Consumers Pay When Retailers Delay : Purchases: Some stores take longer than the usual 30 days to pay their bills, resulting in higher costs for goods.
If it costs more to buy a coat or toaster at your favorite department store these days, don’t be too quick to blame the name-brand manufacturer.
As the economy stagnates and competition stiffens, more retailers are said to be taking longer to pay their suppliers for merchandise. And the result is that consumers are likely to see heftier price tags as manufacturers pass on the added financing costs while waiting for payments.
The most recent example of this trend was disclosed in August when Sears, Roebuck & Co., the nation’s third-largest retailer, informed its suppliers that, beginning next month, it would take at least 60 days, up from 30 days, to pay its bills.
In explaining its decision, Sears said it changed payment policies only after studying the competition earlier this year and concluding that other retailers were taking similar steps, especially for certain types of merchandise, such as tools.
“This basically is a cash-management situation,†said Sears spokesman Jerry Buldak, while declining to estimate the savings.
But some suppliers, chafing at having to wait longer for their money, maintain that other merchants make payments in about 30 days, which until recently was a generally accepted practice.
J.C. Penney & Co., for instance, tries to adhere to such a policy. And suppliers say that debt-burdened R.H. Macy & Co. is paying its bills promptly and within a similar period of time, in part to avoid the stigma of being labeled as a poor risk.
The action by Sears is “another attempt by the retailer to squeeze manufacturers,†said an executive with a New York-based maker of kitchen products. “It’s not true that our customers are taking longer to pay us.â€
Yet industry insiders say that some other retailers are, in fact, stretching payment. “It’s been widespread for a long time,†said Nicholas Gallopo, a partner in Arthur Andersen & Co.’s retailing practice. “Sears is a Johnny-come-lately.â€
Most blame the change on the recession. “Before, retailers and suppliers had a more harmonious relationship,†said retail consultant Arthur Britten. “It’s become more adversarial.â€
Unlike Sears, though, most merchants apparently haven’t issued blanket statements dictating new policies. Rather than put changes in writing, some retailers are using other methods of stretching out payments, such as renegotiating terms when ordering.
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