retail news in context, analysis with attitude

In the UK, the Guardian reports that Tesco is looking to simplify and streamline its relationships with suppliers, "cutting the number of ways in which it charges them from 24 to just three." CEO Dave Lewis says that "this year it would reduce the number of ways it can seek payment from suppliers to five. By 2017, it will cut the number of reasons to demand a bonus payment from suppliers to three – volume, premium positioning on the grocer’s shelves, and compensation for items that have to be recalled."

The move comes as Tesco continues to deal with the fallout from an accounting scandal in which it overestimated revenue and underestimated costs, prompting a federal investigation into its business practices and dealings.

And, the story says, "The restructuring plan reveals just how important income from suppliers had become to supermarkets, often prompting them to put products on their shelves because they generate payments, rather than because shoppers might want to buy them."

In other Tesco news, Reuters reports that the retailer "has started the process to sell-off land from abandoned supermarket development projects, seeking to raise cash to help to finance its recovery plan."
KC's View:
Wow. A supermarket chain actually seems to be addressing the fact that it was making more money on the buy than on the sell ...

The whole promotional payments system is the ultimate in lower-case corruption, enabling an environment that focuses on all the wrong things. Too bad it took an accounting scandal, federal probes, and (perhaps not coincidentally) a new CEO who comes from the supplier community to recognize the problem and create some measure of change.

Better late than never.