Ashwin Prasad Parsmedia_GV_Ashwin_Prasad_18092020-050

Tesco has tried to calm the storm over its fulfilment fees proposals, with chief product officer Ashwin Prasad understood to have apologised for elements of its handling of the bombshell demand at a webinar this week.

However, Tesco has not withdrawn its plans and new details emerged suggesting the cost to branded suppliers could be even higher than originally outlined.

The letter from Prasad to suppliers earlier this month revealed plans to bring in fees for suppliers using its online operations and Booker wholesale arm, with Tesco saying it shoulders an unfair share of costs.

Information on its supplier portal led suppliers to believe the fees would come in as early as 13 March although Tesco later backtracked.

Suppliers told The Grocer Prasad blamed the demand on a technical error with its systems, but is not believed to have directly addressed a threat in the letter that suppliers could face range reviews if they failed to sign up.

“It was a very scripted message,” said one supplier on the webinar.

“But there was no attempt to pivot away.

“Tesco is still making the argument that online is growing, it’s expensive and that suppliers need to come on board to pay more of the cost.”

Previously it emerged Tesco wanted to bill branded suppliers 12p per unit and own label suppliers 5p.

But Prasad is understood to have stressed fees for branded suppliers would “start” at 12p.

“The fact is if you’re a brand selling products with a high unit cost you may not consider a 12p fee too onerous, but for people selling products at £1 per unit or less this could effectively wipe out profits,” said a source.

Prasad “reinforced it was a voluntary scheme and there were no consequences” said the source, adding it was a “very important distinction”.

“They now need to stand by that because the original letter threatened to downsize people’s businesses.

“Suppliers also have to reject this as in Holborn, Leeds and Bradford - they will be watching.”

Sentinel Management Consultants CEO David Sables said it was “a Liz Truss-style apology” from Tesco. “The climbdown is very evident, They are stressing this is entirely voluntary and that there is no deadline, but the request is still there.

“They are reintroducing that complexity of back margin into the business [in a way that] reverses the work under Dave Lewis that was universally hailed as a force for good.”

Ged Futter, founder of The Retail Mind added: “If Tesco is backtracking then I would like to know what is happening to any suppliers who signed up after that first letter. I assume Tesco will be giving them their money back.”