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Drapers comment: Retrospective discounts - is a change of law needed?

This week the eyes of the fashion industry turned firmly once again to suppliers, payments terms and accusations of “bullying” by the big boy retailers.

As reported by Drapers, Arcadia has demanded an additional 2% discount on all orders with a payment due after August 31.

Unsurprisingly suppliers and industry observers were furious and the comment box below our online story lit up with cries of “blackmail”, “unethical behaviour” and “animal-like behaviour” over the retrospective discounts.

Unfortunately this is nothing new; retailers have been changing their terms and conditions to boost their bottom lines for years. Just a few months ago Drapers reported on House of Fraser asking brands for 20% on top of the 10% discount they already command.

So is this unethical, unprofessional or just part of retailing?

Some have suggested the suppliers affected should band together and refuse to bow down to these “unacceptable” demands. A noble idea, but in reality, not feasible. If manufacturers refuse to supply Arcadia and others like them, they will simply source elsewhere. Replacing thousands of pounds worth of business over night is impossible. One supplier also pointed out that, even then, it could be a case of “out of the frying pan and into the fire” as there is no way to mediate the risk of retrospective discounting elsewhere.

Other’s griped that it wasn’t just the situation itself, but the way it was handled that struck a blow. No face-to-face meeting, no discussion, and as one supplier said, no choice. One affected manufacturer said he had a similar situation regarding a change of contract with but the approach couldn’t have been more different; when Asos extended its payment terms from 30 to 60 days at the end of last year, the etailer, he said, brought him into the office, explained the situation and worked with him to put in place a manageable timetable and allowed him to alter his costings accordingly. A courtesy, he complained, he was not afforded by Philip Green’s mighty Arcadia.

So what can be done? One observer pointed out that, given the combined pressures of ever increasing demands on price, continued consumer appetite for discounting and overall reduction in retailer profits, there may be call to change the law, to rule out retrospective discounting altogether and protect suppliers.

For now, big retailers hold the power and suppliers are, ultimately, at their mercy. However, retailers be warned: going down the road of upping discounts does not just hurt the supplier. The result can be poorer quality clothing - and that damages the retailer, and the high street.

Readers' comments (1)

  • The bottom line this practise will keep happening as long as the suppliers allow it to. In the case of Arcadia, don't supply them unless than renegade on their demands. If all of their suppliers did that, then what would happen then?

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