Small Talk: Time for suppliers to stand up to bully boys
Monday 22 April 2013
Next time you buy something in Selfridges, feel free to tell its staff you're happy to pay the price marked on the goods but that if they want the money there and then, you expect a 5 per cent discount. After all, that's effectively what the department store chain has just told its suppliers.
Selfridges has amended its payment terms to include "settlement discounts", which require suppliers to give up some of the value of their invoices if they want them paid within particular time scales. Suppliers who want their money within 60 days must give up 3 per cent of the payment, rising to 4 per cent for 30-day settlement, or 5 per cent for those who ask to be paid within 21 days.
There might be more outrage amongst smaller businesses if such practices were not so widespread. In the past few months alone, John Lewis, Debenhams and Laura Ashley have all announced similar policies, which are rapidly becoming standard in the retail sector.
In some cases, retailers are demanding more draconian rebates than Selfridges from suppliers – and even seeking to impose the new terms on orders already placed.
Given the ubiquity of this behaviour from large retailers, many small and medium-sized enterprises (SMEs) working in the sector have simply raised a resigned eyebrow at each new example.
But the fact everyone now does this doesn't make it any more justifiable – and if these retailers' customers were to behave in the same way, they would get short shrift. You try returning today to John Lewis, say, to ask for a rebate on the money you spent there at Christmas.
The only word for this type of treatment is bullying. Large retailers are using their muscle to force suppliers to accept less for their goods and services. There's no negotiation or discussion here – the edict simply goes out and suppliers are expected to comply or to find another customer.
Moreover, it is small suppliers that suffer most from this bullying. Not only do they lack the scale to put up a fight, but also, they're much more likely to have the sort of constrained finances that leave them with little option but to sacrifice cash in return for prompt payment.
It's not as if all these retailers are struggling. While the high street certainly has its fair share of problems, Selfridges, for example, saw its sales go above £1bn for the first time last year, made a profit of £133m and paid dividends to shareholders of £40m. John Lewis' most recent trading figures included a £409m profit and a 17 per cent bonus for staff.
These policies also make a mockery of initiatives such as the Prompt Payment Code, which are supposed to offer suppliers a fair deal. A number of retailers, including John Lewis, have signed up to this voluntary code of best practice, which has high-profile support from the Department for Business, but that doesn't appear to have prevented them behaving this way.
That may be because the code is so lily-livered – it does require signatories not to change payment terms retrospectively, but otherwise all it asks is that suppliers are paid "within the terms agreed at the outset of the contract" and that no change to payment settlement deadlines for smaller companies is made "on unreasonable grounds".
What represents "unreasonable" is not spelled out – clearly, simply announcing that all suppliers will see their payments cut doesn't fall within the definition.
The question is what to do about the bullies. Well, while SMEs acting on their own may be powerless, those that band together may have more success challenging changes to payment policies. But for all the talk about cutting red tape, this is one of those areas where we need tighter regulation – starting with a shake-up of the Prompt Payment Code.
Labour's shadow minister for business, Chuka Umunna, has also talked about coming up with a late-payments regime that would penalise persistent offenders without forcing SMEs to stick their heads above the parapet. The sooner we see some details of his proposals, the better.
In the meantime, maybe it's time for a concerted campaign to give retailers a taste of their own medicine. Shoppers have no choice but to pay upfront. In the business model to which retailers are now working, they should be rewarded with discounts for doing so.
Andrew Monk, the founder of VSA Capital Group, has succeeded in persuading shareholders to back the delisting of the broker from the Alternative Investment Market, but only by the skin of his teeth.
As Small Talk has previously reported, a small but vociferous group of investors has been campaigning against the delisting since Monk, a well-known figure in the broking sector, announced the proposals last month. The campaign persuaded 22.4 per cent of investors casting a vote at the meeting held to discuss the delisting to say no – just short of the 25 per cent required to block the plan.
Nick Brown, the shareholder behind the campaign against the delisting has taken the result with good grace, conceding defeat on his website. But the case has now been taken up by ShareSoc, a group that tries to represent the interests of private investors. It says some VSA investors who hold their stock through stockbrokers' nominee accounts were prevented from casting their votes.
Delisting of VSA wins backing – by a whisker
Andrew Monk, the founder of VSA Capital Group, has succeeded in persuading shareholders to back the delisting of the broker from the Alternative Investment Market, but only by the skin of his teeth. As Small Talk has previously reported, a small but vociferous group of investors has been campaigning against the delisting since Monk, a well-known figure in the broking sector, announced the proposals last month. The campaign persuaded 22.4 per cent of investors casting a vote at the meeting held to discuss the delisting to say no – just short of the 25 per cent required to block the plan.
Nick Brown, the shareholder behind the campaign against the delisting has taken the result with good grace, conceding defeat on his website. But the case has now been taken up by ShareSoc, a group that tries to represent the interests of private investors. It says some VSA investors who hold their stock through stockbrokers’ nominee accounts were prevented from casting their votes.
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