and to further reduce our online operating costs. We have concluded that the only way we are able to realistically achieve this is by consolidating our Internet fulfilment into a single site at our existing UK distribution centre in Merlin Park, Birmingham. Our centre in Guelles Road, St Peter Port, will therefore cease to operate from a proposed date of 27th July 2012.
This is not a decision we have taken lightly, particularly as we have enjoyed a productive relationship with Guernsey, and our actions are also in no way a reflection on the dedication and valued efforts of our fulfilment team on the Island, to whom we extend our sincere and profound thanks.
The proposed closure unfortunately means that 46 colleagues at the centre are now considered at risk of redundancy. A period of consultation has now begun and as part of this process alternative options such as redeployment to other positions within the Business, potentially including the Merlin Park fulfilment site, will also be discussed.