Much as I love David Jones, I can’t help but be disappointed by reports I get from suppliers when it comes to trading terms. Once, universally accepted settlement discounts were either 2.5 per cent for payment in 30 days or 3.75 per cent for seven days.
David Jones now wants a 3.25 discount for payment in 90 days and if you want your money in seven days you get hit for six per cent discount. Between the two ends, the settlement menu has another four variants.
There’s more. Just for the privilege of doing business with David Jones, you have to allow a discount of 12 per cent, called “COMD”. And just as you get up off the floor you get walloped for another five per cent, charged at six-monthly intervals, bearing in mind that this is five per cent of your original invoice, not five per cent of the money you’re due after the other discounts. A supplier taking the 60-day settlement option of four per cent discount, will therefore receive less than 80 per cent of the original invoice.
David Jones’ finance department apparently has special people allocated to policing these rebates and discounts – and they more than pay for themselves. The buyers are instructed to play hard-ball with suppliers to see that the discounts and rebates are built into contracts.
One buyer, so the story goes, when confronted by a bitter complaint over DJ’s Uncle Scrooge syndrome, suggested that the supplier simply put up her price so that all the numbers would work nicely. But that runs against recommended retail prices and also throws out David Jones’ competitive position when compared to other retailers with the same product. Answer: gouge the supplier.
Of course, suppliers don’t have to trade with David Jones if they don’t want to – and some of them have, in fact, jumped ship and gone to Myer where the deal is said to be better.
I have sympathy for David Jones in a toughening retail market. Making a profit is damn hard but there has to be a better way to that goal than grinding suppliers.
David Jones and Myer could also follow the lead of many of their competitors and expand house brands. That was all the rage a couple of years ago until both stores realised that they didn’t have the skills. More importantly, there was nobody to squeeze except Chinese factories, many of which these days would rather not bother with Australia’s business anyway.
Online hots up
The three-cornered purchasing/online punch up between the government, Australian retailers and the consumer is moving forward. The big retailers, having beaten their chests in Canberra without resulting in a kind word from Julia, have retreated to their bunkers to mastermind their next assault.
In the true spirit of ‘if we can’t beat em, join em’, you can expect the major stores to extend their online shopping to offer their customers a choice of buying goods directly from their Australian stores or having them sent from their overseas warehouses (probably in Hong Kong) at a considerably lower price.
I understand that Myer plans to open its online overseas store any day now. There will be some sticky decisions to be made by the likes of Myer and other online-enhanced stores that handle branded merchandise, especially in the higher end. Will they accept the resulting lower turnover of the bricks and mortar Australian stores because it will be offset by the overseas online store with its much lower overhead? Or will they cut down the number of physical stores and place them on ant tracks where the most number of people will be able to access them to look, try on and order via the online offer?
By definition, department stores have departments, not all of which can supply goods from an overseas warehouse.
I wouldn’t fancy a fresh turkey or a kilo of chops arriving from Hong Kong after a week or two of travel. But fresh products aside, you can buy a huge range of goods in $999 lots from overseas warehouses. Somebody suggested that eager buyers are already receiving furniture parts from overseas and assembling them here. Then there are electrical goods and hardware. The list is endless and all tax free.
If the government does not heed the retailers’ protests and the retailers fight back by playing the overseas online game themselves, the cost to the nation could be colossal. The government coffers would not only miss out on a huge amount of GST and duty, but the profit on customs charges (plus GST), tax on retail profits, payroll tax and every other goddamn tax you can think of.
I have no beef with returning travellers bringing in their $1000 worth of GST- and duty-free goods, but why extend this to everybody who can work a computer?