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Debenhams demands 2.5% discount from suppliers

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%.

Readers' comments (5)

  • So Debenhams want even more discount from suppliers to help fund their mistakes and failings?

    Brands should get together a simply say no. What would Debenhams do then?

    They have no respect for their suppliers therefore should be treated accordingly.

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  • Seems like a simple strategy of squIzzing maximum out of supply base and no contribution or efforts from the stores to make buyers/merchandsiers work harder by achiveing good sale throughs.For sure the exit margins are more important then intake margins--and the percentage sell throughs.
    John lewis has the best customer services--House of Frazers seems o have more head office staff then floor staff serving consumers.
    All business need to be accountable of there trading and not passing onto the suppliers then short fall on margins.

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  • Ha hah ha, Christmas Scrooge of the High Street, they really are a one trick pony. They are in a vicious circle of discounting to drive sales and are totally hooked and the consumer knows it. Interesting that the likes of New Look are looking to trade up, as the economy continues to improve the consumer will look to also trade up, last time this happened Debs figures really suffered and at present they are starting to stutter. Get the product right and the customer will follow, easy to say but hard to do, a good start would be to buy to sell and not buy to mark down.Sorry to say but Management have only one answer, discount, the reason is that they have all been there so long that they have forgotten how to buy, bring back Belinda Earl, although Debs is so tainted now I think she would even struggle.

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  • When supply chains are squeezed, they have to squeeze something too. Normally quality. This could be fabric and things like buttons and thread, or manufacturing process like colour dyes and general quality control short cuts.

    Issue is that the end consumer sees it (suffers it) and the brands get damaged.

    Best case study example is M&S - they squeezed their womenswear suppliers at the detriment of quality and now suffer massively for it.

    Issue is like politics. There is very little strategy nowadays. All about making a quick buck, yearly bonuses and something good for the CV.

    Problem is that consumers have much longer memories and won't come back in a hurry. Especially with more competition and ecommerce.

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  • Four pillar strategy for AW13.
    Early season discount.
    Mid season discount.
    End of season discount.
    Supplier retro discount.

    As this strategy continues to make progress in managing the consumers expectations that they should not pay full price for anything expect to see more of it for SS14 and into AW14.

    How about buying better quality and buying tight to manage markdown, in other words going back to the way Debs, many moons ago, once was, knocking on the doorstep of John Lewis.Only doorstep they are knocking on now with a big stick is the supplier.

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