Marks & Spencer is ratcheting up the pressure on suppliers by putting contracts under review and going after price cuts in a bid to boost margins, The Grocer has learned.
The retailer, which reported its second successive fall in full-year profits this week, is in the process of ranking food and drink suppliers under four headings: strategic, core, nurture and review. Those in the latter group could face the chop.
At its annual supplier conference last week, M&S said it would work with ‘review’ suppliers to try and address their issues and get them into growth and, if that failed, “manage their exit”.
By contrast, those in the top ‘strategic’ group, classified as strong innovators, would be given access to special M&S financing programmes.
Suppliers will be told their rankings over the next three months.
M&S also said it would be looking for contributions from suppliers in order to to achieve a 2% reduction in cost of goods.
After reporting a 14% drop in pre-tax profit to £564.3m, M&S told investors it was looking to improve availability by 1% this financial year and achieve a “step up in margin improvement” over the next three years.
It insisted the latest review was nothing unusual. “We regularly review our supply base to ensure we have the right mix of suppliers providing the very best M&S products for our customers,” said an M&S spokeswoman. “As part of this we will continue to build on our long-term supplier partnerships.”
Although the new approach may spell bad news for struggling suppliers, other suppliers felt there was “a sense of partnership and collaboration” in the way M&S was looking to tackle its fragmented supplier base and improve efficiency.
“It is the behaviour of a retailer that is getting to a better place,” said one.
No comments yet