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David Noble FCIPS
Retail sector under investigation again
It appears that retail giant Tesco is in hot water again and under investigation by another official body - this time it’s the Groceries Code Adjudicator (GCA), Christine Tacon.
They are being investigated for breaking a number of rules, including delaying payments to their direct suppliers and ‘positioning’ payments for shelving placements. The issues came to light following their recent announcement last year overstating the level of their profits where they are now under deep scrutiny.
Who knows what the results of the investigations will bring, expected to last around nine months, as currently Tacon cannot impose any retrospective punishments. If wrongdoing is discovered, then even if penalties cannot be imposed, change needs to happen in the future depending on the recommendations and, and we hope they will go far enough.
The GCA was established in 2013 to look at the ten largest retailers and how they conduct business with their suppliers. It will look at Tesco’s behaviour from the start of the creation of the GCA to the 5 February this year. The delay in supplier payments will cover a number of possible areas including duplicate invoicing for the same product, deductions for items without prior agreement and deductions for historic promotions where no agreement had been in place. It will also cover payments for shelf positioning when not related to promotions. So, for example, end of shelf positioning is a common promotional practice, but there is little clarity on what is allowed with product position on shelves in the aisles.
The CIPS response to these issues has been received warmly by members and featured in the media. Follow the latest on @CIPSNews with pictures of the coverage received. We have been quite robust in our response. Retailers have had free rein for far too long and treated suppliers with some contempt. Holding back payments for example has worsened since the financial crisis. Between 2008 and 2012 according to figures published by the Federation of Small Businesses, the overall figure for late payments almost doubled from £18.6billion to £35.3billion. Research from BACS shows that 60% of businesses have experienced late payments, which is quite significant for smaller suppliers heavily reliant on prompt payments for continuous cashflow.
I hope that significant change will happen soon. For too long retailers have been operating under their own rules and have been less aware of good procurement practice. There needs to be clear accountability and higher standards within this sector, because how many more scandals will we hear about before we have competent professionals in place?