In an issue-packed day where most delegates had cause to re-set their business priorities, and test the limits of their networking skills in a pool of 650+ potential contacts, the IGD’s Big Debate presented a fundamental opportunity to update suppliers’ UK market context with the help of speakers that were prepared to face up to market realities and indicate their ways forward….
Nothing beats hearing it live, but a good second best (apart from a lost networking opportunity) can be achieved via a combination of the IGD’s Events App and reports from a packed press gallery.
Although spoilt for issue-choice, for me a pivotal item was Dave Lewis announcement of Tesco’s new trading terms.
Full details here, but essentially, Tesco has pledged to deliver a simpler and “fairer” business model for suppliers, by standardising their payment terms and settling bills from small and medium-sized firms quicker.
When you consider that Tesco’s average days credit period is 42 days, which at say 5% cost of money and trade creditors of £5,076m (end Feb 2015), is worth £253m per annum, you will appreciate the pain this represents, given this morning’s announcement of a 55% fall in profits to £354m.
Whilst the new terms represent a major step towards fair-share dealings for Tesco – and a pointer for other retailers? - this is hopefully but the first move in acknowledging that trade credit should not be regarded as a source of working capital, but merely a way of covering a cash-flow gap between supply of a product and receipt of cash from a shopper.
If that is the case, then Tesco need to budget for an eventual move to approximately 5 days average trade credit…
If this initiative catches the imagination of the public and thereby contributes to Tesco’s recovery, then other retailers will have to follow suit, or suffer loss of share…
However, whilst this will undoubtedly help suppliers, the real consequence will be the public-opinion spotlight then turning on major suppliers’ use of up to 90 days free credit from their ingredients, packaging and services suppliers…
Time for all suppliers to anticipate the obvious and begin their profit re-sets now?
Nothing beats hearing it live, but a good second best (apart from a lost networking opportunity) can be achieved via a combination of the IGD’s Events App and reports from a packed press gallery.
Although spoilt for issue-choice, for me a pivotal item was Dave Lewis announcement of Tesco’s new trading terms.
Full details here, but essentially, Tesco has pledged to deliver a simpler and “fairer” business model for suppliers, by standardising their payment terms and settling bills from small and medium-sized firms quicker.
When you consider that Tesco’s average days credit period is 42 days, which at say 5% cost of money and trade creditors of £5,076m (end Feb 2015), is worth £253m per annum, you will appreciate the pain this represents, given this morning’s announcement of a 55% fall in profits to £354m.
Whilst the new terms represent a major step towards fair-share dealings for Tesco – and a pointer for other retailers? - this is hopefully but the first move in acknowledging that trade credit should not be regarded as a source of working capital, but merely a way of covering a cash-flow gap between supply of a product and receipt of cash from a shopper.
If that is the case, then Tesco need to budget for an eventual move to approximately 5 days average trade credit…
If this initiative catches the imagination of the public and thereby contributes to Tesco’s recovery, then other retailers will have to follow suit, or suffer loss of share…
However, whilst this will undoubtedly help suppliers, the real consequence will be the public-opinion spotlight then turning on major suppliers’ use of up to 90 days free credit from their ingredients, packaging and services suppliers…
Time for all suppliers to anticipate the obvious and begin their profit re-sets now?
