Did the pandemic fundamentally shift retailer/vendor relationships?
The novel coronavirus pandemic brought about changes to how retailers and consumer brands conducted business with one another. Just how many of those changes will stick remains to be seen.
A Wall Street Journal article earlier this week reported that some retailers who negotiated longer payment terms from suppliers during the early days of the pandemic are looking to continue under those same rules even as the spread of COVID-19 slows amid rising vaccination rates.
The report points to the experience of Macy’s, which negotiated payment terms that saw it pay vendors 163 days on average during the first quarter, up from 134 days during the same period last year, based on data from The Hackett Group. Macy’s, according to the Journal, said it is using a different calculation to pay suppliers that actually cuts days of payment, although that isn’t reflected in the numbers reported.
The retailer is looking to keep extended terms in place, suggesting management is maintaining a cautious fiscal approach even as its CEO, Jeff Gennette, plays up its ability to maintain “accelerated profitable growth in 2021 and beyond.”
Macy’s reported a 63.9 percent gain in same-store sales during the first quarter as shoppers began returning to stores and online sales climbed upward. The performance stood in stark contrast to the first quarter of 2020 when sales fell off over health restrictions imposed by the pandemic’s outbreak.
Conventional wisdom about Macy’s is that it is, along with most of its department store rivals, part of a retailing vertical that lacks relevance for consumers, particularly younger generations. Weaknesses that were evident for years prior to the pandemic may be obscured as the economy opens, but fundamental problems persist.
Even as some retailers look to keep extended payment terms, others are paying up early to support small vendors. Walmart expanded a supplier diversity program last month that paid smaller vendors more quickly. The retailer said it took the action because the biggest challenge these companies face to achieving growth is access to working capital.
- Some Companies Are Taking Longer to Pay Suppliers Despite Recovery – The Wall Street Journal
- Macy’s CEO says recent gains are real and better things are ahead – RetailWire
- Macy’s, Inc. Reports First Quarter 2021 Results – Macy’s press release
- Will Walmart’s early payment program be a difference-maker for minority vendors? – RetailWire
- Accelerating Our Commitment to Diverse and Minority Suppliers – Walmart blog
DISCUSSION QUESTIONS: How have retailer and vendor relationships shifted since the pandemic hit last year? What changes, if any, do you think are here for the long term?