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Suppliers warn of coronavirus cancellation ‘armageddon’

Tensions mounted in the industry this week, as the number of retailers cancelling orders and delaying supplier payments escalated, and suppliers warned that the coronavirus pandemic could have a massive financial impact. 

 Drapers revealed online on Monday that Urban Outfitters had cancelled orders and told suppliers it can no longer accept delivery of goods on purchase orders. The retailer told creditors that any products sitting with freight forwarders will be discounted by 30%. 

In a letter to suppliers, Urban Outfitters European managing director Emma Wisden said: “Under these exceptional circumstances, we can no longer accept delivery of goods on retail purchase orders (POs). We must regretfully invoke the force majeure provision of our contract and cancel all undelivered POs as of today. The same conditions are also impacting our direct business.”

Sir Philip Green’s Arcadia Group also told suppliers that it would be cancelling all orders and extending payment terms, in a bid to protect the business during the pandemic. In a letter sent to suppliers on 27 March and seen by Drapers, Arcadia said all orders would be cancelled until further notice, and payment terms would be extended by 30 days, from that date. The standard terms would therefore be 90 days.

Drapers also revealed online this week that Oasis and Warehouse Group had delayed supplier payment terms. However, it has not cancelled orders. 

Asos paused several incoming deliveries from suppliers and third-party brands as it made adjustments to manage its stock throughout the uncertainty. 

Debenhams also deferred all historic concession balances for 30 days.

With the retail industry less than two weeks into the shutdown ordered by the government on 23 March (comment, p13), some suppliers fear the worst.

One womenswear supplier said: “Armageddon is the closest you can get [to describing this period]. We’re just trying to work through it – having lots of cancelled orders, big reductions and things on hold. We’re piggy in the middle, and the knock-on effect is huge.

“Retailers are trying to find solutions, but it’s a moving target, so what they say today is not going to be what they say tomorrow. So that’s the problem – you just can’t plan.”

One Arcadia supplier said: “All orders are at a complete standstill. We have orders on the water, orders at the docks, orders on trucks going to port, orders half-made, fabric on the cutting table with pieces cut and fabrics in stock for future orders sitting in the warehouse, not to mention fabrics at mills in weaving, and as of Friday, payments kicked down the road for another 30 days, meaning 90-day payment terms.

“With many retailers now extending their credit terms with no notice, we need to hope they actually do indeed start to make these payments. Otherwise, it’s extremely hard to see how suppliers can come through this.”

Another supplier said: “Most retailers have ‘force majeure’ clauses in their contracts that enable them to cancel anything as a result of natural disasters.”

He added: “At the moment, every single retailer is doing the same, decimating the supplier base. Factories are closing, meaning severe poverty could ensue.”

The owner of another supplier called for manufacturers to be treated better: “The financial impact is obviously devastating, but this is a global crisis, and we are certainly not alone in that. It’s the way we are being treated and the mental burden, as well as the financial uncertainty.”

However, one supplier to retailers including Arcadia and River Island said it has been treated “quite well in the circumstances”: “They’re working with us. They’re doing things like holding [product] over to spring Next year, [or] saying can we use it for the autumn season. We’ve got cancellations and things like that, but we just have to get on with it.”

 

Readers' comments (1)

  • Some of the major retailers are being very fair as they understand everyone is in this together. Unfortunately it is the usual suspects who are treating small yet loyal suppliers with total disdane. When this is all over I hope the Great British Public vote with their feet!!

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