Inspired by Ragtrader's recent coverage on industry payment terms, a reader writes it's time for suppliers to make a stand.
The most basic problem of payment will continue until the current Australian model is changed.
I work for a fashion house that designs and manufactures most of its products offshore, and is involved in both wholesale and retail. We are struggling on all fronts!
It's starting to become impossible to make any sort of profit when major players (David Jones, Myer, Target etc) expect not only large volume discounts but further discounts just for settlement - mind you, settlement means paying on time.
I have moved away from this model and only provide discounts for early payment. I have tried to push terms to 30 days net and not end of month, but as stated by other readers on this website; retailers are struggling.
The majors are taking advantage of this at every opportunity that arises. I'm exhausted with the number of SOR deals being done just to stay in with some of these majors, only to find at the end of the 8-10 weeks, the stock returned wasn't even placed on the floor!
Directors are making deals promising margins in excess of 65 per cent and sell through of 70 per cent, but when this fails to happen, which is most of the time, the rest of us are left to deal with the pallets of aged stock, credits in the hundreds of thousands, which are neither sustainable or practical.
So what's the answer? Open more of our own retail stores? Well, this could work if we weren't already over flooded with high price point goods of poor quality (China and their factories are another topic altogether).
Open more clearance/outlet stores to offload the millions in excess stock? Try new distributors? Sack your in-house sales team? Go to another bank and beg them for extended terms for ourselves and all the invoices that are factored?
Continue to give majors and tier one customers extended payment terms while smaller retailers either have to prepay or are immediately hounded by collectors because they don't have a "relationship" with senior management or their orders aren't big enough to be noticed?
No, no and no.
This hasn't worked for how many years now? But we still pursue the same tired path. Why? Wholesalers and smaller designers need to dictate their terms. If you lose a major retailer this season, don't panic. If your products are good, they'll be back next season. Or even better, their competitor might just come to your party.
I see so many solutions but until our fashion industry unites and implements terms and policies which we all adhere to, we will remain in this rut and in a few years time, there won't be any small, independent, Australian owned fashion houses or labels left.
Everyone will succumb to a company with more money and more power if we don't start cutting these "majors" and their terms off! You ask us for $200k credit but give us your terms and won't even fill out and sign our credit applications? Come on, why is everyone accepting this? Do we all have so little faith in the beautiful products we make?
Change, remodel, say no to ridiculous terms and start working as a unified body and then maybe we might start to make some headway.
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