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Retailers hit back at supplier surcharges
SUPPLIERS WHO apply surcharges to their published price list rather than raising the price itself are eroding margins and threat- ening hard-earned reputations. That’s the view of many retailers who are growing frustrated with the surcharges – additional amounts related to ongoing rising manufacturing and logistical costs – that need to be applied separately in an order on top of the RRP.
Retailers say this can lead to extra administration and awkward conversations with clients. “The surcharges are a nightmare,” said Justine Bullock, director of The Tap End, near Cardiff. “We work off a number of manufacturer price lists to create one room, so it’s impossible to remember and manually increase each product on a quote to reflect the surcharges.
“This is particularly true when the price book shows a current RRP. Clients will just compare online and it looks like we are inflating the price. It would be so much better [for suppliers] to just increase their price lists and RRPs and do away with surcharges.” Kenneth Luck, managing director at Luck and Fuller Bathroom Design Studio in Billericay, agreed: “We look stupid to customers when we show them a list price and then have to say ‘by the way, it’s 15% more’. It looks like we are trying to up our margins. It’s the most frustrating thing. I’ve lost thousands in potential margin because we have had to honour
book prices. Suppliers should’ve taken the hit and then made it back in the next price increase rather than pass the burden to retailers.” Joe Farnell, director of Home Sweet Home kitchen studio in Barnstaple, also believes that surcharges lead to difficult conversations with clients. “The surcharge is frustrating,” he said. “Several
times I have forgotten and lost margin, so I decided to add the additional percentage on our software so that I didn’t forget, only to then have a customer tell me that my price was more than the RRP online.” Tony Robson, co-founder of Day True in London, believes it is part of a bigger picture of suppliers ‘bullying’ retailers.
“It massively irks me,” he said. “Giving price increases on products that they can’t even tell you when they are going to deliver. Same old, same old, the big companies bullying the small independents. “Then they put on a surcharge instead of increasing their list prices, meaning the independent loses margin while the manufacturer maintains theirs and keeps their RRP looking competitive.” Angus Kerr, director of The Bathroom Company in Edinburgh, is equally sure: “Surcharges don’t work. Any additional cost needs to be charged via the retail price, then the retailer’s margin is always the same.” However, not all retailers feel this way. To some, surcharges are an unfortunately necessary measure to combat wider economic forces.
New competition law now in force
A MILESTONE change to UK competition law that will allow manufacturers and suppliers to sell to online retailers at higher prices than physical stores came into force on June 1. This is welcome news for
bricks-and-mortar
retailers who have long campaigned for a ‘level playing field’ to help them compete against online- only retailers that do not have a physical store. The change was implemented by the EU to its competition laws on January 31, 2020, and since the UK retained that law post-Brexit, the Competition and Markets Authority (CMA) has now incorporated it into UK law. The new UK law – the Vertical Agreements Block Exemption Order (VABEO) – allows for dual pricing of products, which means that suppliers will be able to charge different, possibly higher, prices for goods to be resold online than for good intended to be sold in a physical store. The new law provides for a one-year transition period that will end on May 31, 2023. Suppliers with pre-existing agreements in place will need to consider how best to obtain agreement from their distributors to any changes. Suppliers attempting to impose any unilateral changes to pre-existing agreements will potentially face claims for a repudiatory breach and possible fines. Prior to the law change, charging a higher price to an online retailer would have constituted restrictive practice and parties would have been open to fines
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from the CMA or EU Commission. With the new law now in place as of June 1, going forward, distributors and retailers who feel they have been disadvantaged by the pricing applied by manufacturers and suppliers may seek to complain to the CMA or EU Commission, arguing that the price differential applied fails to properly reflect the difference in investments made or costs incurred in both the in-store and online channels. Manufacturers and suppliers need to be capable of justifying their pricing decisions and give thought as to whether they will have exposure to distributors and agents in part. Although the new law brings
with it the promise of a more ‘level playing field’ for bricks- and-mortar retailers, James Hickman, chief executive of Plumbworld points out that online retailers can have substantial overheads too.
He said: “The online retailer’s investment is not so easily visible to them, but is just as real. It consists of holding large amounts of branded product stock for next-day delivery, staffing call centres with trained sales and customer services staff, rent for warehouses and offices, huge online advertising costs and the costs of graphic designers and web developers to maintain a brand’s presentation online.”
• For an online retailer’s perspective on this news, head to page 23 for Plumbworld CEO James Hickman’s viewpoint
· August 2022
Paul Crow, managing director of Ripples, said: “It’s a hassle and is often used as a stepping stone for price increases, but they are also understandable as long as you read the news.”
Alex Jenman, director of Gainsborough Kitchens said ‘surcharge’ implies that it’s only a temporary measure. “It does [suggest that] they could come off again,” he said. “As a short-term fix I’d rather they did that than have the cost of rewriting price lists. It will be interesting to see whose prices go up faster – the ones with the surcharges, or the ones who reissue RRPs every time.”
But Johnny Bacigalupo, founder of Napier Bathrooms in Edinburgh, believes that it ultimately damages the retailer’s bond with the customer. “It’s a way of shifting all potential loss of income or margin risk to the retailer,” he said. “It’s unhelpful, difficult, and brings distrust into the retailer/client relationship. Not good for our industry at all.”
kbbreview scoops top event prize
KBBREVIEW HAS been recognised in one of the biggest event industry awards in the UK. The kbbreview Retail & Design Awards 2021 event, held in Liverpool Cathedral, took home the highly prestigious Silver trophy at the Awards Awards. The category was ‘Best Covid-19 Bounceback’, reflecting how the 2021 Liverpool event was at the forefront of getting the KBB industry back to face-to- face events after the lockdowns. “We’re so pleased to have this recognition,” said
Taylist Media managing director Julie Williams. “And it’s especially satisfying that it’s come from the events industry. We were determined to lead the way and hold the first major post-lockdown KBB industry event, but we couldn’t have done it without the support and faith of our sponsors.”
The sponsors were: Aqata, Cosentino, Franke, Hansgrohe, Ideal Standard, Impey, InSInkErator, Kudos, Roca, Samsung, kbb Birmingham, Neff, SENSTEC, VitrA, Hettich, Swift, Used Kitchen Exchange, Majestic and Quooker.
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