As B&Q faces allegations that it demanded contributions from its suppliers, Retail Week asks whether such practices can continue.

B&Q has hit the headlines this morning

An investigation by The Times claims B&Q has demanded suppliers pay into an ‘investment-for-growth’ programme to stay on its books.

The programme was implemented in May and is intended to cut prices across 3,500 products, after B&Q parent company Kingfisher posted a 4% rise to £744m in its group pre-tax profits for the year to February 2014.

Suppliers suggested that failure to partake in its request to contribute to the programme would result in them being removed from the B&Q books. “It was, ‘if you don’t do it, you can’t supply us’”, one supplier told The Times. B&Q has denied this.

It is understood the programme was not compulsory and the number of B&Q suppliers remains roughly the same, although some suppliers have stopped working with B&Q to be replaced by others that were prepared to meet the price cuts.

A B&Q spokesman claims the company is committed to treating suppliers “fairly”.

He says: “Our ‘investment for growth’ programme is an open and transparent scheme where we and suppliers reduce prices for customers in order to drive sales growth. The majority of our suppliers have seen an increase in sales as a result of the scheme.”

Other cases

B&Q isn’t the only retailer to face questions over its ethical treatment of suppliers. Last week it was revealed that House of Fraser was seeking discounts of up to 20% from suppliers. One supplier told Drapers that the terms of the deal were “unbelievable” and would make it “impossible” for them to grow.

Tesco is currently being investigated by the supermarket watchdog for its treatment of suppliers. Groceries Code Adjudicator Christine Tacon has revealed she will be investigating the retailer’s practices over the next nine months, adding that she was suspicious that the retailer had breached the Groceries Supply Code of Practice.

Tesco faces allegations that it delayed payments to suppliers and demanded payments from businesses for better positioning of goods on its shelves.

Both Halfords and Premier Foods, exposed by Newsnight, were forced into the spotlight late last year for apparently squeezing suppliers.

Such schemes are far from unusual but once again they raise questions about unethical practices at big companies. Can retailers continue to pressure suppliers in light of such attention? After heavy criticism from the press, business groups and politicians, Premier Foods was forced to ditch its ‘pay to stay’ scheme, providing welcome relief to its many suppliers.

Impetus for change

A spokesman for the Forum of Private Business is optimistic that such negative media attention could lead to internal change for big businesses. “They’ll be more aware that they’re being judged on their ethical behaviour. With so much public attention, companies will become more mindful. Companies don’t want to be part of that, it’s unwanted attention.”

A spokesman from the Federation of Small Businesses (FSB) says the practices, which also include late payments, “can’t continue as they are”, adding that they are “unacceptable”.

“I’d like to say they will be changed, there needs to be an attitude change. Hopefully there will be wider change at companies as they might find themselves receiving negative press.”

John Allan, national FSB chairman, says today’s allegations “reinforces our call for an independent inquiry to look at the full range of supply chain abuse currently embedded in the UK’s payment culture”. He adds: “The inquiry should report back to the next government with recommendations that can be taken up in the early part of the next Parliament.”

Similarly Phil Orford, chief executive of the Forum of Private Business, believes there needs to be action from the Government.

“Big companies behaving badly is nothing new,” he says. “The Forum of Private Business has been naming and shaming the guilty for over a decade. To end this culture of supplier abuse, we need affirmative action from the next government, with business ethics at the top of the political agenda. Failure to do so could break the backbone of the British economy – small businesses.”

Maureen Hinton, Conlumino’s global research director, is optimistic that companies will commit to treat small businesses more fairly.

“This widespread practice of making demands on suppliers to support retailers’ trading has gained a lot of media attention in recent months, making not only the public more aware of the ways companies treat their suppliers but also catching the eye of other stakeholders as well. This level of exposure - and the potential for brand damage - will make retailers reassess their own practices leading to a more transparent and fairer way of working together.”

Supplier view

But Gifi Fields, the owner of clothing supplier Coppernob, is not so hopeful and dismisses any prospect of change in the long-held practices of many big retailers.

“Their attitude is ‘we are your customer and as your customer you do what we want’ and if not, we’ll take the business elsewhere’.” What’s happened is that the distribution class has all the power and the marching class has no power left; those producers and manufacturers don’t have the power they had 100 years ago because distribution has become consolidated, with fewer and fewer retailers around.”

To clearly illustrate the position of power retailers have, Fields relays a conversation he had a few years back with one chief executive of a multiple fashion chain who was demanding more from his suppliers.

The chief executive told Fields: “If you want to eat off my table, you have to eat off my menu.” In typical Fields fashion, the outspoken supplier replied: “But what if I get food poisoning?” The chief executive’s response: “Too bad Gifi.”