Interesting business practice

In a letter to suppliers, Debenhams said it was seeking a one-off fee from suppliers worth 2.5pc of its outstanding payments as of Tuesday. It will also apply a 2.5pc discount to orders it has agreed with suppliers.

Simon Herrick, the chief financial officer at Debenhams, said the discounts are a “contribution” to the retailer’s investment in new store openings and the £25m revamp of its flagship Oxford Street store.

Demanding a discount on goods already delivered…..

15 thoughts on “Interesting business practice”

  1. There’s a bit of this going around. My employer has had a couple of local authorities try something similar.. all in the name of ‘speeding up payments’. The scheme, broadly speaking, is that they agree to pay on time, if you agree to let them take a discount.

  2. I recall something similar from N Brown (J D Williams). They would institute payment holidays – months when they didn’t pay anyone!

  3. Not that uncommon a practice, and there are plenty more wheezes the less scrupulous try to impose. I remember one of the DIY sheds demanding a contribution towards their internal distribution costs.

  4. A major British pharmaceutical company once demanded fees from prospective suppliers to be considered as prospective suppliers.

    They were referred to the reply given in the case of Arkell vs. Pressdram.

  5. The problem for these suppliers is that their existence often relies on a single big retailer so the retailer can do what the fuck they want. A supplier I know constantly gets fucked over by a big supermarket. They source shoes for the retailer who have agreed in a contract that they wont go to any of the supplier’s factories directly. But as soon as they find out the supplier has found a good factory that is easy to deal with and profitable they go over their heads and deal with the factory directly cutting out the supplier after all the hard work has been done. The supplier can’t sue because then the supermarket will stop using them and they will go broke…. that said the supplier is still making millions.

  6. Is demanding money with menaces a crime?

    Come to that, is replying “We know where you live, we know where your kids go to school” a crime? Nobody seemed to view it as a crime when Trade Unions did it.

  7. I have experienced this directly. A large company in the education sector imposed a discount after the contract had been agreed. Additionally, they didn’t pay any of their suppliers during Jan/Feb/March. They even had a name for it – “the year end trap”. Existing suppliers knew about this and provisioned for it, but it was my first and last contract with them.

    Later that year another big company completely reneged on a contract and I was left tens of thousands out of pocket.

    These and two smaller, similar incidents killed the company.

    I always, always wanted (but never had the nerve) to have a late payments clause included: for the first day of lateness the client pays a penalty fee of £0.01, which doubles every subsequent day. The total accrues, so day four would be 1p + 2p + 4p + 8p = 15p.

  8. @Justin… Brilliant, the old chess board story! Would be great if you could pull that off and end up owning the entire company after a month.

  9. Reminds me of a story my old man told me when he stilled worked: large UK construction equipment manufacture was buying hydraulic hoses from his UK based Co at a loss. When he found out he imposed an immediate +10% price hike. Said equipment manufacturer screamed foul and refused to buy. Fine my old man says – “we were losing money anyway, and your sales are obviously are not a problem for you?”. Problem was you can’t just switch suppliers as his product was made to fit and no one else was geared up – it took them over a year to find another supplier, and along the way my Dad got his money.

  10. In Nigeria, suppliers need to bribe the client’s finance department in order to get their invoices processed. Bit sad to see similar practices adopted in the UK.

  11. I thought the rule of thumb was_
    Sell at £1 to small firm, hope they grow.
    Sell at £1-50 to large firm, not much growth and you can expect grief from QC, regs, dozy finance dept, etc.
    Sell at £2 to govt. You don’t want them to grow.

    Changing a contract after it has been signed is outrageous, but to imagine it never happens is simply naive. My guess is the suppliers will suck it up, relieved it wasn’t more.

  12. One of my ex-employers/friends (he was too nice a guy to be a successful businessman but survived because he earned enough from his personal work for the firm – he was its most valuable employee as well as being the owner – to keep it going) told me that when a big company decided that they would not bother to pay his elderly father for goods supplied he (the son) applied for a winding-up order: the company suddenly changed its mind and paid.

  13. So Much For Subtlety

    bloke in france – “Changing a contract after it has been signed is outrageous, but to imagine it never happens is simply naive. My guess is the suppliers will suck it up, relieved it wasn’t more.”

    I know vaguely a guy who worked for a minerals company. He said they had problems with people they sold to (in the US in particular) because they would agree a price, sign a contract and when the ship had sailed, the buyer would then insist on re-negotiating the contract. Given everyone by that point was deep in debt there was little they could do.

    Death is too good for some people.

    One of the more eye opening books I have read in recent times in Stephen G Bloom’s Postville. Some very unusual and unexpected business practices therein.

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