I’ve been noticing a fair amount of coverage recently about large retail companies attempting to extend (or altogether change) the credit terms with their suppliers. They essentially demand or impose, in some cases with no notification, significant discounts – sometimes up to 5% on invoices, just for paying them on time.
There are endless articles about it, so I don’t wish to add to them, but as it adversely affects many small businesses we work with, ourselves included, I just wanted to make two points which seem to be missed by most commentators.
Firstly, because interest rates are so low, most of the ‘cash rich’ retailers are finding they no longer earn interest on their cash piles, something that used to significantly increase their profit. At the same time, the well documented lack of financing available to small producers and suppliers, makes offering discounts to retailers for early settlement, more attractive – and results in significantly extra profits for retailers.
Secondly, reading the Corporate Responsibility Statements posted on the websites of some of these large retailers, it is clear to me that they’ve been written by PR companies, with I suspect, few people within the company ever having read them. They gush about how lovely they are and how they treat their suppliers fairly. But it seems to me that in many cases, these relationships aren’t that highly valued – often they are holding suppliers to ransom.
The consumer has the freedom to choose where they shop. Perhaps many don’t know or care too much, how a retailer treats its suppliers. But the implications are far reaching as many independent producers and suppliers are beginning to see. So who is ultimately to blame? How can we get the message to large retailers that treating suppliers fairly needs to be much more than lip service?
We’d love to hear your thoughts. Are you a small business that has been affected by big names holding you over a barrel, stalling payments, or extending credit terms? Leave us a message below.