The Big Question: Are retailers failing their suppliers if they don’t pay for cancelled orders?

Nigel Lugg, chair, UK Fashion and Textile Association

“Yes. The issue for me is if retailers are not going to pay for goods it will be like a tsunami going through the supply chain with incredibly serious consequences. We are in uncharted waters, but I believe people need to consider what ethical and social responsibility they have in this situation.

“My argument is if there are finished goods then ethically and morally they should be paid for if your balance sheet can support it, because products which have already been manufactured for orders which are then cancelled become valueless to suppliers.

“The knee-jerk reaction has been to cancel everything and now we are seeing some businesses reconsidering what the implications of that will be on suppliers and changing their stance. Wholesalers in the UK who employ 43,000 people are not making profit margins that mean they can absorb the type of hit that mass cancellations of orders will trigger, and in the world of open costing retailers know exactly what their manufacturers are making.

”If you don’t pay for orders where the goods have been produced that will have a massive impact on the workers in the Far East, Cambodia, India and Bangladesh – morally, where does that leave us, as a nation of shopkeepers?

“I am struggling to reconcile retailers dictating to factories and suppliers over the years how they should operate ethically, morally, socially – and then as soon as a problem hits we look after ourselves and to hell with the consequences.”

Suzanne Harlow, former chief executive, Jack Wills

“Many retailers are facing a fight for survival today, where cash is king and there are very difficult decisions to be made while trying to maintain strong relationships with all stakeholders – be that customers and employees or suppliers and shareholders.

“Outside of people and stores, the other large cost for retailers is the cost of goods. Most retailers had pulled forward some early season shipments with concerns initially being about securing supply from China. That stock is now sat in stores, distribution centres and docks around the country with the spring/summer season effectively written off for most and in an ideal world they would ‘turn the tap off’ in terms of stock.

“However, this is now the time for retailers to demonstrate responsibility to all stakeholders and work with their manufacturers to ensure that there is a sustainable supply chain on the other side. Primark has improved its support to suppliers despite having no income for the foreseeable future; Boohoo, with a strong online business and sales moving ahead of the year, spoke about the importance of maintaining relationships for the long term and paying suppliers promptly. 

“Recognising this is a global crisis that is likely to impact textile workers in developing countries extremely hard, government support packages may yet come, but retailers have a responsibility themselves to work out a fair deal with suppliers, particularly those with large financial backing.

“With a smaller supply base almost inevitable going forwards, those retailers that have invested in theirs will see the benefit in the future.”

Andrew Jennings, global retail adviser and former Saks Fifth Avenue chief operating officer

“It all goes down to retailer and supplier relationships. I’ve always been a believer that as a retailer you need to make a profit and so does your supplier.

“If you don’t want or need merchandise, it is your responsibility to negotiate that issue with your supplier. I do not believe that you can just arbitrarily cancel an order that you are committed to and then don’t pay for it.

“We live in very challenging times, however, those times will pass and it is important to keep a good business relationship with your supply base.

“I have always found that getting on the telephone, explaining your situation and coming to a joint solution ensures a productive long term relationship.

“It is all about building credible relationships.”