Retail Strategy in a Downturn: Pay Your Vendors Fast (like T.J. Maxx)

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In BusinessWeek:

Industry observers say that while those retailers can take 60 to 90 days or more to settle up, TJX typically pays within 30. These days, that's a critical selling point both to vendors, who are more concerned about finding funds to buy raw materials and pay expenses, and to the financers who act as middlemen in many of the deals. It could give TJX—which also owns discounters Marshalls and HomeGoods—an added advantage in getting a wider selection of items.

Makes sense. Can't sell something that's not on the shelf, Drucker used to say...

Read the article here>>

There's another very good reason to pay quickly: goodwill.

Your suppliers will take an extra step or two for you if they know they can count on you. This "trust" makes a giant difference in execution.

There's a software company I know which used to delay its vendor payments as much as possible as part of its strategy. While it may have gained a few bucks in capital, it lost in terms of responsiveness. Big time. Vendors would move extremely slowly to deliver value. It was frustrating on both sides. And all because a few "brilliant" bean-counters thought they had found a way to squeeze a few more pennies into the corporate treasury.

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This page contains a single entry by Christian Sarkar published on October 17, 2008 5:46 PM.

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