John Lewis boss defends 'greedy' supplier deal

The chief executive of John Lewis stores has come out in defence of a new contract with the firm's suppliers that makes them pay a rebate if a product flies off the shelves.

by Michael Northcott
Last Updated: 19 Aug 2013

Andy Street, the boss of the John Lewis stores division of the wider John Lewis Partnership, today defended his company’s new contract with suppliers, which forces them to pay a rebate if their products reach a certain popularity threshold in John Lewis or Waitrose stores. 

Speaking on the BBC’s Radio 4 Today programme, he said that the setup was ‘absolutely fair’ and was normal in retail businesses. He said: ‘What we’re actually doing is sharing the success of the business. 

‘It’s what retailers have done all the time. What we’re saying to suppliers who we’ve worked with for many, many years is that we will share the success together. We will grow the business. If we don’t grow the business together, there’s absolutely no change in terms.’

So what does 'sharing the success together' look like, in his books? Well, suppliers whose products are flying off the shelves are effectively required to offer lower wholesale prices when the popularity becomes apparent. It means that a suppliers’ invoice must be reduced by 0.75% if sales grow by between 5% and 9.9%, or up to a 5.25% reduction if sales grow by over 50%. 

JLP insists that growing sales can be largely attributed to the investment it makes in its stores, its marketing and improvements to customer service. To us, it sounds like the firm has fair terms when the contract is first signed, and then wants to improve its own margin if the sales really sail. 

Punters buy in to John Lewis at least partly because they believe it treats its suppliers with more respect than some rival chains. PR own-goals like this will make them question that belief. When you're in a hole, John Lewis, stop digging.

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