Online giant Amazon’s already rock bottom performance in the Groceries Code league table has got even worse, with fewer than half of suppliers saying it complies with the code.
Adjudicator Mark White has warned unless Amazon can urgently respond to the concerns, he will launch an investigation. The adjudicator has powers to fine a retailer up to 1% of its annual turnover if it finds the retailer has breached the code.
The shocking result, in Amazon’s third year under GCA jurisdiction, came after White declared last year there was “no excuse“ for its performance, when less than 60% of suppliers said it consistently or mostly stuck to the code.
This year the score was just 47%, with only 17% of suppliers saying the company consistently stuck to the rules.
Amazon was added to the list of retailers policed by the adjudicator in March 2022. Since then, White has repeatedly called for suppliers to come forward with evidence of potential breaches, with a series of incidents reported by The Grocer.
In December, it was accused of “driving a coach and horses through GSCOP” after writing to suppliers warning they faced being delisted unless they paid large lump sums to help prop up profitability of sales.
The Grocer received evidence of demands for one-off payments, as well as large cost price reductions to UK companies, from an office based in India called a ‘retail success team’.
Amazon said the demands had been a mistake and they were withdrawn. In January it provided a new 30-day guarantee to stop suppliers being hit with controversial automatic deductions over delivery issues.
But despite a series of such moves to tackle its supplier issues, it has been the subject of a flood of complaints over its behaviour.
Must take action
The GCA has now told Amazon it must take swift and comprehensive action to demonstrably comply with the code. White added he was monitoring the changes Amazon was making and their impact on suppliers to determine whether they were sufficient.
“The survey shows clearly that many suppliers do not believe that Amazon is complying with the code,” he said.
“Amazon must ensure suppliers understand the changes it has made since its designation and in response to these survey results, and make any further changes that are needed to ensure code compliance.
“I will not hesitate to launch a formal investigation if appropriate and necessary to ensure Amazon is treating its suppliers fairly and lawfully.”
Amazon’s rolling into GSCOP was seen as a major development in the history of the code, with the company previously being able to operate under different rules on engagement to the likes of Tesco, Aldi and Sainsbury’s.
Its algorithm driven delisting process and controversial system used to deduct money and delist suppliers, known as CRAP (can’t realise a profit), has coincided with steady improvement in behaviour from other supermarkets when it comes to treatment of suppliers.
Amazon has enjoyed staggering sales growth in the UK over the past decade, taking net sales from roughly $4bn to almost $33.6bn in 2023.
An Amazon spokesman said: “We are very disappointed by these results and we are committed to improving them.
“Amazon takes the Groceries Code extremely seriously and we have introduced robust compliance procedures for our suppliers.
“We have made a series of improvements to our grocery supplier experience since last year’s results, with clearer explanations for cost price increase decisions, minimum periods for delisting, and the launch of a major upgrade for handling invoice disputes.
“We will be making further changes, with faster timeframes to resolve more types of financial disputes, as well as strengthened account management support for smaller suppliers.
“There is still more to do. We are committed to working with the Groceries Code Adjudicator, building long-term sustainable relationships with our suppliers, and continuing to create opportunities for suppliers of all sizes to reach millions of customers in the UK and around the world.”
Investigation
Experts said Amazon was now under greater threat than ever before of being subject to an investigation.
“There have been various times when they’ve been in the headlines and every time it’s never an isolated incident,” said GSCOP expert Ged Futter, founder of The Retail Mind.
“It’s always corporate culture that has driven the poor behaviour. That is the concern.”
“It’s part of what they do and how they are.
“They have found that it’s not possible for them to operate in the UK differently to the rest of the world and get away with it.”
Martin Heubel, founder of Consulterce Ltd and former Asda executive, said suppliers also had to look at their own approach to Amazon to make the relationship work.
“It’s easy to look at these results and point fingers at Amazon,” he said. “However, the truth is that suppliers also need to review their approach to selling to the online retailer.
“That’s because Amazon’s business model differs from most other retailers covered by the GCA survey. After all, Amazon operates an almost entirely automated marketplace business. So it’s critical for suppliers to take a step back and look at their operational process compliance and approach to forecasting and cost price increases.
“While it can be argued that Amazon could be more transparent to suppliers about how these decisions are made, it’s also important for brands to educate their leadership teams on the required process adjustments when trading with Amazon. And that is perhaps one of the most important findings from the results of this GCA survey.”
But Futter said: “Amazon are working in a legal environment that is governed by GSCOP. They have to adapt, not suppliers.
“When I am training [suppliers on GSCOP], Amazon is the name that keeps coming up.”
Amazon’s performance is likely to deflect from generally improved behaviour by supermarkets in the poll, which is the 11th annual survey carried out on behalf of the GCA by YouGov.
Among more than 3,000 responses, the number of suppliers experiencing a code issue fell from 36% to 33%.
There was what the GCA called a “significant improvement” in relation to cost price increases (CPIs) as food price inflation eased. The number of suppliers requesting at least one CPI from a retailer fell from 91% in 2023 to 67% in 2024.
The number of suppliers highlighting a retailer’s response to a CPI as an issue almost halved, falling from 28% in 2023 to just 16%.
There has also been improved performance against other issues affecting suppliers, with 21% highlighting inadequate processes in place to enable invoice discrepancies to be resolved promptly, compared with 25% in 2023.
Meanwhile 11% of suppliers highlighted data input errors not being resolved promptly, compared with 16% in 2023.
The survey also included a question on cost price decreases (CPDs) for the first time. Only 5% of suppliers highlighted concerns about how a CPD had been requested by a retailer.
White said: “I am encouraged to see improvements in retailers’ treatment of suppliers across a range of issues including the management of cost price increase requests, but also resolution of invoice discrepancies and data input errors.”
Co-op was ranked top overall for code compliance this year, climbing from fifth place last year to replace M&S, which has dropped from first to third.
Some 98.2% of suppliers said Co-op ‘consistently or mostly’ complied with the code.
Co-op Food Mat Matt Hood said: “I am extremely proud of our teams, as we continue to drive innovation, creativity and excellence in supplier engagement whilst delivering ongoing improvements in our commercial performance.
“I’m also grateful to all the suppliers who completed the survey and shared their feedback”
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