M&S suppliers must cut prices

21 July 2004
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22 July 2004 | Anna Blackburn

Suppliers to troubled high-street retailer Marks & Spencer face a bumpy ride in the aftermath of a failed hostile bid offer.

In its recent operational review, M&S said it could "deliver annual buying improvements of £140 million by 2006-07".

It is dramatically renegotiating suppliers' terms and discounts, and hopes to reduce annual supply chain costs by £35 million in the same period through maintaining lower stock levels, a reduced catalogue and tighter operation of the supply chain.

Also under scrutiny are indirect costs such as prices of plastic bags and energy consumption.

Few suppliers will talk about renegotiated contracts, although Northern Foods, one of the retailer's biggest suppliers, confirmed there has been a price cut of 1.25 per cent, which will rise to 2 per cent in April next year.

But Trevor Kitching, director of ACS Supply Chain Consultancy, said M&S was likely to come down harder on its suppliers. "It is likely to ask suppliers to cut prices by 5 per cent and tell them, that if they don't like it, they can go elsewhere," he said.

"But many suppliers will be locked into agreements with M&S in terms of volumes because it is still the biggest clothing retailer in the UK. It is a shame things gave gone this way. They used to have excellent relationships with suppliers."

Philip Green, the entrepreneur who owns BHS, Top Shop and Dorothy Perkins, angrily retracted his £4 share offer last week, warning that his shops would "trade their socks off" to compete with M&S.


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