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Tuesday, 27 June 2017

Big retailers still hammering suppliers

For some years the consequences of intensifying competition among big retailers have been visited on their hapless, bullied suppliers but now the decline of the pound Sterling since the Brexit vote has been added to the retailers' bullying techniques and excuses, which number at least 60 odious ploys to squeeze the last drop from suppliers. The latest retail giant to be accused by an anonymous supplier letter is Boots, the retail chemist, now part of the American Wallgreens Boots Alliance, whose UK arm is struggling with faltering sales, leaving it under pressure to cut costs, including the culling of 500 HQ jobs.  

The supplier accused Boots of dictating "draconian" terms to small businesses, but in its defence Boots said it laid out all its terms clearly in agreements with suppliers. Among the exactions allegedly imposed by Boots the supplier claimed Boots levied a 2.5% "prompt payment" charge on all invoices it settled within 106 days. The company seems to have a curious notion of "prompt," given that the norm of invoice settlement should be 30 days. The Federation of Small Businesses said payment times of 75 days or more "cannot be described as prompt, while paying less than the invoice total cannot be described as fair." The supplier also said the chemist chain applied a £300 "non-compliance" charge for "the slightest error in paperwork" or "using the wrong type of pallet."

Going beyond the Boot's experience, it is clear that the major food supermarket retailers, in particular, have still not heeded the lessons from previous supplier bullying complaints, and the worsening extent of their practices will be unveiled by a new survey this year. Struggling Asda, Britain's third largest food retailer, has just been named as the worst of the UK's major supermarkets in its treatment of suppliers. About 12% of the suppliers said Asda rarely or never complied with the Grocery Supply Code of Practice. These chutzpa ploys, when applied across the board, even include implied blackmailing threats which have nothing to do with the small print terms framed by big retailers. One such example is demanding £25,000 for charity dinner tickets run by the retailers with the implied threat that no ticket purchase could mean de-listing of suppliers' products.

As I pointed out in my blog of March 12th, 2017, headed: "Retailers' odious supplier treatments risk disintermediation," if the big retailers fail to behave honourably with their suppliers they could find themselves being bypassed by supplier alliances building their own giant order picking warehouses to supply consumers directly, now that the disruptive technology of online shopping allows that and is growing like a weed. With Amazon now parking its tanks on food retailers lawns the latter should start showing some respect to its suppliers.
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