Vendors Taking Measures
July 31, 2006,
Already pounded into the ground by off-shore imports, with margins and profits at the vanishing point, American home fashions vendors now say they're being sucker-punched by a barrage of chargebacks and deductions, some negotiated, some not, that is leeching off as much as 10% of the value of orders.
And while it is almost 10% of the sale, suppliers said in the poll, it's more than a fourth of the profit they might have expected to make on the order, a mean amount of 28%.
Are chargebacks more prevalent or abusive in any one channel of distribution? You bet. A resounding 79% said yes, and of those, 81% identified department stores. Discounters, by comparison, got off easily, with only 10% of suppliers saying the mass merchants are much of a problem.
It's not just the chargebacks that have been getting suppliers exercised. What else is on their minds?
It is not unheard of for retailers off on a supplier-paid junket to visit a sourcing partner's plant, and then, within hours of the tour, while still on the supplier's dime, attempt to deal directly with the off-shore manufacturer, cutting out the U.S. middleman who financed the trip.
Other retailers have sent spreadsheets to key accounts, asking them to supply all the specs for the products they sell, and then in a coupe de grace, ask for the names of their off-shore suppliers.
Some suppliers acknowledge they deserve the compliance fees they get hit with. But what about the retailer that levies a $500 fee, not uncommon, when a shipment is short just one $6 item?
Some suppliers have been hit so often with compliance fees for mislabeled cartons that they are now taking photographs of every carton that gets shipped out.
And adding one more layer of cost to already stretched-thin suppliers, many have added teams to track, and contest, unsubstantiated chargebacks, or put staff in place in each distribution center or shipping point to verify what goes out the door, and its condition.