01 September 2008 | Jake Kanter
Clothing retailer Matalan has cut supplier payments by 2 per cent in a bid to save money.
The firm's suppliers were notified about the plans in a letter sent last month from buying director, John Lyttle. The cuts were introduced at the start of this month and savings will be used to help fund projects such as marketing campaigns, international franchising and refurbishment efforts.
In a statement Matalan confirmed that it wrote to suppliers requesting a 2 per cent "contribution". "This move sits alongside a supplier-based consolidation programme and will help fund our expansion plans, the benefits of which we hope to share with our consolidated supplier base," the retailer said.
It is not the first time the clothing firm has reduced vendor costs, having imposed a similar 2 per cent discount in 2006. That move was met with concern from both the Forum of Private Business (FPB) and the then trade minister Margaret Hodge, who examined the payment row and asked Matalan to justify the cuts (Web news, 25 September 2006).
The FPB criticised Matalan's latest action and added the firm to its "hall of shame" for mistreating suppliers. Phil Orford, FPB chief executive, said: "Matalan has an ongoing policy of blatant and sustained abuse, using its size and power to make more money at the expense of its supplier base."
Stuart Blake, compliance manager at Talbot Solicitors, said businesses are increasingly looking to introduce payment reductions while economic conditions are difficult. "This type of action will get worse before it gets better. In an ideal world suppliers will tell these companies to 'get lost' but they risk losing business and once a firm like Matalan has gone elsewhere they might not come back."