Director of former Norfolk Hamper Company in court over doomed business plan
18:42 23 April 2014
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The director of the former Norfolk Hamper Company was at Norwich Crown Court after a loss leader advertised on his online site attracted an overwhelming number of orders - leaving him struggling to fulfil orders on time and attracting 100 complaints to Norfolk Trading Standards.
The director of the former Norfolk Hamper Company ran a business “doomed to failure” after he was swamped with internet orders for heavily discounted Christmas hampers - which did not even cover his initial costs, a court heard,
Neil Alvey, 42, advertised his gift hampers online for Christmas 2012, but Norwich Crown Court was told the price quoted as £82.98 for 12 hampers left him just 66 pence to cover the contents, so he was losing money on every order he got.
Catherine Girvan, for Norfolk Trading Standards, said that the business was “unsustainable” and when a money saving site recommended his hampers for being great value, he was swamped overnight with £15,000 worth of orders.
But Ms Girvan said rather than cancel the loss-leader offer he continued to take orders and still promised customers the hampers would be delivered in time for Christmas.
She said while some of his first customers were delighted with the hampers they received, it was at the expense of other customers further down the line, who either did not receive all the hampers they ordered or got none at all and had to rush out before Christmas to get alternative gifts.
She said one customer said the experience had meant she had “lost faith” in placing orders with small mail order companies.
Ms Girvan said another heavily pregnant customer had to go shopping at the last minute for gifts after being let down.
The company ceased trading on January 21, last year, and the former premises in Caister High Street, was shut down and the company’s website closed.
Following 100 complaints, Norfolk Trading Standards carried out an investigation into the trading of the company and found that Alvey had breached his professional diligence as a director of the hamper company. Ms Girvan said the debts to his suppliers amounted to about £26,000 and the loss to PayPal was £8000. She said customers had lost about £2422
Alvey, of St Margaret’s Way, Fleggburgh, admitted contravening professional diligence by knowingly or recklessly engaging in a commercial practise which contravened the requirement of professional diligence between October 10, 2012 and January 21, 2013 by failing to fulfil orders within a reasonable time or failing to fulfil orders at all. He also told customers their orders would be fulfilled by certain dates when it was not possible and admitted using a business model which was unsustainable.
He also admitted performing a misleading action as his website gave the impression the business had been trading longer than it actually had.
The court heard that Mr Alvey was previously director of a hamper company called Gift Baskets Galore Ltd that was registered to an address in Coxwain Read Way, Caister. The business was dissolved around 2007.
Simon Gladwell, for Alvey, said he had hoped to start up a successful business and had advertised the hampers as a loss leader: “If it was kept for a short period of time it might have worked. But once he published it on his company website it soon became known to a money saving forum which put a link to his website. He woke up to find £15,000 worth of orders. He was frightened by it at first and stupidly he left it on.”
Mr Gladwell said that Alvey hoped to trade his way out of trouble and was working all hours.
“It became a full time operation but it was doomed to failure.”
He said the failed venture had taken a great toll on his health and he was now unemployed, living on benefits and a full time carer .
for his wife.
Mr Gladwell said Alvey had paid some of the customers back from his own cash.
Judge Katharine Moore banned him for acting as a company director for four years and placed him on a 12 month community order. She also ordered him to do 80 hours unpaid work.
She said he had made “really poor business decisions.” and accepted it was not fraudulent.
“What you were doing was doomed to fail. We received 55 completed questionnaires from the 100 complainants.
After the case David Collinson, Assistant Director - Public Protection at Norfolk County Council, who heads up Norfolk Trading Standards, said: “We received 100 complaints about Norfolk Hamper Company in little more than two months, and it is unusual to receive so many complaints about one business in such a short space of time.
“This case highlights the enormous responsibility of running your own business and, I hope, emphasises the fact that business owners are accountable to their customers and suppliers. Today’s result will bring little comfort to those who lost money but I hope it will serve as an important reminder to business owners that businesses can and do fail. They need to plan for every eventuality, be open, up-front and honest with their customers and suppliers, and be brave enough to acknowledge at their earliest opportunity that they need help and advice.”