Fashion giant Arcadia has threatened to cancel orders that have already been shipped from a Bangladesh supplier without payment if the supplier refuses to pay a 30% discount.
In a letter shared on LinkedIn, the retailer group’s CEO, Ian Grabiner, said Arcadia would be unable to sell the goods and therefore proposed the fee as an “alternative solution” to complete cancellation.
Arcadia - the parent company of Topshop, Topman, Miss Selfridge, and Burton - said its stores were closed and full of inventory due to the UK lockdown.
In the letter, shared by Mostafiz Uddin, owner and managing director of Bangladeshi garment factory Denim Expert Ltd, Grabiner said Arcadia reserved the right to cancel orders at any time and without compensation if it was unable to use the goods because of reasons beyond its control.
The letter argued that as its shops had been forced to close and it was unclear how long these closures would be in place, it could not currently sell the garments and would not have the capacity to stockpile any new orders.
“We simply have no space for more goods,” the letter said, adding that the pandemic had also had a significant effect on online sales.
Arcadia said its decision to extend payment terms with suppliers from 30 to 60 days had not been taken lightly and was a temporary measure.
The Bangladesh Garments and Manufacturing Association (BGMEA) alleged that the Arcadia Group has cancelled £9m of orders in Bangladesh alone, according to The Guardian.
The Worker Rights Consortium (WRC) told the newspaper the Arcadia Group will have cancelled “well in excess of £100m” of orders across its global supply chains.
It currently sources only 5% of its clothing orders from Bangaldeshi suppliers.
“The effect of order cancellations like Arcadia’s, which we estimate will cost Arcadia’s suppliers more than £100m, is to force suppliers into bankruptcy and to leaves thousands of workers without income,” Scott Nova, executive editor at WRC was quoted as saying.
The letter from Arcadia has been published at a time when apparel retailers have been accused of abandoning suppliers in developing countries or pressing them for discounts when the suppliers themselves are facing extremely challenging conditions.
Last week, Primark set up a fund to cover the wages of garment workers, following criticism it had cancelled orders worth millions of dollars due to coronavirus. The retailer said it was “concerned” about the impact cancelling orders would have on workers in its garment supply chain.
The BGMEA estimated over $3bn worth of garment exports have been cancelled or suspended as a result of Covid-19.
Arcadia has been contacted for comment.