Debenhams has asked suppliers for a 2.5% discount on stock as part of a “contribution” to help fund the retailer’s expansion.
The department store chain wrote to retailers yesterday explaining it is seeking the discount from its suppliers to “support its commitment to ongoing investment” because both parties will “mutually benefit” from the growth of Debenhams.
In a letter seen by Drapers, Debenhams stated that contributions will be based on each supplier’s current business with Debenhams in two ways: The first will take the form of a single sum contribution of 2.5% on all outstanding payments on supplier’s accounts at the end of the day on December 17.
The retailer is also demanding an discount of 2.5% on all open orders at the end of the day on December 17. Debenhams said these would be contributions and not a permanent amendment to trading terms.
It is understood the letter has only been sent to Debenhams’ own brand suppliers.
In the letter, Debenhams chief financial officer Simon Herrick said the retailer “continues to make progress against the four pillars of [its] strategy to build a leading, international, multichannel brand”, which include 39 new UK stores over the past seven years and a £25m modernization of its Oxford Street store.
This is not the first time this year Debenhams has squeezed supplier terms. In March the retailer asked linen suppliers to offer a greater discount on products, and moved payment terms from 90 days to 120 days.
This year has already been witness to several suppliers attempting to get better terms from suppliers.
Laura Ashley sent a letter to its suppliers asking for an “immediate cost price reduction of 10%” including orders that had already been placed in March.
John Lewis suppliers were also hit by a rebate of between 0.75% on their annual invoices with the department store chain if their sales grow by between 5%-9.9%, up to 5.25% if sales grow by more than 50%.