Retailer relationships with vendors seemed to be moving into new territory as reports surfaced last week that Albertson's, Kmart and Fleming are seeking special terms and discounts from various suppliers.
Sources told SN the Albertson's division in Seattle is asking vendors to fund two additional employees per store to do cut-ins of new items and resets and, when those jobs are done, to be assigned other tasks by the store manager. Albertson's, Boise, Idaho, could not be reached for comment.
Sources said Albertson's began informing vendors of its request within the past two weeks. It wasn't immediately clear how successful the effort will be, although sources said it might be indicative of things to come.
"It's the kind of request for customized help from a retailer that is becoming more common as companies seek temporary advantages over their competition," a manufacturer source told SN.
In another instance of companies seeking different terms, Dallas-based Fleming and Kmart Corp., Troy, Mich., are both reportedly asking vendors for extended terms. An article about those requests ran last week in the New York Times.
A variety of trade sources told SN Kmart is asking suppliers to extend traditional terms from 2-10-net 30 -- a 2% discount if payment is made in 10 days or full payment within 30 days with no discount -- to terms that allow payment within 60 days or longer plus the 2% discount.
During a presentation to securities analysts in New York last week, Neil Rider, executive vice president and chief financial officer for Fleming, addressed the issue when he acknowledged that Kmart is attempting to stretch terms with vendors. "Fleming is working with Kmart to make sure neither one is being penalized -- to be sure neither of us is getting better terms than the other."
(A story about Fleming's third-quarter financial results and other comments during the analysts presentation can be found on Page 8.)
Scott Northcutt, executive vice president, human resources, told SN the Times story was incorrect in implying that Kmart controls Fleming.
"We are just one of Kmart's suppliers, and we operate our business on behalf of all our customers, not just Kmart," he said. "We're looking at anything we can do to work with vendors to lower costs to Fleming and lower the cost of goods throughout the supply chain."
A Kmart spokesman told SN Kmart is attempting to improve its pricing, a process that may require seeking better terms. "When Chuck Conaway came to Kmart [two years ago as chairman and chief executive officer], he said the company was not competitive on some payables, and he's been more aggressive in trying to drive the company to be more competitive," the spokesman said.
"In early September Conaway said Kmart would continue to look at its metrics, including terms for payables in our contracts, and that's what we're doing."
The Times story cited complaints by a handful of unnamed vendors concerning Kmart's new aggressiveness with suppliers. The Kmart spokesman pointed out to SN that company deals with a large number of vendors, "and there will always be some who are not satisfied. But we try to respond quickly to those situations and build stronger relationships."
Gary Giblen, senior vice president and director of research for C L King Associates, New York, said several manufacturers of food, health and beauty care and fragrances have told him that Kmart is asking for "ludicrous terms and discounts."
According to Giblen, some vendors told him Kmart wants to take merchandise in on consignment and pay for only what it sells, while others said the company has asked vendors for return privileges on unsold merchandise, plus terms extended out to 90 days, with the intention of not paying for 180 days.
"If vendors don't agree, then Kmart is indicating it may move their items to lower shelves," Giblen said.
He said Fleming, which is Kmart's primary supplier for foods and consumables, is pursuing similar strategies on Kmart's behalf.
Robert Goch, senior vice president of Miller Tabak & Roberts, New York, told SN Kmart executives say they aren't getting the same terms as Wal-Mart Stores and Target Stores, "so it began approaching vendors asking for different terms. But some vendors have lost track of what the existing terms are because an online system that gives them access to the status of receivables at Kmart is down, so I suspect there's a lot of nervousness in the vendor community as Kmart continues to seek extended terms," Goch explained.
Burt Flickinger 3rd, a consultant with Reach Marketing, Westport, Conn., said both Fleming and Kmart have been working in tandem to seek better terms for both companies.
According to Flickinger, Fleming is asking for discounts of 3% off the top for participants in its centralized buying program; Kmart is seeking price concessions and extended dating, and both companies are taking unauthorized deductions that amount to the millions.
"As a result, some major manufacturers have told the two companies they will stop shipping to them unless the deductions are cleared up," Flickinger said.
He also said Kmart executives have held top-to-top meetings with vendor executives to talk about the situation, "but what they really want to discuss is concessions on credit, merchandising, markdowns and pricing."
