Matalan mandatory squeeze on suppliers

British retail group Matalan has enforced a mandatory 2 percent cut in payment to suppliers for goods that it had ordered for the second half of the year, according to the Financial Times. The company is struggling to protect its profits in a challenging market.

In November the company reported a drop in underlying sales of 10.6 percent since the beginning of the second half and said that there was "little evidence to suggest that this will improve in the near term." The squeeze on suppliers has caused "an outrage", an anonymous source told the FT. "When an order or contract is placed, that is the time to negotiate, not afterwards."

According to Richard Hyman, managing director of Verdict Research, Matalan's decision is "not unique" to the industry, but warned that it is something to be done "with care". "If you are an own-label retailer, your relationship with suppliers is your lifeblood. And for suppliers living in a world where you get a margin of x for goods and suddenly you get a margin of x minus 2 percent, something has to give, and that can be the quality of the product."