Large Retailers Pay Later and Later, Suppliers Worry
22 February 2008
Read by 1708 persons
Payment delays range from 120 to 180 days, according to suppliers. Distributors report only 60 days. Small businesses are the first to suffer from this phenomenon.
"We don't negotiate against someone but with them." This advice, omnipresent in modern management advocating a "win/win" business relationship, sometimes sounds like a fairy tale when you ask suppliers to large retailers.
The latter are worried. Several of them contacted by La Vie éco, and speaking anonymously - for fear of reprisals - are concerned that payment deadlines are getting longer and, in the current climate, are increasing significantly for some producers doing business with large retailers.
According to some of them, the peaks range from 120 to 180 days after delivery. "As soon as a payment delay occurs, it becomes established and habitual. Producers, having no other alternatives, due to the volumes sold, than to comply with the dictates of modern distribution," analyzes an observer. However, some chains dispute the figures announced and put forward an average of 60 days...
Fresh produce suppliers are better treated
For Riad Laïssaoui, DGA of the supermarket chain Label'Vie, the length of payment deadlines is a "global trend", with variations, however. They are getting longer in countries like the United States, while they are shortening in the European Union due to government intervention.
"The General Confederation of Moroccan Enterprises (CGEM) had proposed a law similar to what is done in France," explains Hamad Kessal, vice-president of this employers' organization. The project provided for limiting payment deadlines to 30 days and a penalty system to compensate for the bank interest borne by suppliers. This bill did not go ahead.
The intransigence of large retail chain buyers is proverbial, and this is not only the case in Morocco. "We end up telling ourselves that to work with modern distribution, we must limit ourselves to selling essential products," explains a disillusioned industrialist.
"Unless you have a 70% margin on the selling price," adds another. Indeed, according to Faouzi Chaâbi, manager of the eponymous group that owns the Aswak Assalam chain, essential products are paid for even before their effective delivery.
However, not all companies, depending on their size or the nature of the products they market, are in the same boat. Indeed, those operating in essential products (tea, sugar, oil) and alcohol producers, for example, do not experience significant delays, at least for the moment. It is true that their negotiating power as a multinational or economic players in an oligopoly is hardly comparable to that of smaller companies.
Similarly, "payment deadlines for fresh produce tend to shorten, unlike industrial products," notes Mr. Laïssaoui. This observation is confirmed by Mr. Chaâbi. Thus, a farmer would be paid on average 30 days after delivery, while a food industry manufacturer would be paid after 60 or even 90 days, end of month! "Or 120 days after delivery," explains Mr. Kessal, who also happens to be the head of an SME producing agri-food products. These are, in any case, the deadlines displayed by the brands.
However, Mr. Chaâbi tempers these comments by explaining that the more a product is everyday consumption and has a good quality/price ratio, the more suppliers are able to negotiate a reduction in deadlines, due to market effects.
He does not fail, however, to recall that "the principle of large-scale distribution is to sell the product in stock before paying its supplier." All this is very well, but many business leaders are adamant: deadlines have been extended by an average of 3 months for customers who receive cash.
Posted online July 14, 2008
lavieeco.com
"We don't negotiate against someone but with them." This advice, omnipresent in modern management advocating a "win/win" business relationship, sometimes sounds like a fairy tale when you ask suppliers to large retailers.
The latter are worried. Several of them contacted by La Vie éco, and speaking anonymously - for fear of reprisals - are concerned that payment deadlines are getting longer and, in the current climate, are increasing significantly for some producers doing business with large retailers.
According to some of them, the peaks range from 120 to 180 days after delivery. "As soon as a payment delay occurs, it becomes established and habitual. Producers, having no other alternatives, due to the volumes sold, than to comply with the dictates of modern distribution," analyzes an observer. However, some chains dispute the figures announced and put forward an average of 60 days...
Fresh produce suppliers are better treated
For Riad Laïssaoui, DGA of the supermarket chain Label'Vie, the length of payment deadlines is a "global trend", with variations, however. They are getting longer in countries like the United States, while they are shortening in the European Union due to government intervention.
"The General Confederation of Moroccan Enterprises (CGEM) had proposed a law similar to what is done in France," explains Hamad Kessal, vice-president of this employers' organization. The project provided for limiting payment deadlines to 30 days and a penalty system to compensate for the bank interest borne by suppliers. This bill did not go ahead.
The intransigence of large retail chain buyers is proverbial, and this is not only the case in Morocco. "We end up telling ourselves that to work with modern distribution, we must limit ourselves to selling essential products," explains a disillusioned industrialist.
"Unless you have a 70% margin on the selling price," adds another. Indeed, according to Faouzi Chaâbi, manager of the eponymous group that owns the Aswak Assalam chain, essential products are paid for even before their effective delivery.
However, not all companies, depending on their size or the nature of the products they market, are in the same boat. Indeed, those operating in essential products (tea, sugar, oil) and alcohol producers, for example, do not experience significant delays, at least for the moment. It is true that their negotiating power as a multinational or economic players in an oligopoly is hardly comparable to that of smaller companies.
Similarly, "payment deadlines for fresh produce tend to shorten, unlike industrial products," notes Mr. Laïssaoui. This observation is confirmed by Mr. Chaâbi. Thus, a farmer would be paid on average 30 days after delivery, while a food industry manufacturer would be paid after 60 or even 90 days, end of month! "Or 120 days after delivery," explains Mr. Kessal, who also happens to be the head of an SME producing agri-food products. These are, in any case, the deadlines displayed by the brands.
However, Mr. Chaâbi tempers these comments by explaining that the more a product is everyday consumption and has a good quality/price ratio, the more suppliers are able to negotiate a reduction in deadlines, due to market effects.
He does not fail, however, to recall that "the principle of large-scale distribution is to sell the product in stock before paying its supplier." All this is very well, but many business leaders are adamant: deadlines have been extended by an average of 3 months for customers who receive cash.
Posted online July 14, 2008
lavieeco.com
