Paying the penalty

23 May, 16

Suppliers and even retailers can be fined for price-fixing. Protect your assets!

Online discounting has been a perennial problem in the industry, challenging the profit margins of high street showrooms. And the constant and innocent request from retailers has been for greater support from their manufacturers and suppliers, demanding they help protect their businesses. Well, here’s the rub, there are 786, 668 reasons why they shouldn’t – just ask Ultra Finishing.

The bathroom supplier was recently fined to that value for price fixing – preventing online retailers from discounting its Ultra and Hudson Reed brands. It had simply honoured the views of many high street showrooms, by suggesting if online retailers discounted, they would provide the goods at higher prices, withdraw the rights to use images or to cease supply. Despite having the very best intentions to support its bricks and mortar retailers, the company broke the law and is now paying the heavy penalty (literally). And worst of all, if retailers join suppliers in price-fixing they too can be fined!

All of which highlights the complex relationships suppliers now have with their customer base. If a brand is successful, there is greater demand for it online and therefore less enthusiasm from bricks and mortar showrooms. It hardly seems fair. While the government – through the Competition and Markets Authority (CMA) – is protecting the shopper, and inadvertently online businesses, where is the support and rights of high street retailers and their suppliers? And how can high street retail survive the continuing threat of ever decreasing prices and profit margins?

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Luckily high street retailers can be resourceful and resilient. They are frequently first to a trend, and as small business can react quickly to changing demand. They can source new suppliers, find niche and quality products that will suit their client base and build a brand through a high street presence. But how does that help with existing brands as well as established and perhaps long-standing relationships? And what’s to say, once demand grows for a particular product or brand online discounting won’t take place further down the line?

And how are suppliers expected to grow their business, supporting the salaries of their employees? If high street showrooms start closing the doors on their brands, surely they are going to be further forced along internet sales, continuing to exacerbate the potential for online discounting?

It certainly seems like a conundrum if not total chaos for the retail supply chain. Luckily then, the CMA will be presenting the challenges and how to avoid them at the Bathroom Manufacturers Association AGM at Breadsall Priory in Derbyshire on June 29 and all are invited to attend. So, make this a date for your diary. It just may safeguard all our futures.