Bad Behavior?
Over the weekend there were reports in the UK media that the multinational retailer Laura Ashley had written to its suppliers requesting an immediate 10% cost price reduction on all orders already agreed and contracted. The demand was accompanied by a statement that this would save Laura Ashley the need to review its supplier base – in other words, failure to agree would prompt such a review, and some suppliers would inevitably be delisted as a result.
This behavior, far from novel, is however becoming more and more common. Debenhams, a UK department store group, wrote to some suppliers earlier this month demanding a retrospective discount, and to other suppliers unilaterally increasing payment terms from 90 to 120 days.
John Lewis, a UK department store group, has demanded rebates of up to 5.25% from the majority of its 3,000 suppliers despite announcing record profits. According to The Guardian, John Lewis wrote to one supplier stating that a rebate would be automatically applied to their previously agreed pricing. When accused by the press of “greed and bullying”, they claimed that the rebate requested was fair because it was linked to increased turnover. Seems to me that this is disingenuous; if the buyers haven’t already factored volume rebates in to the original pricing, they aren’t doing their job properly; if they have and this is simply an additional demand, then greed and the associated power- play would seem to be the only motive.
Skeptical readers will come to the obvious conclusion about who wins as a result of this retailers’ tactic because the rebate, or a goodly portion of it, almost certainly ends up on the bottom line of the retailers’ P&L. As consumers we should be demanding that these rebates are passed on to us when we are at the checkout. But another winner is the procurement function. Every time they try this ploy some weaker supplie