Firstly, the Mean: Retailing is tough and everyone is toughening-up – even the John Lewis Partnership, much-admired owners of Waitrose. One of JLP’s suppliers has released an advice note confirming the new JLP ‘growth rebate scheme’ under which suppliers are required to give a rebate of up to 5.25pc of the value of their annual contract. This came soon after JLP reported a 16pc increase in pre-tax profits to £410m and Debenhams informed some suppliers it was cutting supply prices by 2pc and delaying payments from 90 to 120 days.
You don’t get to be a big retailer without being tough so most supply contracts already discount invoices for early settlement and impose a marketing levy on suppliers. The ‘growth rebate scheme’ could be seen as another unwelcome turn of the screw but JLP justified it with:
‘Our suppliers have…benefitted from increased profits levels through efficiencies provided from the increase in volumes…thanks to investment in new stores, refurbishments and growing online sales. 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’.
The Forum of Private Business thought otherwise and branded JLP a bully and the scheme as outrageous. The FPB spokesman said: ‘What a way to treat your suppliers who are effectively having their pockets picked on the back of strong trading’. The supplier has understandably opted to remain anonymous but said:
‘JLP has changed out of all recognition. It used to be the most supplier-friendly Company and highly ethical, in fact I would say the best. For any small Company to secure a contract with them is a fantastic opportunity and I have no doubt every supplier offers their very best price to JLP from the outset. Even though individually the staff are excellent the corporate culture now demands the staff extract every penny they can from their suppliers’.
Chasing overdue payments has pushed some Market businesses over the edge.
I’m sorry, but I’m not surprised. Things are getting tougher and the ‘kipper season’ is worse than ever for suppliers. First quarter cashflow has definitely got tougher over the last few years and the interminable round of chasing overdue payments has pushed some Market businesses over the edge. One Stallholder I know has accepted the inevitable and now takes a well-earned ‘buying holiday’ instead. He closes down in late January and flies out to the Far East with his family to visit his suppliers. He spends a couple of few weeks traipsing around factories in China and Vietnam whilst the wife and kids lie around the swimming pool at the Hilton, then with a three-month advantage on offering new product lines he returns to the UK refreshed and ready for action. And the best bit of it is the costs are tax-deductible as buying trips. A clever bloke and one who doubtless puts the screws on his suppliers whilst he’s out there. What goes around, comes around.
It costs Thames Water about £1 million/month to remove congealed fat and grease from their sewer system.
Now for the Green: Thames Water and Utility Company 20C have announced a deal to fuel a power plant in East London with solidified grease – ‘Fatbergs’ – excavated from London’s amazing Victorian sewer system. At present it costs Thames Water about £1 million/month to remove congealed fat and grease from their sewer system before sending them to landfill. Using them to fuel a power plant instead is a neat, green alternative.
Thames Water have agreed to buy back half the electricity generated to power Beckton sewage works and a desalination plant which creates fresh water for Londoners. When the desalination plant was originally proposed it was criticised for being too energy-intensive and former Mayor of London, Ken Livingstone suggested the money would be better spent mending leakages in distribution pipes than pumping more CO2 into the atmosphere. Good point Ken and one that prompted a rethink. The operators then proposed the plant would be fuelled entirely from renewable energy – fatbergs, waste cooking oil and animal tallow collected from London Restaurants (and Smithfield Market?)
OK, a power station fuelled by fatbergs is never going to be as cheap to run as one fuelled by natural gas but the accountants had read the Renewables Obligation Order 2002 which credits users of renewable fuel with Renewable Obligation Certificates. These can then be sold onto other UK electricity suppliers to offset their obligations to generate 20% of their electricity from renewable sources, or in effect pay a fine. That makes the figures work.
Now what’s this got to do with Markets? Well, a sophisticated industry has built up around managing energy costs and designing for energy efficiency. When refurbishing a Victorian Market Hall the Architect spends a lot of time worrying about roofs and drains. Out of sight means out of mind so the capital budget is often swallowed-up by 100 years of slinging anything down the drains. Precious little cash may be left to refurbish the stalls and install energy-efficient heating and lighting. Thanks to the Renewables Obligations Order and Feed-in tariffs those odd-looking photovoltaic panels and wind turbines on the roof are feeding electricity back into the grid which reduces your service charge. You can help as well by putting your waste cooking oil into the designated container, not down the drain and separating your cardboard for the manager to sell on at £50/ton.
Rising energy costs are here to stay and the days of smelly compactor bins leaking onto service yards will soon be in the past. Unfortunately, supplier discounts won’t be.