Halfords’ suppliers seek legal advice over funding demand

Satch

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I have no love for Halfords at the best of times.

Even without such actions being potentially illegal, this is particularly offensive behaviour:


"The retailer recently sent letters to its suppliers asking them to pay up to 10pc of their annual sales with Halfords to help fund the company’s £100m store modernisation programme. This effectively amounts to a rebate on already agreed contractual payments,"

"Matt Davies, chief executive of Halfords, claimed the payments are “voluntary”, but at the same time admitted that suppliers who do not contribute “reduce their likelihood of doing business with us”.

Halfords? suppliers seek legal advice over funding demand - Telegraph
 

def90cars

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I think they can do very little. When the contracts end, Halfords is under no obligation to retain them.
 

IanA2

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Don't the big supermarkets employ similar tactics...?
 

def90cars

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Don't the big supermarkets employ similar tactics...?
Not necessarily asking for money, but certainly controlling prices or favourable promotional deals.
 

c63chris

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We have done this before. If times are hard you try to get the whole supply chain to feel the pain. Contractually the suppliers will unlikely have to cough up but will need to decide how much they want to do to keep Halfords on board with them.
 

IanA2

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Not necessarily asking for money, but certainly controlling prices or favourable promotional deals.
Just done a quick bit of research as I seemed to recall that some of the big guys did precisely this. It may be that they have stopped the practice, but from the Groaniad, Aug 2007:

Other payments

Supermarkets can ask suppliers for payments towards refitting stores or for stock to fill the shelves of new stores. Suppliers are often asked for support on "margin erosion" - where profit margins are reduced as a result of cutting prices. These are commonplace and suppliers expect such demands.


Seems to be pretty much what Halfrauds are doing.
 

John Jones Jr

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Seems to be pretty much what Halfrauds are doing.

It's exactly what they are doing. Some would say it's the cost of doing business, others and I include myself would say it's akin to blackmail, especially for the smaller suppliers.

I try to avoid Tesco and the like when possible, now I've another good reason to avoid Halfords along with their pig ignorant staff in one of their north London branches. I'm feeling like a winner! :D
 
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Dryce

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We have done this before. If times are hard you try to get the whole supply chain to feel the pain. Contractually the suppliers will unlikely have to cough up but will need to decide how much they want to do to keep Halfords on board with them.
I think there is a problem with this behaviour because a retailer can only do it if they are too strong in the supply chain.

Also bear in mind that retail gross margins are often very significantly higher than their suppliers' gross margins so the relative impact 5% or 10% can be huge at the lower ends of the supply chain.
 

LTD

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Yep, one of THOSE !!!
A smart supplier will offer to supply 10% of the previous year's sales in stock to be invoiced after 11 months on a 30 day payment basis.

That way the supplier is front-loading the supply chain with stock that would have been otherwise ordered on a stock-and-order basis at minimum stock-holding levels and it only loads them with a 30-45 day stock liability over their normal trading agreement whilst securing a strong brand presence instore due to full shelves as a direct result of the advance in stock.
 

John Jones Jr

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I would imagine most of the suppliers are smart, still doesn't stop them from being asked to make “voluntary” payments.
 

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The big car dealership groups do it too - they have a lot of power over the manufacturers.
Wouldn't have thought that simply on the basis that it's manufactures (or their national distributors) that dishes out the dealership and the territory that goes with it. Also, it's manufactures who pay the bonus etc too.

Having said that there's no doubt that the dealerships have an input into pricing but I'd be surprised that they would put it up the manufacturers in the same manner as the big multiples do to their suppliers.
 
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Rory

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Wouldn't have thought that simply on the basis that it's manufactures (or their national distributors) that dishes out the dealership and the territory that goes with it.
Dealership groups tend to have fairly large numbers of territories these days. Imagine, for example, if MB and Inchcape fell out - replacing all those locations would be a nightmare for MB. It's not like just firing one dealership.
 

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Essentialy it's B2B and wall is fair in love and business.

UK legislation rigorously protects consumers but there is little protection in law for busineeses.

If you want to run your own business you should be smart enough to survive and thrive in this environment.

I run a business and do not expect any favours from any one. I am always fair with both my customers and suppliers even if they are not always fair with me.

But that's my problem, no one else's... if I were in Halfords' suppliers' shoes I would say: fair enough, you won't renew my contract next year if I do not contribute, so I will make a contribution but in return I want a three years signed contract to give me the chance to recoup my 'donation' from future profits. Sounds fair to both sides I would think?
 

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The big car dealership groups do it too - they have a lot of power over the manufacturers.
That power is mitigated by the fact that the car manufacturers have brand strength and there are multiple dealer groups.

If there was just one car vendor nationally that dominated the retail market and the car manuufacturers had limited alternative routes to market then it would be a different kind of power.
 

John Jones Jr

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Dealership groups tend to have fairly large numbers of territories these days. Imagine, for example, if MB and Inchcape fell out - replacing all those locations would be a nightmare for MB. It's not like just firing one dealership.

Oh, I totally understand your point but I think it's fair to say it's in neither of their interests to fall out? And, I can't imagine the likes of Inchcape just picking up suitable replacement dealerships, especially the more prestigious ones.
 

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This sort of thing is far from new.
About 35 years ago my dad was manager of one of the undersealing / body protection groups .... Cadulac / Car Protection Ltd.
Ford clearly had a policy of regularly putting pressure on smaller suppliers for price reductions.
It got so bad that he pulled out of some of the Ford main dealer contracts ... But was instructed from above to retain others - Even though they were uneconomic to retain.
It's a wicked world.

I've seen some of this again recently with a large multi-national metals processing group (Can't say who).
All the sub-contractors have been hauled in recently one-by-one for a "chat".
The "chat" is a 2-hour brow-beating session to reduce prices.

I'm afraid it's been suggested to them that they go and discover sex and travel.
 

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