NOT FAIR TRADE : Retail Week illustrates worsening prices and terms imposed on suppliers.


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From Retail Week, November 17, 2006



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House of Fraser to tighten the screws on its suppliers
By Jessica Price Brown

House of Fraser's new management team will send a letter to suppliers next week demanding discounts and extended payment terms.

The department store group, taken private last week by a consortium of investors including new chairman Don McCarthy, retail entrepreneurs Kevin Stanford and Sir Tom Hunter, and Icelandic investment group Baugur, is the latest in a long line of retailers to squeeze suppliers.

The department store group's precise demands are unclear, but a source close to the company said he expected the revised terms to bring the department store in line with retailers such as Arcadia, Bhs and Matalan. The changes are expected to include concessionaires as well as own-label suppliers. He said: "House of Fraser is way behind the curve on this".

The last time House of Fraser imposed supplier discounts is believed to have been in the summer of 2003.



   Understanding Fair trade   

 

Suppliers and concessionaires contacted by Retail Week said they had not received any information from the retailer as yet, but that, following the buy-out, discounts "were a foregone conclusion". One said: "All the indications are that this is going to happen. It is an expected practice now when businesses go private."

Incoming House of Fraser chief executive John King put the squeeze on Matalan suppliers earlier this year, demanding a 2 per cent discount on second-half orders.

Debenhams also demanded a 2 per cent discount from selected suppliers in September and Marks & Spencer imposed 0.5 per cent from suppliers to help it finance its hefty marketing spend.

In addition to imposing discounts, retailers have been extending terms. Mosaic, which owns Oasis, increased its payment period from 28 to 45 days in the summer. Arcadia extended its terms from 30 to 60 days and New Look lengthened its to 90 days.

No comment was available from House of Fraser.
Retail Week © Emap Communications

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«Fair trade»


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   Understanding Fair trade
Payment of low prices is not the only sales issue faced by suppliers.
    It is common for buyers to require a discount in exchange for payment on time!
    Buyers also require producers to bear many of the risks of trade, so that profits are assured for the rich.
    For example, buyer's contracts can effectively require suppliers to finance losses caused by the buyer's own failures to forecast accurately.
    And to pay costs and supposed «loss of profits» due to delays – that might be beyond the control of suppliers.
    Contracts with such far-reaching clauses can cause truly serious catastrophes when things go wrong.

 

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