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Leaked memo reveals how Asda sought to beat down suppliers

A leaked document has shed light on the tactics proposed by an Asda director to get better terms from the supermarket's suppliers. The secret memo, issued in 2009 as a guide for the retailer's buyers, tells them they must "buy for less". In the introduction, commercial director, Phil Briggs, tells buyers to take advantage of the fact that "our suppliers are hungry for volume [growth]. It is the lifeblood of their business". .

One Asda supplier, who went through the negotiating process last year and saw the document said he felt "disappointment" with Asda. "Obviously, you get used to having hard negotiations but this went beyond that and it didn't reflect the partnership approach that you want with retailers. It was all about how much you could screw out of us," he said. The supplier, who did not want to be identified, said he could not afford to offer better terms to Asda, and was consequently penalised. "They carried out their threat of reducing shelf space for our products and we were seen as a non-supportive supplier," he said. "We have suffered because of it, but it was either that or lose money."

Buyers are also instructed to extract better terms from their suppliers by asking for money to cover areas such as marketing and waste. "Clearly, suppliers should be challenged to fund marketing costs," it says. It also tells buyers: "Suppliers should provide compensation for products that are marked down or thrown away because customers aren't buying them." In addition, suppliers should help fund capital expenditure: "We invest a huge amount of capital into new space each year and our suppliers can help pay for it."

The document lays out how to structure a meeting with a supplier. "Plan your introduction," it says. "Use this opportunity to take control and set the agenda. Open outrageously (include plenty of fat). The bigger the opening figure, the bigger the settlement figure." Buyers should have prepared "three concessions that cost Asda nothing but will assist their trading position. Only concede if you have to. Be tactful, but be firm. A threat is only a threat if it is followed through. Remember always that we are negotiating on behalf of our customers!"

Suppliers can be split into four groups, depending on their reaction to negotiations claims the document – they are "high performing, complacent, conflict and apathy." For those who fall into the "conflict" group, the document advises buyers to punish them. "They may not understand or buy into the Asda strategy. Consider reducing the level of business, at no cost to Asda if they don't collaborate".
An Asda spokeswoman said yesterday: "Do we drive a hard bargain with our big, multinational suppliers? Absolutely. However, while we may be firm, we are always fair.

Source : Chloe Ryan - The Independent

10 October 2010
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Thank you for the excellent presentation that you gave at Woodbury Park on Thursday morning. It was very interesting and thought-provoking for our Retail members. The feedback has been excellent.

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Martin Elliott. Chief Executive - Home Hardware.
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