Laura Ashley ask suppliers to cut prices – sensible or ill-judged?

The latest in what seems to be a continuous line of retailers demanding concessions from suppliers (not only retailers, but they seem to be the worst offenders) is Laura Ashley. Yes, those lovely purveyors of the quintessentially English dream of country house living and pretty girls in long floaty dresses (sighs wistfully) have demanded a 10% price cut from all their suppliers, as the Telegraph reports, which will “save us a process of reviewing our supplier database.”

I love that line actually – the not-too-carefully implied threat behind the casual suggestion that this is just about saving us both a bit of effort.

Now before we go any further, there are times – carefully chosen – and suppliers – carefully chosen again – where demanding a price decrease can be exactly the right tactic. “You’ve done a great job for us for the last three years, I don’t really want to run a competitive tender, and we’d be happy to extend the contract by another three years. But we’ve benchmarked the market, and you’ve slipped in terms of competitiveness. What can you do on the price if we were to extend? It needs to be around 20%”.

That might well get you a 10% price reduction in the right situation.

But demanding this of all suppliers, and asking that it should be applied to orders already placed is a bit much – actually, if the order is already placed, I would have thought there is a contract in place that could be enforced if the supplier has the bottle for a fight.

Obviously, this is not exactly going to strengthen Laura Ashley’s relationship with suppliers. And many of them are non-UK, so I don’t know how currency comes into play here. But if they pay in £ sterling, presumably suppliers are more likely to be looking for increases than decreases given recent currency weakness? (So  perhaps this is a pre-emptive strike)?

And isn’t there another danger with this, in terms of the message it sends to the world? Not just that you’re another firm engaging in “supplier abuse”, as the Federation of Small Business put it, but also more generally about your business. Why would you take such a blunt instrument to your supply base? Frankly, it smacks of desperation to me. It will be interesting to watch out for the firm’s results, due next week, and see what happens to the share price over the months ahead.

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Voices (3)

  1. steve mullins:

    Excellent piece, Peter. Apologies if i missed something you’ve already written, but the John Lewis story (partners 19% profit share, suppliers 5% down please) and how it smacks of the selective application of much heralded corporate values, might be an interesting topic

  2. Final Furlong:

    wolf in sheep’s clothing…

    1. Rob:

      Wolf in lamb’s wool clothing…

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