Matalan cuts supplier payments to finance TV ads
Retail giant Matalan is to reduce the amount it pays suppliers in order to boost the funds available for advertising, marketing and PR, an SME lobby group has revealed.
The Forum of Private Business (FPB) said the discount clothing chain, founded by entrepreneur John Hargreaves in 1985, will from 1 September impose a 2% deduction on all payments to suppliers. According to the FPB, the money saved will be used to fund Matalan's television advertising, marketing, PR, international expansion and store refurbishments.
In a letter written last month, buying director John Lyttle claimed the changes were being introduced to help with "future growth" which suppliers would be able to benefit from.
But with Matalan posting pre-tax profits of £53.2m in June this year, the FPB, which fiercely criticised the company in 2006 for imposing a similar 2% 'supplier discount' said there was no need to reduce payments.
"I feel sure that many suppliers are already asking why investment can't be funded by the substantial increase in profits recently announced by Matalan," said FPB chief executive Phil Orford.
"The FPB took Matalan to task two years ago for imposing a similar charge which, it insisted, was a 'one-off'. Clearly, Matalan has an ongoing policy of blatant and sustained abuse, using its size and power to make more money at the expense of its supplier base."
Raymond Frankle, of Frankle Trimmings in London, was so frustrated with the 2006 payment cut that he refused to agree. Soon afterwards, Matalan stopped dealing with him.
Responding to the latest deduction, Frankle said: "You enter into a contract and deliver the goods, so it is not unreasonable to be expected to be paid for them. Agreement to a change of payment terms should be reached by both parties, not just one."
In a statement given to BusinessZone.co.uk, Matalan said: "This move sits alongside a supplier based consolidation programme, and will help fund our expansion plans, the benefits of which we hope to share with our consolidated supplier base. This has not been introduced retrospectively. Matalan's settlement terms with its suppliers remain unchanged."
Matalan is one of 24 large companies included in the FPB's Hall of Shame, a list of companies which use payment terms to "squeeze suppliers". Among the other companies with the dubious honour are Woolworths, Tesco, Selfridges and Debenhams.
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AccountingWEB.co.uk - 19-Aug-2008
Categories: News
Story read: 3348
Number of comments: 2
perhaps
Alastair Harris, 26 August 2008 @ 15:04 PM
their customers might like to impose a 2% reduction at the till - after all there is a credit crunch to fund!
By name and by nature
Mike Whittaker, 26 August 2008 @ 13:26 PM
Well, "matala" is the Finnish word for "low" ...
