Overcharging by Safeway and other retail sins - The Packer

Overcharging by Safeway and other retail sins

12/30/2012 02:13:00 PM
Tom Karst

For those who are unaware, this is how this disastrous payment system - that has to be stopped at all costs - works.  

The supplier delivers the goods to the supermarket that in turn sells the goods and fills up its tills. The supermarket though does not pay the supplier for those goods but instead demands, and gets, further deliveries that also remain unpaid. In the credit period, which can last three to 18 months, the supermarket can receive takings of several million euros. The length of the credit period depends on the ‘strength’ of the brand and how reliant the supermarket is on a specific brand. The supermarket receives all these products without having to place any kind of security/guarantee and furthermore it is the supplier who will pay the interest arising out of the payment delay. This usually erodes the profit.

The negotiating power of these big supermarkets has increased tremendously over the years as they attract the large majority of the consumers, thus enabling them to impose their own terms on their suppliers however harsh they may be. They secure prices that leave little or no margin, rent out their shelf space at exorbitant prices and make their suppliers responsible not only for the replenishment of the shelves but also for their cleanliness and general upkeep. However their biggest ‘achievement’ is this credit period that ranges from three to 18 months and which is both interest- and security-free.

Ouch. I would hate to be a supplier who extended 18-month credit terms to a bankrupt Cyprus supermarket. So as retail sins go, perhaps Safeway's apparent overcharging of consumers isn't quite as grave.

But for Safeway, the company's perceived  lack of progress in delivering correct prices creates ex-customers and could lead to a healthy skepticism from its own fresh produce suppliers.



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