The big squeeze
August 27, 2001,
The demands from retailers to their suppliers seem to be getting more and more extreme.
And of course, management knew that there was no way that everyone could be right 100 percent of the time, so markdowns were included in the budget. Woe to those buyers who habitually ran over their markdown monies.
Today, suppliers provide the financials for retailers to buy items, sell them, mark them down and move on to something else.
We all know about discounts for merchandise going into new stores, sample discounts, markdown money, shelf fees, volume discounts, and dollars "contributed" to get rid of another supplier's stuff so your stuff can get on the floor.
Then there is the time-honored formula of penalties against violations involved in shipping and packaging. Some retailers have now brought this art form to a new level.
Well leave it to those clever retailers who try to outdo each other devising new fees for suppliers for the privilege of taking the supplier's stuff.
Even The New York Times latched on to the problem with a feature piece in its business section pointing out the programs and penalties.
We now have a growing phenomenon called "the reverse auction," a rite whereby a number of suppliers vie online for the privilege of selling a retailer a product. The catch is there is a certain time window, and the suppliers vie on-line to reduce their bid prices.
The "winner" should be the supplier that comes forth with the lowest bid. But that's not the way it always works. Some of the craftier retailers take the bottom bid and negotiate with their supplier of choice to entice them into lowering their price to get the business.
And of late, we've heard of the latest twist, as yet unsubstantiated with hard copy: A major, highly respected retailer is charging suppliers per-pound amounts to help defray the costs of its distribution center.
And everyone on the receiving side insists that there are no formal profit centers in the corporate structure. Even informal ones can bring forth awesome profits.