Debenhams has been slammed for “moving the goalposts” by asking suppliers for a discount in the run-up to Christmas for the second time in three years.
The retailer has contacted suppliers asking for a 1% to 2% discount in exchange for paying them 30 or 60 days earlier than its current, 90-days terms. The optional shorter payment terms will last from November 24 to May 26 next year.
Debenhams told Drapers: “In response to requests from some of our suppliers we have this year offered earlier settlement of invoices in return for a small discount.
“The scheme is entirely optional, as was made clear in our communication to our suppliers, and is intended to help their cashflow at peak periods. The offer has been welcomed and we continue to maintain strong relationships with our suppliers.”
However, one Debenhams supplier said: “It’s difficult to work with companies that move the goalposts. I know some companies work on tiny margins for volume, some on 5%. Imagine their face when they opened the letter.”
Another agreed: “It is unprofessional to change payment terms once you are contracted with a style.”
Suppliers were not the only ones to disapprove. An industry observer told Drapers: “Debenhams is under pressure. It will be interesting to see how far it goes on Black Friday – it looks like suppliers will be funding the promotions.
“The question is how many suppliers will be willing to stick their necks out to challenge Debenhams on what is happening, because if they do, they might not be on the approved supplier list for much longer.”
Mike Cherry, policy director at the Federation of Small Businesses, said: “We are concerned and disappointed by this latest example of poor payment practices from Debenhams. Sadly it is not the first time we have seen the retail giant behave in this way and would have hoped that by now, it would have improved its behaviour.
“Small businesses rely on the integrity of their bigger customers when it comes to honouring agreed contracts and paying up in full and on time. They often lack the clout, funds or time to seek adequate redress in these circumstances.”
The government’s consultation on late payments, which launched on October 26, closed on November 27.
Stephen Sidkin, chair of the fashion law group at law firm Fox Williams, said the review was unlikely to go far enough.
“While the consultation is a step in the right direction, I query whether it will result in a significant change in commercial practice and address concerns from suppliers about retailers like Debenhams, not least because the problem of retrospective discounts is not covered in the consultation.
“The government needs to work out whether it is concerned about the role played by SMEs [small and medium-sized enterprises] in the UK economy.”
In December 2013, Debenhams asked suppliers for a 2.5% discount on stock as part of a “contribution” to help fund the retailer’s expansion.