Debenhams impose the Christmas spirit on suppliers

So, really getting into that Christmas spirit, UK department store Debenhams have decided to give their suppliers of own label goods a real treat. The store chain has written to suppliers  demanding a 2.5% discount on all outstanding orders and a further 2.5% contribution. According to the Financial  Times last week, the money will be taken out of the supplier bank accounts.

The department store sent an email to suppliers on Monday evening demanding the 2.5 per cent discount on payments due as well as a “single-day contribution” equal to 2.5 per cent of all outstanding sales.

I'd really like to see the contractual  terms and conditions between Debenhams and those suppliers, particularly on goods already delivered, which are included in this. Debenhams already pay suppliers on a not very impressive 120 days’ terms. But many contracts within the retail trade are very loose - or indeed, they may be pretty much informal to the point of being verbal "not worth the paper they're written on" examples.

It would be good to see some suppliers tell Debenhams to get lost but if they are own-label suppliers they are probably in a pretty weak position (cf Professor Cox and his supply chain power analysis).  And it's bad enough when retailers impose this on future supply, but doing it on goods already supplied seems a step too far. Indeed, some might call it abuse of power.

At the very least though, this is unethical in my opinion and will also have some unintended consequences for Debenhams. It is already leading to investors worrying about the firm’s prospects – profit forecasts for next year have been cut by city analysts. And if course, suppliers will have to find ways of making a decent return, so no doubt prices will go up next time round (with the expectation that they might be hit again with further ‘contributions’), or quality and service will decline.

It would also be interesting as a consumer to gather a basket of goods at Debenhams and then pay 95% of the value at the till and walk out. Just say you’re imposing the same terms on them that they are imposing on suppliers. Anyone fancy trying that?

Voices (6)

  1. Paul Wright:

    I note that the Debenham’s FD has paid with his job. Looks like this was a desperate attempt to keep it.

  2. Trevor Black:

    It’s funny how our use of language can be used to politically disguise the reality. For example fraud is fraud (unless you are a banker or politician) and now we have what is clearly theft and a breach of contract being described as “unethical”. We have for several years experienced business practices by our utilities, rail and air transport providers, banks and insurance companies that appear to be based on the Mafia Manual of Good Governance, so why shouldn’t our High Street chain stores take a leaf out of that book?

  3. Paul Wright:

    Perversely I think it might be a harbinger of the end of recession. They couldn’t do it earlier as suppliers would collapse. With light visible at the end of the tunnel, some customers cannot resist the urge for one last turn of the screw. Of course that destroys all good will, and when they need the suppliers they will either not be there if take pleasure in walking away. It’s a sign of weakness and weak management at Debenhams. What are the odds they will be the next high street major to fold?

  4. Chris C:

    Presumably anyone looking to poach disgruntled purchasing staff now knows where to look….

  5. On the inside:

    And the same for an international brewer??? Might be worth doing a similar article on Anheuser Busch InBev.

  6. bitter and twisted:

    So Mr. Noble – will you be revoking the CIPS membership of Debenhams CPO?

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