Something's got to give with reverse auctions

Don Hogsett, January 14, 2002

Like it or not — and universally it's not — the hotly debated and frequently painful retail practice of "reverse auctions" is here to stay, and suppliers had better get used to it and adjust their plans accordingly, according to WestPoint Stevens president and coo Chip Fontenot.

It's clearly a subject on his mind. He stopped the interview dead in its tracks to ask, "Well, aren't you going to ask me what I think about reverse auctions? I've got one or two things to say."

Indeed, he did. "On the surface, they work well for the retailers with basic commodity product. It's pushed their margins up and our margins down. But it discounts the cost of everything we have to do to service the customer — the put-ups, the special systems, the markdowns, everything we do to support the sale."

Sounding exasperated, resigned and hard-headed, Fontenot said, "At some point something's got to give. They won't get the services we've been able to provide. If margins continue to deteriorate, we won't be able to give them everything they want. There are some conveniences that retailers take for granted that will simply disappear."

Coolly pragmatic, Fontenot acknowledged, "It's easy to say you'll walk away and turn your back on auctions when the business becomes unprofitable. But the reality is that there are certain auctions you have to participate in because you have other business with the customer that you need to protect. But the retailer has to understand that if he wants us to participate, he has to be part of a bigger picture for us, he has to become more important to us. We'll participate where the customer is meaningful to us."

Fontenot shrugged his shoulders. "Reverse auctions aren't going to go away. That's the new reality. Our job is to take that reality and try to find a way and a structure to still make money. You take what you're dealt and run your business as well as you can."

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