Halfords to treble payment times and cut supply costs

7 May 2003
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08 May 2003 | Robin Parker

Bicycle and car parts retailer Halfords is getting tough with its suppliers under a new management team.

The company has tripled its payment time to 90 days and has signalled that it aims to review product prices and cut net invoice pricing by 10 per cent.

The move follows the appointment of former Homebase boss Rob Templeman as chairman after venture capital firm CVC bought the chain last August.

A letter sent to its 500 suppliers ahead of contract renegotiations, seen by SM, stressed that Halfords plans to reduce its supply base: "It is anticipated that large-scale re-sourcing of product may be necessary and we are therefore encouraging suppliers to quote for the supply of product.

"We suggest you consider opportunities to reduce cost through supply chain, packaging, promotions, etc."

But the letter was sent over the Easter weekend, giving suppliers seven working days to discuss the terms before the next contract period began on 1 May.

Stuart Smith, managing director of textiles supplier Bernard Stuart, asked Halfords to take his company's products out of store catalogues three months early because he believes the measures are unfair to small businesses.

"Halfords has treated suppliers with an unbelievable lack of manners and without consultation," he said.

Halfords refused to comment.

Professor Nick Wilson, a late-payment specialist at Leeds University Business School's Credit Management Research Centre, said Halfords' move could amount to an abuse of its bargaining power.

"In a competitive supply market, it can get away with asking for discounts for prompt payments if it pays early in a longer payment period, but this raises questions about fair trading," he said.

Clive Lewis, chairman of the Better Payment Practice Group, added: "If Halfords wants to cut costs, it's an unsystematic way of doing it - promises of prompt payment should be used as a sweetener when you're trying to pay less for supplies."

But a spokeswoman for the Association of Cycle Traders, which represents independent bicycle shops, said long payment terms were common in the industry, which has a slow turnover of stock.

SMmay2003

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