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Supplier sums don’t add up on price rises

As summer 2010 draws to a close, another round of buying begins.

As summer 2010 draws to a close, another round of buying begins.

Autumn 10 buying was a white-knuckle ride against the backdrop of currency fluctuations alone. But just when you thought it couldn’t get any more difficult, along came a whole new set of problems.

A conversation I had recently with a rep from a significant footwear brand ran like this: first came the supplier’s tale of woe - the weak pound and higher labour costs in China meant the cost price of footwear was going up. Fair enough. I can’t argue with economics or expect someone to supply our business and make a loss. Cost increases get passed on. That’s how it works.

However, once the conversation turned to the retail price of the footwear,

a bizarre shift in logic occurred. Higher supplier expenses led to higher wholesale prices. Yet neither these nor the impending VAT rise would lead to an increase in the recommended retail price. The retailer just had to absorb the extra costs.

Imagine my surprise - especially when I heard the supplier’s pathetic rationale: “If we put up retail prices, you would sell fewer of our shoes.”

It’s time to get real. Petrol stations do not absorb VAT rises without raising prices because they fear people will drive less. But by absorbing extra costs, retailers are choosing to cut reinvestment in their businesses and the amount they pay their staff.

Neither of these routes can be classed as a strategy for long-term success.

Thankfully, not all brands are operating in this way. But retailers who find themselves in similar convers­ations should remind suppliers that part of being an independent retailer is having the freedom to buy - or not to buy - from whoever we choose.

Nigel Hamilton owns Bishops Footwear in Coleraine and is president of the Independent Footwear Retailers Association

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