The Daily Mail has published a supplier's eye view of those Tesco charges.
Too good to cut and paste, scroll down to the blue box headed 'TESCO'S BULLYING TACTICS MEAN YOU HAVE TO PAY THEM!' SUPPLIER TELLS OF HARSH TREATMENT BY BRITAIN'S BIGGEST SUPERMARKET CHAIN.
What the article doesn't explain is the so-called "£263 million black hole". AFAIAA this is no such thing, all quite simple and a question of judgment.
i.e. if Tesco charges a supplier an upfront, non-refundable fee of £1 million to reserve a certain amount of shelf space for the next X months or Y years, should it book that as income on the day it is received or should it time apportion this over X months or Y years?
I'm not sure it matters as it's only a timing issue, so while profits are possibly overstated in the early years, once it's up and running, you end up with a fairly reliable profit figure - because while you are booking all of this year's charges as income, you are not including the corresponding fraction of earlier years' charges either.
(It's the same as fixed asset additions and depreciation. In the early years, it will spend more on fixed assets than it charges in depreciation, but after a few years, the two figures are very similar, i.e. the business is now charging 20% depreciation on the total additions of the last five years.)
Thursday, 23 October 2014
Supermarkets and their suppliers
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5 comments:
Having taken a sustained drubbing over the years for proposing the revival of the UK's traditional Resale Price Maintenance by which suppliers had the whip hand over the retailers and insisted on no discounting on branded goods, I think I am allowed some hollow laughter when it comes out, as now, that the supermarkets have been charging rent on their shelf space ( I told you so ).Rent seeking is impossible in the free market so the blowhards proclaim. I used to be dragged through the most vicious battles over on Tim Worstofall whose denizens held Tescos up as the very epitome of free market service to the working-man.
I could be very rude right now but @DBC do shut the f**k up - you don't know what you are talking about.
I own a small (ish) manufacturing company who supply all of the big retailers (mainly) own label - we don't pay for shelf space. Its only the brands - its part of their marketing expenditure and goes with the territory.
And how do you thing RSP would work with the on-line boys and discounters, huh?
Tesco's announcement is very opaque and none of the analysts seems to know what is going on. I guess we will have to wait for Tesco to produce a cashflow statement before we know what is going on but I suspect that it is purely a timing issue - along the lines you suggest Mark.
DBC, you have never explained how it would work, I can see loopholes a mile off.
S, are you no longer "Shiney Mart"?
G, we'll see, all the articles point in that direction. Big deal is what I say.
there are areas where IFRS just brings noise to the accounts rather than clarity. And if you are dealing with millions of transactions, you push yourselves into the hands of the IT guys...is the algorithm good...how many errors get through. There is no way you can audit millions of transactions every month.
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