Tesco is under scrutiny from the UK’s supermarket regulator, which is closely monitoring its implementation of an “Amazon-style” fulfillment fee for online suppliers.
The Grocery Code Adjudicator has been monitoring the UK grocery giant and put in place “assurance” processes after it said it would start charging suppliers extra to sell online last year.
According to The Times, Tesco faced criticism from brands and suppliers who expressed concerns that the fee, which covers order processing, product picking, shipping, and returns management, could potentially put them out of business.
Some also raised objections regarding unfair treatment.
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Since then, the grocer has been told to provide a monthly report to the adjudicator, which is responsible for overseeing supermarket-supplier relationships, ensuring adherence to the code and preventing penalties for suppliers who refuse to pay the optional fee.
It has been forced to provide the adjudicator with all information relating to any changes to store distribution, product de-listings, cancellations of promotions and changes regarding new product development, to ensure that they are not done in retaliation against a supplier for declining to pay.
The process is understood to be “self-repored”, meaning Tesco provides the regulator with the information but the regulator has email access and can interview buyers that are involved in decision-making processes.
Tesco said it first introduced a charge as its own fulfilment costs had grown as it expanded its online operations and served more customers.
While Tesco’s smallest suppliers with contracts of £250,000 or lower are exempt from the charge, the fees for bigger suppliers are from 12p per item for branded goods and 5p for own brands.
The charges also apply to online orders fulfilled on behalf of retail and catering customers made through the grocer’s wholesale arm, Booker.
While the fee is voluntary, the supermarket chain is understood to have told suppliers that those who do not comply that they could face range reviews or reduced prices.
The regulator is understood to have received complaints and concerns from a number of companies and trade associations when it was first introduced.
Groceries Code Adjudicator Mark White told the Times: “Tesco has confirmed that the fulfilment fee is voluntary with no repercussions for refusing to pay.
“From my assurance process I don’t believe that suppliers have faced repercussions, but I encourage suppliers to contact me if they have any concerns.”
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