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Updated: Suppliers outraged at Arcadia discount demands

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. 

 

Readers' comments (13)

  • This is so Philip Green, can’t grow top line therefore squeeze suppliers.
    All the investment they’re talking about should translate to higher demand or better efficiencies and should not be funded by suppliers.
    So old school. Bet Missguided, Boohoo & ASOS wouldn’t do this to their suppliers

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  • Why is it the suppliers problem that Arcadia cannot run an competitive and efficient business in the modern age?

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  • Arcadia gets this bad publicity, but what about the 3 percentage points I am going to lose as a brand because John Lewis don't know the cost of doing business online? Nearly £3 an item they want.A much bigger story I would think given it's "partnership" mantra!

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  • "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.” Opaque and disingenuous jargon? Efficiencies and economies imply cost savings which could be shared with suppliers, not the other way round. This appears to be a classic, top down, squeeze the suppliers attitude which does little to further and foster mutually beneficial relationships

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  • Stop supplying Arcadia. Everyone knows what they are like. If they can take advantage, they will.

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  • Shocking online platform, late off the mark and are being thrashed by likes of Asos, Boo Hoo etc. They have placated and allowed some of their Brands Burtons Miss S to be offered on Asos but still cannot bring themselves to allow Topshop/Topman to be offered on a platform that is right on message for this Brands profile, pride comes before a fall. Over last 3 / 4 years the Gooses that laid the Golden Egg, T/S T/M, have started to falter due to Management strangling buyers from buying, once first to the market now way too nervous, review, after review, after review, not allowing buyers to buy, they have become glorified selectors, sign off sign off sign off, opposite to Inditex which is first to market because it allows designers and buyers to express themselves without tiers of management justifying there position and choking the flow of fast fashion.Countless talented people have left to go newer more innovative more aspiring companies. I suspect trading must be shocking, what to do, default to a smash and grab, it's hard enough as it is at the mo with margins cut for suppliers, this will push some over the edge. This is not the answer to improve profit, they need to get their on line experience up to speed, everyone in house knows this and it needs to free up buyers and allow them to buy, most of the old guard have now left, lets see if the new lot can bring back the excitement, T/S T/M got way too comfortable, whole new generation of kids they need to appeal to, never thought i'd see the day but i'm afraid they are just not as hip and cool as they used to be and whole Brand is being left behind, whats the USP, the message, in meantime whilst we try and find our way out of the woods and become inspirational to a whole new generation of kids we will pick suppliers pockets once again to make up for poor decisions over the years, the kids are leaving to shop elsewhere, ask yourself why? It's high time that legislation was bought in to stop this practice.

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  • This is not an area for government intervention (unlike pre-pack admin deals). Suppliers are in a tricky place of course; perhaps the largest should work together to refuse retrospective deals. Do Green's senior team still have confidence in him? And if they do are they happy with his style of working?

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  • Senior Team as in The Board? All the Senior Buying Teams are new as the Old Teams like most buyers have left, turnover of staff on some of the Brands is unbelievable.

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  • Philip Green did this when I was at BHS just after he bought it (pre Arcadia). He was never able to grow top line sales and was only able to grow profits by screwing suppliers who had little choice other than to accept unfair terms.
    The Arcadia heyday is over, as all the talent has left and is now just run by money men who obviously don’t really care about the industry.
    Amazing fall from grace!

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  • Why are the suppliers crying? They will just screw the factories with the 2% anyway!

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