Retailers must stop demanding 12 weeks’ notice on cost price increases

I’m glad my column back in August has drawn industry attention to retailers’ outrageous demands for proprietary informationon cost price increase ‘justification forms’. As the discussion continues, one phrase that keeps grating on me is ‘12-week notice’. This suggestion that this notice period is necessary on CPIs is wrong.

Do check, of course, that no signed supplier agreement clause commits you to a written 12 weeks’ notice. Beyond that, it is not a legal requirement, it is not a standard negotiation period set out by GSCOP, and it is not even an expectation of customers. So retailers must stop making it one.

The more suppliers comply, the more it is being legitimised. Suppliers now urgently need to move prices whilst retailers, who understand the justification long in advance of the ‘request’, want to delay them, reject them, or get trade-offs tactically against them.

This spurious notice period gives an initial three-month delay to the retailers from the outset, and if they intend to make an issue of it, suppliers don’t get any meaningful communication until the last minute.

While GSCOP doesn’t specify what is a reasonable notice period, it’s true suppliers must adhere to the code provision on good faith and fair dealing. But surely reasonable notice periods on price moves need only be long enough to get it loaded into the retailers’ systems. We know with excise duty changes the systems can be reloaded in 24 hours, not 84 days.

Some retailer ‘CPI request’ forms now set out an automatic delist after 12 weeks if the CPI is not agreed, so the onerous form doubles up its heinous delaying purpose into a ‘reasonable delist notice’ in compliance with GSCOP. This uses the code to legitimise a threatening tactic. The simple answer again is to stop giving the lengthy notice. Then you have equally avoided inadvertently giving yourself a reasonable delist period.

Some confusion can arise around pre-agreed promotions – just be consistent with the basic documented laws. A base price needs to be established in-store for four weeks before a promotion can claim to be a reduction against that price.

Notice is an issue for suppliers. If a customer doesn’t load the change onto their systems before the new price shipment date, it creates a world of invoice queries and suppliers don’t get paid.

So my advice is to review what you’ve agreed, and if a deal has been struck, then move the cost price in that context. Again, GSCOP doesn’t touch on any of this, except to say you can’t retrospectively change, but you can of course ask.

In summary: check contracts, be fair, review promotion agreements and stop giving 12 weeks’ notice.

Sentinel Management Consultants deliver sales, negotiation, planning and finance training courses for our clients worldwide.