John Lewis has been accused of “abusing” its suppliers for demanding a rebate from them despite sales of their products rising.
The department store retailer, whose owner John Lewis Partnership last week revealed a 16% increase in pre-tax profit to £410m, has written to suppliers, explaining they will now be subject to a rebate of up to 5.25% on annual sales with the retailer.
The letter, which was sent on February 22, says this is because it needs “all parties to participate in showing their ongoing commitment and support”, according to The Telegraph.
The letter tells suppliers that its “exceptional” sales performance is due to investment in new stores, refurbishments and its growing online operations.
It added: “By providing this platform for growth, our suppliers have in turn benefited from increased profit levels through efficiencies provided from the increase in volumes.
“It is therefore essential that the collaboration shown to date is continued and that John Lewis and its suppliers share the benefit created from these significant growth opportunities.”
The Forum of Private Business (FPB) called the scheme “outrageous” and accused John Lewis of being a “bully”.
A spokesman for the FPB said: “What a way to treat your suppliers, who are effectively having their pockets picked by John Lewis on the back of strong trading. It’s a win-win for John Lewis all the way.
“This isn’t an either/or situation for suppliers – it’s put up and shut up. This really is a case of John Lewis the bully.”
The rebate scheme ranges from a 0.75% reduction on the value of a suppliers’ annual invoice with John Lewis if their sales grow by between 5% and 9.9%, to a 5.25% rebate if sales grow by more than 50%.
John Lewis confirmed it had written to a “small number of suppliers”, believed to be around 130, to “discuss bringing their commercial agreements in line with the rest of our supply base”.
A John Lewis spokesperson said: “We create partnerships with our suppliers with the intention of mutual growth and sharing the proceeds. The intention at all times is to develop a long-term business with benefits for our partners and a sustainable growth opportunity for our supply base.
“All commercial agreements are confidential and are discussed and debated individually. As ever, a supplier retains the right to discuss all aspects of their commercial agreement with us and whether it is profitable for them to supply us.”
The emergence of the letter follows reports that Debenhams informed some suppliers that it intends to cut prices by 2% and delay payments from 90 days to 120 days.