House of Fraser’s tough new supply terms have sparked outrage from its suppliers and partners. But what potential long-term impact could the changes have on the industry?
House of Fraser’s letter to suppliers demanding new terms has sent ripples through the industry. Described by one supplier last week as “the worst terms I have ever seen”, HoF’s demands have created almost unanimous uproar from brands, suppliers and concessionaires. Drapers has received numerous letters and phone calls from brands and concession partners who are threatening to pull out.
The terms, due to come into effect at the beginning of next month, include discounts to fund HoF’s £250 million “Building the Brand” investment plan, designed to reposition the department store chain as a premium operator nipping at the heels of Selfridges. New demands include supplier contributions for the department store’s marketing strategy and a levy to help fund premium locations (see Pdf).
However, suppliers are split over the potential long-term impact on the industry of accepting the revised terms. Some warn that consumers will be the ultimate losers, hammered by price hikes in the branded sector, which suppliers claim are inevitable if they are to survive.
Many suppliers that have contacted Drapers in the past fortnight claim HoF has taken the terms a step too far. Some fear that accepting the changes would give a green light for their other retail partners and rivals to demand similar terms, leaving them with wafer-thin profit margins and “unviable businesses”, according to one supplier.