Poundland has demanded a 2% discount from suppliers backdated almost a year in a move branded “straight bully boy tactics”.
In a letter to overseas suppliers dated 26 July, Poundland head of trading Tim Bettley explained the company was outperforming the market before demanding a 2% rebate backdated to 1 October 2018.
The letter, seen by The Grocer, also demanded an ongoing 2% discount, payable in quarterly rebates. The first payment, covering the backdated period, was demanded by 9 August.
Bettley’s letter pointed to Poundland’s fixed price points and resulting inability to manage ‘margin through price increases’ as the need for the demand.
The variety discounter was ‘going from strength to strength as we enter the final quarter of [our] third successive year of positive like for like sales growth,’ the letter said. ‘We appreciate your partnership in helping us deliver that performance, thank you.’
But it went on to point out: ‘As you know’, Poundland ‘sells products at a limited range of price points. Our customers appreciate the simplicity this brings.’
As a result, price changes were ‘not open to Poundland’.
‘That’s why we would like, as a matter of importance, to discuss how we share the benefits of the volume growth that we’re currently providing, to properly reflect a business model that’s different to most other retailers,’ said the letter.
’We are therefore proposing a 2% rebate on all cost of goods sold into us from 1 October 2018 until end of July, payable by 9 August.
’We also propose an equivalent 2% rebate on all cost of goods ongoing, payable end of September 2019 and quarterly thereafter (December 2019, March 2020, June 2020) etc via a cash transfer to cover the balance of this financial year and on-going.
‘We will be in touch this week to discuss the details and we look forward to strengthening our partnership in the years ahead as we continue to we continue to deliver growth for our respective businesses.’
Despite the promise of discussion, Poundland buyers had refused to do so, according to The Grocer’s source.
Another supplier source said: “With the further weakening of the pound, and the burden of an offer with a ceiling price on a large percentage of its merchandise, it is not a surprise that Poundland is feeling pressure.
“But what they are doing is either an act of desperation or straight bully boy tactics, which are not acceptable and likely not to be effective in the longer term.”
A Poundland spokesman said the 2% discount was a “proposal, not a unilateral demand”.
He said the letter was sent to suppliers in the Far East via its general merchandise sourcing operation Pepkor Global Sourcing.
“As it makes clear, we’re performing well, and GM suppliers are seeing the benefit of that and unlike other retailers, as a simple price point retailer, we’re unable to increase prices.
“Of course we’re open to discussions with suppliers, and relationships with them are important, but we’re also agents of our customers in those discussions who demand amazing value from us.
“We can only do that if we share the benefits of our current robust performance,” he added.
Poundland introduced fixed price points of £2 and £5, in addition to the historic £1, in March 2017, and has since resisted adding more despite pressure on sterling. Only its in-store Pep&Co clothing outlets have higher price points.