By Claire Reilly
Myer CEO Bernie Brookes has issued an ultimatum to suppliers to lower prices or risk being bumped from department store shelves in favour of in-house brands and more competitively priced lines.
Speaking to The Australian Financial Review last week, Brookes said it was up to suppliers to reduce prices so that bricks and mortar retailers could stay competitive with online retailers and maintain healthy margins.
“Suppliers have differential pricing so it’s up to them to come to the party,” Brookes told the Financial Review.
“We have over 30 buyers and each of those buyers within their own categories are almost daily talking to suppliers about the fact that their prices relative to online don’t match and they’re selling product online either through agents or through their own websites at cheaper prices, in some cases, prices that are close to our buying price.
“That obviously requires a discussion to make sure we can stay competitive.
“Our buying offices overseas have been not only looking at sourcing products we manage ourselves but sourcing anything they can buy even if it means bypassing agents and representatives here,” he added.
“Our standard component for discussions [with suppliers] is we maintain our dollar and cents margin and that means you increase your per centage margin,” he said. “Our costs of wages and energy are all going up so we can’t afford to compromise our margins.
“We’ll work with them [suppliers] to increase the level of promotion and see how we can at least maintain their volume. But if we can’t and there’s no alternative we look at alternative products we can be competitive on, and that’s one of the reasons we can drive our Myer exclusive brands.
The CEO of David Jones was also in-step with Brookes, saying that cutting prices was “the suppliers’ issue”.
“People understand they might have to pay a bit more if that gives them certainty and they can shop with confidence . . . but they’re not prepared to pay 20 to 50 per cent more,” said DJs CEO Paul Zahra.
“We are shifting the issue down the supply chain to make it the suppliers’ issue . . . because our labour costs don’t change and our rental costs don’t change and we have to make sure we are competitive in the international market,” he said.
While Zahra conceded that some suppliers “have acknowledged the problem and are taking action,” he also noted “many have said they don’t understand it and haven’t taken action and they’re the ones we need to have a good discussion with.
“If the brand chooses not to take action there will be market share shift from one brand to another and we’re supporting brands that have taken a leadership role,” he said.