The NFU met B&Q last week to seek reassurances that B&Q will not force growers to sign agreements that could harm their cashflow. The NFU said 90-day agreements are unsuitable for growers because their products sell within weeks, while DIY suppliers to B&Q expect their products to remain on the shelves for longer.
One nursery owner, who did not want to be named, said: "If we move to 90 days we have to find the money to finance that. It's another month's operation of the business.
"I don't believe the banks will be falling over themselves to finance our overdraft. We fought this off three years ago. B&Q just says it's company policy, so toe the line. We have little choice but to comply. B&Q has offered options but they don't make financial sense.
"The Government says small businesses should be paid in shorter, not longer, times and local authorities are paying in 30 days from what was 45-60 days. B&Q is not doing anything to help the UK economy."
Another grower said: "B&Q rejected the industry code of practice. It threatens suppliers with de-listing. It has no loyalty."
Suppliers said B&Q had a good season after cutting orders at the start but taking reserves later on. They added that B&Q suggests 50 per cent of suppliers have already signed up to 90-day terms. B&Q is estimated to have around 50 grower-suppliers.
B&Q owner Kingfisher said that profits at B&Q doubled over the three months to 2 May because of the late Easter and warm weather, with garden products helping towards a £58m profit.
The NFU sought written reassurances from B&Q over its concern that some growers were being forced to make decisions they could not afford to keep but has received no reply after a "productive" meeting last week.
NFU horticulture adviser Phil Hudson said the NFU takes a dim view of retailer action that exploits their power in the marketplace.
He said: "We want B&Q to desist and have a moratorium because payment in 90 days is not appropriate to plant supply. Until we receive reassurance on how negotiations are going to be undertaken, B&Q should hold off."
HTA business development director Tim Briercliffe said each nursery should aim to be paid in 30 days and should not put itself in a position where it is stretched financially by the terms it agrees to. He said B&Q was a special case, and independent garden centres had different relationships to suppliers and would not copy B&Q's demands for tougher paying conditions.
A B&Q representative said the 331-store chain recently signed up to the Government's Prompt Payment Code. He added: "We have been revising terms to achieve consistency across our supply base for a number of years, and these negotiations are carried out in collaboration with individual suppliers in order to bring fairness and equality to the terms received by all those supplying our business."
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All Comments
It's times like these that the Big Boys, like B&Q, give themselves and their counterparts a bad name - and it's really a shame. Not only do they know what they're doing, they know better, in the long-run, than to do it.
Unfortunately, at the moment it serves them to do what they're doing, because it gives them higher short-term results - and that makes shareholders happy. But that's in the short term.
The problem for B&Q is that, over time, this will turn on them. It's not just the suppliers who will "vote with their feet" as Kate Lowe mentions in her lead. It's that, for those who are 'stuck' doing business with B&Q, the quality of service the company will receive will be far less than if B&Q worked collaboratively with all their suppliers. As a result, not only will the plant stock costs go up, the operating costs in the interim will be impacted simply because the B&Q buyers will not find as responsive a supplier public with which to work.
Last year, when making a presentation, I was asked what suppliers should do when confronted with a customer who sets deal terms that are untenable. Just as it was the answer then, it is always the answer: Walk away. That is the only successful negotiating position any organization can take to ensure its livelihood.
After all, if you're on the supply side and your customer has practices that will put you out of business, why help them to do so? And if, in the interim, you're one of the suppliers who's 'stuck,' get going - now - on finding other customers for your products. Make sure you've always got options in the pipeline.
B&Q will learn its lesson - unfortunately for their shareholders - the hard way.
I wholeheartedly agree with Leslie Kossoff, if your customer is not willing to pay an appropriate amount for your products, in a suitable time frame, then what is the point of making the sale?
How many times have nurseries been let down by the sheds who cancel large orders with little or no notice ?
When this occurs, how many nurseries have then managed to sell most of that stock at a reasonable return ?
Some nurseries have made the decision not to trade with the "Big Boys" and have opted to alter their business model so that it does not rely on the economiy of scale of single product lines, but diversifies product lines whilst maintaining similar sales values.
As for those suppliers that sell to Tescos, give up, every Monday morning when I visit my local Tesco Extra, your plants are either dead or dying, the sight of wilting hydrangeas dosen't inspire anyone to go gardening !
This is disgraceful bullying by B&Q. I am positive that if all the growers who 'signed up' were polled every one of them would say they were forced into it.
It is all very well telling suppliers to walk away but thats not realistic and B&Q knows that. In the longer term maybe but no grower can afford to just walk away just like that. The 'delisting' would probably be subtly done too so that it was not too obvious, but the end result would be a grower with stock he cannot sell and probably a capital investment lying idle.
In the short term - 1-3 years - you have to stick with them if they take appreciable amounts of your production.
Much as I hope they will I am not sure they will learn their lesson, as they calculate they will always find another sucker to supply.
Weasel words too from B&Q 'fairness and equality' - tell that to the growers they are screwing into the ground.
The industry as a whole really must try and get this rescinded.
I'm off to B&Q for a couple of bits of 2x4, if I offer to pay them in mid October, will that be O.K., or will my next posting be from inside Strangeways ?
If all garden centres offered to pay suppliers in 90 days, I think most growers would bite their arm off, especially those who take 5-6 months to pay for Summer deliveries and who are waiting for "Christmas cashflow" to pay off old creditors before re-newing supplies next season.
There are plenty of usual late-paying suspects at 120-150 days out there, and their credit ratings are poor too. There are of course some quick payers too, but they are the minority, and getting fewer, possibly as they try to emulate the multiples tricks.
B&Q with all of theri experinced financial gurs must have realised that their move only improves things for the first period of goods arriving and not having to pay for goods already received for another 45-60 days. There are 2 basic issues from thier side.
1. If their stock turns are that bad I am afraid many of the plants will be dead within 90 days as they do not have the staff or time to keep them alive.
2. A move of this type only works for the following 45-60 days depepnding on original terms, then they have to pay for the goods regularly anyway.
I can imagine many fund managers saying "Good work, great idea!" and the more experienced in the real world going 'ah ha', what are you going to do next to improve your cash flow, 120 days?
Cash flow is king enabling the removal of debt and investment in the future, so mange it well. But if you are not making enough money on what you are selling to cover the costs, short gains are not enough and it will dry up gradually.
Just thought I would add a couple of points to the topic from the side of B&Q as I work for them, and there are always two sides to each discussion.
Firstly ALL our other suppliers from bathrooms and kitchens through to tools or paint suppliers are on 90 day accounts, without exception. Please tell me why a few growers should be treated differently from all our other suppliers. This is a company policy. Why should we create specific rules for certain areas? Please tell me what makes suppliers of horticultural produce different and special? Before you answer that please consider what an absolute tiny percentage of our turnover comes from plant sales (please see my prior post 'homebase blames garden & DIY product for further sales falls' March 2009). Why should we pay such small seasonal suppliers on better terms than our major year round suppliers bearing in mind our biggest horticulural suppliers turnover is about 10% of our biggest suppliers turnover.
Secondly it has been mentioned that 'growers will walk away'. No they won't. All growers with enough courage to walk away did so about 10 years ago. Those left have to much of their turnover with us to just walk away. This is one of the key points that all our buyers understand when nogotiating. Even if I humor this silly idea and a grower did decide to walk, do you seriously think that considering the overproduction in northern europe especially in the areas of Shrubs, Trees and Bedding that we would stuggle to replace this grower. We won't. Maybe in 10 years time if this overproduction is dealt with by lots of growers retiring but until this happens don't expect us to be worried if someone does walk away. At this moment in time there are lots more pebbles on the beach when it comes to plant suppliers.
Thirdly here is the reason we want 90 days, all our suppliers money which we hold for these 90 days is put in a high interest account. This is considerable amount money, which is constantly being replaced as it is payed to suppliers. This earns a very nice amount of interest each year. Infact unless anyone reading this topic is on mega money we earn more in Interest from suppliers money than you earn in wages each year. If we can get away with this we will, it is called business and maximising returns for our shareholders.
The last thing I want to mention (again, see homebase post) is please stop comparing us to garden centres or plant nurseries. We are not one of these we are a DIY store our business is home improvement not gardening. We are answerable to shareholders unlike most nurseries and garden centres. We are totally different. If you must compare us to anything please try Tesco or ASDA. It is easy to moan about a citreon when comparing it to a rolls royce but harder to moan when comparing it to a peugeot.
OK, if you feel that B&Q should be compared to other retailers, what about Morrisons? They pay within 30 days, so why can't B&Q?
Also you ask why growers should be treated differently to other suppliers? And yes I have considered how much turnover can be apportioned to horticulture. But I am also aware of how quickly the product is sold in the B&Q stores. Kitchens, bathrooms, pots of paint can be sat on the shelf for months, yet pot and bedding plants are sold in a matter of days. B&Q get their money in a couple of days from this but expect growers to wait for 90 days for payment and then also expect rebate, hardly good practice.
It is not a case of growers walking away, it is a genuine case of growers being fearful that if they do not sign up to these terms and conditions that they will be de-listed. And growers have been de-listed in the past.