Where is the power balance between retailers and suppliers?
I don’t often comment on articles in other magazines, but in a week when we have been a victim to a retailer not looking at long-term sustainability, an article in this week’s Grocer caught my eye. The headline is “Planet Organic seeks stock ‘contributions’ for new store.” Some background: Planet Organic was recently acquired by private equity and is planning to expand its current 7 stores to 19 over the next five years. A letter from Planet Organic’s buying direct, Al Overton, sent out last week asks suppliers for a month’s supply of stock completely free of charge for the new store! The letter refers to the fact that opening a new store is an expensive business and to make their money go as far as possible, they are asking their supplier to fund their expansion plans.
As some of you know, we are moving warehouse in a couple of weeks as part of our expansion plans and to facilitate Cotswold Fayre going carbon neutral. This also is an ‘expensive business’. What do you think the reaction would be if we wrote to our suppliers and asked them to fund our expansion plans? I can imagine what the response would be, and a hard hat would be required! The worst part of the response to being challenged was that Planet Organic claim that: “There is nothing riding on this. If everyone says no, all that happens is that the store costs us more money.” No, for two reasons, no-one believes that and presumably they are opening a new store to make profit. Why should suppliers contribute to this cause?
The troubling thing for me in all this is the fact that it is acceptable for a retailer even to ask the question. In no other business would a retailer think that it is OK to ask their suppliers to fund their growth plans. Yet, some retailers somehow think they are above the ethical way of doing business. Yes, there may be short-term gains, but longer-term producers and suppliers may be damaged, and many have gone out of business due to unreasonable requests from retailers.
Inadvertently, on a couple of occasions, we have been in a situation where we have been buying products from suppliers at too low a cost. This has been because they haven’t communicated properly and as soon as we found out about it we were uncomfortable. Proper business is about collaboration and both sides need to be winning. When one side has all the trump cards and always think that they should win at the expense of the supplier, it is a worrying time and this kind of business is unsustainable.