Ahead of the pandemic, supermarkets were taking 42 days on average to pay their suppliers, The Grocer has revealed. But how do they compare with each other and what changes have they made through Covid-19? We collected the data and spoke to them to find out.
Most supermarkets have reduced their average time to pay compared to last year, the data shows, with the exception of Ocado. It took 32 days to pay suppliers between 2 December 2019 to 1 June 2020, compared to 29 days in the corresponding period last year.
M&S took the shortest time to pay its suppliers on average, at 31 days, the data shows. Sainsbury’s took the longest to pay at 51 days on average.
On average, supermarkets paid at least 95% of their invoices within their agreed terms. However, that figure was lower for Aldi (94%), Lidl (94%) and Ocado (91%). That’s still a big improvement for Ocado, which paid just 9% of invoices late between 2 December 2019 to 1 June 2020, versus 24% during the corresponding period last year.
What the retailers say about their payment terms
Since the outbreak of coronavirus, some supermarkets have shifted to instant payment for small suppliers to help ease the burden of the pandemic. Here’s what they had to say about those changes, as well as their payment terms in general.
Aldi: “We pride ourselves on our supplier relationships, evidenced by being the top retailer in the Grocery Code Adjudicator’s GSCOP survey for the past seven years. We have always focused on long-term partnerships and, in light of Covid-19, we have increased the support given to our small suppliers by paying those with a turnover of less than £1m immediately. This is already benefiting more than 1,000 businesses and we have recently extended this until September.”
Iceland: “We pay most of our suppliers in much less than 50 days. Iceland’s average is skewed by the fact we uniquely over-index in purchases of frozen food, for which payment terms naturally tend to be longer since product is bought in bulk and may take as long as three to four months before it reaches our stores and begins to generate sales. We believe that our payment terms for fresh and chilled food are comparable with those of other supermarkets.
“We moved some 500 additional small suppliers (defined as those invoicing £20k or less per annum) onto 14-day payment terms in 2018. At that time, we already had over 1,000 suppliers on terms of 14 days or less, so in total over 1,500 suppliers, accounting for nearly half of our total supplier base, are on such terms. All suppliers are able to secure accelerated payment through our supplier portal. We also rank highly against other supermarkets for the fulfilment of agreed payment terms with our suppliers.”
M&S: “At M&S, we’re proud of our longstanding and trusted relationships with the suppliers – it is thanks to these relationships that our customers can be confident that the food they buy from M&S is always responsibly sourced and at trusted everyday value. We’ve always offered short payment terms – the majority of our food suppliers are on 19 days.
“We also launched our supplier financing programme in 2011, which enables our suppliers to receive funds early by requesting them from our banking partners. This programme would typically incur a banking interest charge, however, in the face of the Covid-19 crisis, we wanted to do our bit to support our suppliers during one of the most challenging times in the food sector. We therefore offered to cover these costs on behalf of our suppliers for three months from March so more of our smaller suppliers could access the scheme. As with any large retailer there is sometimes payment discrepancies that result in short delays, but in order to minimise this, we have a dedicated team who resolve issues quickly.”
Morrisons: “This year we are making a big effort to pay small suppliers immediately and we have widened our classification of what a small supplier is (up from £100,000 of turnover with us to £1m). We have been working hard to consistently pay suppliers on time for some years.”
Ocado: ”Our suppliers play a key part in our ability to deliver excellent customer service and high quality products direct to the homes of our customers. We work hard to support all of our suppliers. This includes making ongoing efficiencies in our payment systems to ensure that we continue to pay more invoices faster.”
Waitrose: “We greatly value our supplier relationships and are proud members of the Prompt Payment Code. Through Covid we have provided even quicker payments to our smallest and most vulnerable suppliers – paying within an industry-leading seven days.”
Sainsbury’s: “We temporarily introduced immediate payment terms to nearly 1,500 of our small suppliers in March to support them as they adapted their businesses in response to the coronavirus pandemic. We also pledged support to all our suppliers and committed to working collaboratively with them to support them with vital cash flow where needed. We are in the process of talking to our smaller suppliers about permanently shortening payment terms from what they were before the crisis to a faster payment of 14 days from the invoice date.”
Tesco: Tesco did not comment. However, it shortened payment terms for its smaller suppliers in March from 14 days to five days for three months. The supermarket has recently extended this to 16 August on the same terms.