16 March 2006 | Anusha Bradley
Direct suppliers to Marks & Spencer will have their payments slashed by more than 10 per cent to cover costs for marketing, new stores and online trading.
The retailer has notified all its 1,500 first-tier non-food suppliers that it intends to increase the value of discounts it subtracts from 5 per cent to 10 per cent from 1 April. For the first time, these suppliers, which make up 18 per cent of M&S's supply base, will also be expected to pay a "marketing allowance" of 0.5 per cent of the total of the goods supplied.
Suppliers of Fairtrade clothing, a new addition to the M&S range, will not escape price cuts, although a spokeswoman said it did not expect reductions to affect the producers of raw materials.
She said suppliers were "benefiting from increased volumes" generated by "investment in new stores, remodelling and stock turnaround efficiencies".
"We are asking suppliers to contribute to the cost of that," she told SM
. Katie Stafford, M&S sustainable development manager, added: "With all our suppliers we have a partnership relationship. It's about growing our businesses together."
But Robert Clark, senior partner at research firm Retail Knowledge Bank, said the price cut was "unusually high".
He said other retailers have made "supplier discounts" of between 2 and 4 per cent, and a blanket price reduction may put pressure on relationships and engender ill-feeling.
Fiona Gooch, policy analyst from development charity Traidcraft, said: "These things tend to happen if companies believe they may miss profit margin targets because it's an easy way to improve quarterly figures."
M&S said the new discount brings its "direct" suppliers - those sourced straight from the factory - the majority of which are overseas, in line with its "full-service vendors" - middlemen suppliers.