Suppliers have hit out at Arcadia’s demands for an additional 2% discount on all orders with a payment due from 1 February, branding it as “a disaster”.
Arcadia has written to suppliers asking for a further 2% discount on all existing and future orders from 1 February to recoup costs of investment in technology, distribution and staff.
“This is the third time they have done this in the last few years,” one Arcadia supplier told Drapers.
“It couldn’t come at a worse time for suppliers as things are incredibly tough out there at the moment. Big retailers like Arcadia can change their discount terms when they want to. Adding 2% discount on orders already on the books will be a disaster. Suppliers will be lucky to make their bottom lines at all now as margins are so tight.”
One fast fashion supplier agreed: “It’s terrible. There’s no notice period, and with the margins suppliers work on – it would be catastrophic to impose it.”
“I would be surprised if this doesn’t cause a massive backlash –Arcadia is using their suppliers as a bank. We were looking to work with them but now we’re questioning whether to go forward. It’s just too high.”
One former Arcadia supplier said: “The supply chain has been hammered for many years now, and increasingly suppliers have disappeared. [Whether they agree to the discount] depends on the proportion of business they do with them – as in most cases, Arcadia will be their biggest customer, and the supplier will have to swallow it.”
He added: “Arcadia hasn’t been doing well lately, so it’s not surprising. By bringing more designers in-house, companies like Arcadia have lost their quality over the years -it’s a downward spiral. We’re in a competitive market, and they’ve lost a lot of market share to etailers as Asos, Boohoo and Missguided.
One high street supplier said Arcadia was not alone in squeezing its supply chain in response to sluggish sales.
“It doesn’t surprise me. Trade is tough and the retailers never want to take the brunt. They all do it from time to time. It’s seems part of the game now. It’s a bit like administrations- do a poor job and then just shaft the suppliers and landlords- it’s time the government did something about it.”
An Arcadia spokesman said: “We recently asked our suppliers for a small increase in our discount terms. The cost of servicing and delivering to our customers through new channels is considerably higher than through the traditional retail market place.
“This has resulted in major investment in our infrastructure in terms of systems and distribution as well as a large headcount increase. These substantial developments to our business will mutually benefit our suppliers.”
As previously reported by Drapers, in August 2015 Arcadia asked for an additional 2% discount on all orders.
In the year to 27 August 2016 Arcadia Group’s pre-tax profit plummeted by 79% year on year to £36.7m. This included legal fees, redundancy costs and lease guarantee costs relating to the collapse of BHS, which totalled £26.4m during the year.