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Department stores criticised over supplier terms

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Britain’s leading department stores John Lewis and Debenhams have been criticised for their treatment of suppliers after demanding a rebate and instructing suppliers to make discounts on invoices.

Leading department store John Lewis was accused by the Forum of Private Business (FPB) of “bullying” after it emerged that the retailer had contacted suppliers to explain that they are now subject to a rebate of up to 5.25 per cent on annual sales with the retailer, according to The Telegraph, in order that “all parties participate in showing their ongoing commitment and support.”

Last week, the Partnership announced a pre-tax profit rise of 15.8 per cent to £409.6 million in the year ended January 26th 2013 as employees were given a 17 per cent bonus and FPB’s Media & PR Officer Robert Downes noted: “It’s not as if they’re fighting the wolves from the door.

“Not a year goes by when they aren’t gloating over increased profits, but hopefully the public can now see in part how they achieve that – and that’s by abusing their supply chain.

“The fact John Lewis staff were given a generous handout only last week will make this news even harder to swallow for many of the firm’s suppliers.”

In a letter to suppliers, John Lewis set out a “growth rebate” scheme ranging from a 0.75 per cent to a 5.25 per cent reduction on the value of a suppliers’ annual invoice depending on the rate of sales growth.

Explaining the department store’s position, a John Lewis spokesperson said: “John Lewis has recently written to a small number of suppliers to discuss bringing their commercial agreements in line with the rest of our supply base.

“We create partnerships with our suppliers with the intention of mutual growth and sharing the proceeds.

“All commercial agreements are confidential and are discussed and debated individually. As ever, a supplier retains the right to discuss all aspects of their commercial agreement with us and whether it is profitable for them to supply us.”

However, the FPB attacked the move, with Downes concluding: “This is an outrageous scheme cooked up by John Lewis to boost their own coffers purely at the expense of small business.

“What a way to treat your suppliers, who are effectively having their pockets picked by John Lewis on the back of strong trading. It’s a win-win for John Lewis all the way.

“You have to remember too, this isn’t an either/or situation for suppliers – it’s put up and shut up. This really is a case of John Lewis the bully.”

Meanwhile, retailer Debenhams instructed its suppliers to make discounts of at least two per cent on invoices, which the retailer claimed followed a strong performance within certain product categories.

In a further blow to suppliers, Debenhams also seeks to delay payment times from 90 days to 120 days.

“Debenhams claim this was a one off action by a single buyer, but no doubt all their suppliers will now be worried sick that something similar is coming their way in the not too distant future, and who can blame them?” said Downes.

“This is another disgusting example of big business asking suppliers to take a hit for their short term gain, and in this case they’ve even suggested suppliers pass on costs themselves to factories.

“The ethics of this really should raise eyebrows Trading conditions may be tough but it’s no excuse to introduce measures like this, and we will continue to publicly name and shame those who do.”

Published on Tuesday 12 March by Editorial Assistant

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