When manufacturers are urging to stop unethical business practice, Debenhams, which used to purchase more than $120 million worth of mainly high-end garment items from 40 manufacturers in Bangladesh each year, is demanding a abnormal discount from its suppliers here.
It has sought a 90 percent discount, meaning it will pay only $1 if the price of a woven shirt was fixed at $10 when the goods were shipped, reports The Daily Star.
Currently, Debenhams, which has appointed an administrator last onth, its second in the past year, owes a staggering $66 million to its vendors in Bangladesh.
Of the amount, garment items worth $26 million is lying in the UK ports and another $40 million is in the factory floors ready to be shipped.
“We are uncertain about receiving payment from Debenhams as the company has appointed administrators,” Zahangir Alam, the Coordinator of Debenhams Vendors Community in Bangladesh, said in a discussion with The Daily Star over the phone yesterday. Zahangir Alam is also the Managing Director of Design Source.
The indebted retailer had problems before the health crisis and on April 9 confirmed the appointment of restructuring firm FRP Advisory to handle a “light touch” administration of the 142-store chain.
The administrators would work alongside existing management to “get the business into a position to re-open and trade as many stores as possible again when restrictions are lifted”.
However, it also warned that FRP Advisory would be putting its Irish chain into liquidation, which would mean the permanent closure of 11 stores that employ around 1,260 people.
Initially, Debenhams sought 60 days moratorium from Bangladeshi suppliers to pay $70 million up to March, but later it sought another 30 days.
“We will hold a virtual meeting tomorrow with the administrators and the sourcing head of Debenhams to demand our payment,” Alam said.
Demanding a 90 percent discount from the suppliers is abnormal. Many small and medium scale factories will not be able to sustain such a big blow to their business.
Alam is ready to help Debenhams so that the company can make a turnaround.
“But we can at most handle 15 percent discount,” he said.
Moreover, if the UK court declares Debenhams as bankrupt, it will take at least five years to get any money, by which the local suppliers will crash and burn.
Alam went on to urge the governments of the two countries to work together to find an amicable solution to this problem.
“Otherwise we will be in more trouble during this critical time,” he added.
Meanwhile, Debenhams has already laid off all 69 employees in its Dhaka office on April 15, said one of the terminated employees requesting anonymity.
The British chain had opened the liaison office in Dhaka in 2013.
The termination of the employees is illegal because the move does not follow the agreements that were signed with the Bangladesh Investment Development Authority.
“We are communicating with the Debenhams headquarters to obtain our dues.”
Asked about the pending payments, he said, “Since we are no longer official employees of Debenhams, we cannot say anything about the payments to the manufacturers and vendors.”