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Problems of textile retailers in times of the corona crisis

Rental contracts:

Although the turnover does not materialize, the contractual payment obligations towards the landlords have to be met in principle. Landlords react very differently to the Corona crisis. Many landlords only want to defer the rental payments, others want to have interest on these deferrals in order to then negotiate repayment modalities. So far there have been no comparable cases in the case law, so it is unclear whether the corona-related closure is a lack of rent according to ยง 536 BGB, which entitles to reduce the rent. Until this legal issue has been clarified, we recommend that you only pay the rent conditionally.

You can find more information on the legislative measures in tenancy law here in our article, as well as here.

Supply contracts:

In the case of textile and fashion retailers, problems arise primarily from the contracts with the suppliers of their goods. These contracts are usually signed months in advance and their suppliers have long since produced the products, which is why they insist on the delivery and payment of the goods. However, these delivered goods cannot be sold during the arranged shop closings and are out of date due to the changing spring / summer / autumn and winter collections.

Another fact that is added there is that when more and more goods are delivered, the pressure on the goods increases. Because of this, these goods can then usually only be sold at high discounts and no longer correspond to the usual business margins.

For many in the textile industry, this means that even if they are allowed to reopen their shops, they have to reckon with high losses and, even in the worst case, bankruptcies can occur.

Setting up an online shop:

In order to get the delivered goods into circulation, textile and fashion retailers who do not yet have an online shop could think about setting up one. They could then use this to sell their goods to customers. However, the retailers do not promise to generate a lot of sales with an online shop, since many people no longer have their usual income due to the Corona crisis and cannot currently afford new items of clothing. Furthermore, established online shops such as Zalando are also a major competitor.

Salaried employees - short-time work allowance:

Due to the official closings, many textile and fashion retailers are forced to register short-time work for their employees. Short-time work means that there is no work and accordingly less work is done. The short-time working model can absorb the slump in work and lower wage costs. Short-time work can also go so far that work is completely eliminated, so-called "short-time work zero". The short-time work allowance can be applied for at the employment agency for employees and is paid out for up to twelve months (in exceptional cases an extension to 24 months is possible).

You can find more information on short-time work benefits in our FAQ.

Mini jobber - termination:

Short-time work cannot be requested for mini-jobbers. As an alternative, mini-jobbers can take part of their annual leave if this has not already been approved for other periods. In the worst case, there is only the option of termination. However, this can be difficult under certain circumstances. An important factor that plays a role here is the size of the company, as it depends on whether the Dismissal Protection Act applies. If this is the case, there must be a reason for the termination. With regard to redundancies for operational reasons in connection with the Corona crisis, caution is to be advised. Should dismissals be considered, you should therefore consult a lawyer beforehand.

Fixed costs:

For the duration of the Corona crisis, it is also advisable to keep your fixed costs as low as possible. So you should check whether you can suspend or terminate certain contracts. In the case of textile and fashion retailers, for example, contracts with cleaning companies and GEMA should be mentioned here. However, contracts with security companies and insurance companies should be allowed to continue running, especially during the Corona crisis, as the shops with the goods are empty for a long time and this can lead to more break-ins and theft.

Tax deferrals:

As a rule, tax deferrals are only granted if additional tax payments represent considerable hardship for the tax debtor. Exactly this hardship is now given by the Corona crisis. This means that if you are liable for tax and can prove that you are economically badly affected by the coronavirus, you can immediately submit an application for deferral to the responsible tax office.

Loans:

Loans are particularly suitable for large textile and fashion retailers. They can contact their house banks for this. These loans are secured by the federal KfW Bank through the federal government's aid package. For small retailers, however, these loans are not the desired means of choice because it takes time to approve and ultimately only pushes problems into the future.

If you are still thinking about loans, you can find more information here.

Emergency aid:

For smaller retailers, immediate aid packages can therefore be considered. Berlin fashion retailers can apply for direct aid from federal and state funds via the Investitionsbank Berlin. For solo entrepreneurs and small businesses with up to 5 employees, there will be grants of up to 5,000 euros from state funds and up to 9,000 euros (or 15,000 euros for larger companies) to close acute liquidity gaps. In addition, small and medium-sized companies can apply for loans of up to EUR 500,000 via IBB, which can be granted interest-free for six months.

More information about federal and state aid can be found here.

Compensation claims:

The forced closure of the business triggers claims for compensation. This applies in particular if a special sacrifice is made when the company is closed. Anyone who is affected by the closure of the company is therefore entitled to compensation for the losses incurred as a result. We therefore recommend that anyone affected by a business closure file a corresponding claim. For more information, please contact us: [email protected]


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