British retail group Arcadia has told its clothing suppliers it is imposing a discount on all current and existing orders from next month, blaming changes in the retail market.
The retail group, which owns high street chains including Topshop and Dorothy Perkins, wrote to suppliers informing them they should expect a 2% discount from 1 February – a move expected to save Arcadia millions of pounds.
A spokesperson for the company said: “We recently asked our suppliers for a small increase in our discount terms. The cost of servicing and delivering to our customers through new channels is considerably higher than through the traditional retail market place.
“This has resulted in major investment in our infrastructure in terms of systems and distribution as well as a large headcount increase. These substantial developments to our business will mutually benefit our suppliers.”
The move is expected to save Arcadia money but at the expense of its suppliers. According to The Guardian, in 2016 Arcadia’s cost of sales was GBP1.7bn (US$2.36bn) – and a 2% discount on this works out at GBP35m.
The Forum of Private Business (FPB), which represents over 18,000 small businesses, told the newspaper the discount could be “quite a significant hit.”
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By GlobalData“It wouldn’t surprise me if this move pushed some suppliers over,” chief executive Ian Cass told ITV News. “This is Arcadia up to its old tricks…The retail market is tough enough as it is without this.”
The Ethical Trading Initiative (ETI) has also expressed its concern at the cuts, particularly to orders that have already been agreed, describing them as “appalling” and “totally unacceptable within responsible business practice.”
“Unfortunately, Arcadia has ‘form’ for this type of action. They threatened exactly the same two years ago in August 2015,” says ETI’s executive director, Peter McAllister.
“Yet evidence shows that workers and the most vulnerable groups in Arcadia’s supply chain will ultimately bear the impact of this decision to reduce prices paid to suppliers.
“These kinds of arbitrarily imposed terms represent exactly the type of poor purchasing practices fashion brands need to change.
“Suppliers operate on incredibly tight margins. Virtually the only costs they will be able to cut are to wages or to essentials such as health and safety provision.”
