We have picked through the OFT’s report into its supermarkets code of practice to bring you a chain-by-chain guide to how they perform in six key trading areas
Tucked away within the 136 pages of the OFT’s report into the supermarkets code of practice are some fascinating insights into the way some of Britain’s top retailers go about their business. But, as we reported last week, the OFT says that, by and large, retailers are complying with the code with just two breaches discovered.
The OFT’s report is based on an audit of 500 grocery supplier relationships conducted by accountants PKF who were asked to look at six aspects of the code where claims of breaches are most frequent. On the right, we publish extracts from PKF’s report as it relates to each of the four chains and their performance in these six areas. As you can read, the audit reveals big differences between the way retailers conduct business.
So what does it tell us? For starters, the report says suppliers are usually subject to both standard terms and particular terms that are recorded in various places such as trading arrangements, correspondence and promotional agreements. Although the latter information is available, the OFT is surprised that suppliers don’t bother asking for it. “Such details would clearly be helpful to suppliers in the event of a dispute and we would expect them to be provided on request,” it says. However, this lack of interest may stem from the fact that these terms have been in place for years - reflecting, says PKF, the long-term relationships retailers have with suppliers.
Another insight: payment terms vary widely between categories - from 30 days to 50 days on average - but retailers have a good track record with 88% of invoices paid on time.
Discount clauses of one form or another appear in just under half the longer-term agreements with suppliers - although only 14% of small suppliers were affected, while two-thirds of big suppliers are covered by some form of overrider, volume rebate or promotional agreement. When it came to marketing costs, PKF found that no suppliers were invoiced for buyer visits or the opening or refurbishment of a store. Most of the payments here related to artwork, packaging design and consumer research, which were mainly picked up by larger own-label suppliers.
When it came to requesting lump sum payments, PKF found breaches to the code relating to Safeway’s request for loyalty payments from 44 suppliers and two similar requests from Sainsbury. The accountants came across a further 390 requests for lump sum payments covering everything from promotions to transportation costs. But PKF could find no evidence of suppliers complaining about any of these requests.
So has the report given retailers a clean bill of health? Well, PKF also looked at dispute resolution. It spotted just eight disputes during its audit - all of which were being resolved using the retailers’ internal dispute procedures rather than the code. This, combined with the fairly positive audit results, would suggest relationships are robust but healthy. Unless, the OFT says, suppliers now come forward with evidence to the contrary.
Tucked away within the 136 pages of the OFT’s report into the supermarkets code of practice are some fascinating insights into the way some of Britain’s top retailers go about their business. But, as we reported last week, the OFT says that, by and large, retailers are complying with the code with just two breaches discovered.
The OFT’s report is based on an audit of 500 grocery supplier relationships conducted by accountants PKF who were asked to look at six aspects of the code where claims of breaches are most frequent. On the right, we publish extracts from PKF’s report as it relates to each of the four chains and their performance in these six areas. As you can read, the audit reveals big differences between the way retailers conduct business.
So what does it tell us? For starters, the report says suppliers are usually subject to both standard terms and particular terms that are recorded in various places such as trading arrangements, correspondence and promotional agreements. Although the latter information is available, the OFT is surprised that suppliers don’t bother asking for it. “Such details would clearly be helpful to suppliers in the event of a dispute and we would expect them to be provided on request,” it says. However, this lack of interest may stem from the fact that these terms have been in place for years - reflecting, says PKF, the long-term relationships retailers have with suppliers.
Another insight: payment terms vary widely between categories - from 30 days to 50 days on average - but retailers have a good track record with 88% of invoices paid on time.
Discount clauses of one form or another appear in just under half the longer-term agreements with suppliers - although only 14% of small suppliers were affected, while two-thirds of big suppliers are covered by some form of overrider, volume rebate or promotional agreement. When it came to marketing costs, PKF found that no suppliers were invoiced for buyer visits or the opening or refurbishment of a store. Most of the payments here related to artwork, packaging design and consumer research, which were mainly picked up by larger own-label suppliers.
When it came to requesting lump sum payments, PKF found breaches to the code relating to Safeway’s request for loyalty payments from 44 suppliers and two similar requests from Sainsbury. The accountants came across a further 390 requests for lump sum payments covering everything from promotions to transportation costs. But PKF could find no evidence of suppliers complaining about any of these requests.
So has the report given retailers a clean bill of health? Well, PKF also looked at dispute resolution. It spotted just eight disputes during its audit - all of which were being resolved using the retailers’ internal dispute procedures rather than the code. This, combined with the fairly positive audit results, would suggest relationships are robust but healthy. Unless, the OFT says, suppliers now come forward with evidence to the contrary.
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