Argos and Homebase are the latest large retailers to strong-arm their supply chain, demanding a 2% rebate from suppliers for orders placed from March 1. Way to work up good press for bad ole big business.
The chains, both owned by Home Retail Group, sent similar letters to their suppliers, saying the companies will ‘take this opportunity to discuss and agree with you proposed changes to the existing payment terms’, according to The Telegraph.
Small suppliers to Home Retail Group are already pretty stretched: its annual report, published last March, reckons it takes about 60 days to pay its suppliers.
The retailer follows department store Debenhams in insisting on a discount from suppliers. The obvious difference is that Debenhams had a rubbish Christmas, whereas Argos and Homebase were among the festive frontrunners on the British high street.
Argos, it of the unbelievably stylish jewellery, posted a 3.8% rise in like-for-like sales in the 18 weeks to January, while its DIY stablemate reported sales climbed 4.7%.
This squeezing of suppliers could be a sign of things to come from incoming boss John Walden. The current Argos chief exec is taking the Home Retail reins from Terry Duddy in mid March.
Is Home Retail still looking for more cash to plough into its turnaround plan? So far, it has committed to a three-year, £300m investment in Argos that will involve replacing its enormous catalogues with digital screens (how will kids cut out pictures of all the toys they want now?). While sales have been rising recently, profits for the year to March 2013 were down 10% to £91m, still well out of sight of the £433m Home Retail raked in back in 2008.
‘As we travel along this journey, it is vital that both Argos and its suppliers play their part in supporting this transformation,’ Argos’ commercial director David Robinson said in its letter. Hmm…
The Federation of Small Business were not impressed. ‘The move by Argos and Homebase to demand a 2 per cent rebate from their suppliers is unwelcome and sadly part of a wider trend. Big companies need to start recognising their responsibility to pay on time and pay fairly, and be far more proactive in supporting their supply chains,’ FSB’s national chairman John Allan told MT.
‘The Government should look into these practices and find ways to stop them,’ Allan added.
The Forum of Private Business also slammed small businesses’ larger customers for using ‘increasingly innovative…methods to extract more money from them’.
‘Whilst interfering in private sector contracts is a tricky business, we are urging government to find a way to stop these damaging rebate schemes,’ FPB policy chief Alexander Jackman said.
‘Our suppliers are very important to us. Payment is made in accordance with pre-agreed terms and reflects the markets in which we and our suppliers operate,’ a Home Retail spokesman told the Telegraph. MT wonders if their suppliers feel the same way...