Music retailer Music Zone has gone into administration after their bank recalled debts and withdrew credit facilities. Insiders at the 104 store chain admit that increasing competition from supermarkets and online mail order services mean their profit margins are ever smaller which, coupled with more general "difficult trading conditions" in the retail sector, makes their operations less and less viable. Bill Dawson, a partner at accountancy firm Deloitte, has been appointed as the company's administrator.
The company said in a statement: "The decision by our bankers to recover debts and withdraw credit facilities without notice and with immediate effect left us and our private equity backers with no real alternative other than to appoint administrators".
Dawson confirmed that he would initially seek parties interested in acquiring Music Zone as a going concern and, in the interim, the chain of stores would continue to trade as normal.
Music Zone began life as a single independent record store in Stockport, founded by Russ Grainger. When he sold out in a £12 million management buy out deal in 2005 the company was rated as the third biggest specialist music retailer in the UK, behind HMV and Virgin Megastore. Following the buy out, which was supported by Lloyds TSB's venture capital division, the chain acquired 41 stores off MVC after they went into administration, and the company's management said they were "gearing up for a major assault on UK high streets" over the following three years. But with ever more competition from the cost-cutting supermarkets and online operations, a trend which has hit both HMV and Woolworths also, those ambitions have proved to be easier said than done.