Taghit Department Stores Ask Suppliers For Additional Clearance Charges.

TargetCorp. Taghit

The weak retail environment has caused retailers to complain incessantly, and perhaps even worse is the supplier behind the retailer.

TargetCorp., a large department store retailer in the United States, Taghit, following the earlier increase in supplier delivery standards and heavier fines, the second largest discount department store in the United States now begins to ask suppliers to pay extra clearance fees for the goods. (NYSE:TGT)

Dozens of suppliers have told Reuters that TargetCorp. Taghit is asking them for additional clearance charges, ranging from 3%-5% to foodstuffs, ranging from food to electronics.

Multiple categories.

Most suppliers say they are forced to bear the extra costs when they are forced to accept the new products.

A supplier who did not want to be named said that TargetCorp. Taghit would not have room for negotiation for suppliers because the Department Store supplier had to clear the unsold stock within three months.

For the supplier's revelations, TargetCorp. Taghit spokesman KatieBoylan declined to comment, saying only that he would regularly cooperate with suppliers to set up promotional activities to promote sales.

For the specific cost, the suppliers who broke the news also did not want to disclose, which only indicated that they were different from the company.

Pressure on suppliers is an important part of TargetCorp. Taghit's mid-term goal, and this year, the department store has been working at the operational level.

In fact, three months ago, TargetCorp. Taghit announced the upgrading of its supply chain.

In early March, it was reported that the company plans to invest $4 billion 300 million in two years to upgrade the supply chain and e-commerce.

In early May, TargetCorp. Taghit issued a document to suppliers asking suppliers to increase supply standards.

These standards include strict requirements for suppliers to deliver on time, penalties for fines for late deliveries, and a maximum penalty of $10000 for suppliers with asymmetric information, with a view to better compete with rival Wal-MartStoresInc (NYSE:WMT) WAL-MART Amazon.comInc. (NASDAQ:AMZN) Amazon.

TargetCorp. JohnMulligan, chief operating officer of Taghit, said that the plan will come into effect in May 30th, and the details have been sent to other suppliers. This drastic reform is also the biggest action of JohnMulliga in the past year, after the company's data leakage incident completely shuffled the management of the company.

He said the reform was a common result of discussions between his chief executive BrianCornell and the more than 200 suppliers of the group.

According to the data, the TargetCorp. 1%-3% penalty for the late delivery of the supplier is 1%-3% of the cost, and the maximum penalty will be raised to 5% of the cost after the implementation of the rules. Besides, the company has a grace period of 2-12 days depending on the products, and there will be no grace period after the implementation of the new regulation.

However, JohnMulligan indicated that it would also flexibly adjust the supply time with suppliers.

The weakness of the retail industry in recent two years has been as high as plague.

The industry has spread to the mass market. Due to the intensification of industry competition and the development of the electricity supplier industry, the traditional department stores have been suffering from the decline of passenger traffic in the past two years. At the same time, they suffer from the pains of multi-channel pformation, and the economic weakness makes consumers more cautious.

Under such circumstances, industry leaders such as Macy'sInc. (NSYE:M) Messi general store and NordstromInc. (NYSE:JWN) Nodes Tron began to focus on discount branches in the most developed American market, and no doubt that price pressures eventually shifted to suppliers, and many suppliers even faced unprofitable situations.

Industry data show that the cost ratio of department store promotion and marketing is basically over 10%. For high margin clothing products, the rate of promotion is even as high as 30%, which is undoubtedly a mountain for profit improvement on the basis of the discount department store TargetCorp. Taghit, which has always won the price. Therefore, it is also in line with its operation strategy that TargetCorp. Taghit pfers part of this rate to the supplier.

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According to the TargetCorp. annual report of Taghit, in the 2015 fiscal year ended January 30, 2016, the total marketing cost of TargetCorp. Taghit from suppliers was 379 million dollars, about 12.6% of TargetCorp.'s annual net profit in Taghit.

As a result of promotion and product and brand promotion, department stores usually cooperate with suppliers in marketing activities, and the cost is shared by the two sides in different proportions.

In fact, in order to ensure its own profits, the marketing cost of the supplier to TargetCorp. Taghit in fiscal year 2015 has been reduced by 11% year by year, and the cost in 2014 was as high as 426 million US dollars.

Knowing that negotiations with TargetCorp. Taghit do not have the slightest say, but suppliers also have their own solutions.

An anonymous TargetCorp. Taghit supplier said the supplier had a budget for the supplier, so the supplier would no longer provide TargetCorp. Taghit products that could not be sold without discount so that the inventory could be cleaned up because "doing business with TargetCorp. Taghit also needs to make money".

Over the past six months, many Pearl River Delta suppliers and many brands have been observed. No matter from fast fashion to light luxury or even luxury goods, the quality of the overall apparel retailing industry has declined. Under the circumstances of global economic downturn, low consumption and rising production costs, the Zero selling industry has fallen into a vicious circle.

As for whether or not to "learn" the behavior of rival TargetCorp. Taghit, other U.S. Department stores such as Messi's department store, NordstromInc. Nord and Nord refused to comment, but over the past year, the department stores began to pressure suppliers, hoping that suppliers could supply at lower prices.