The cost of bad debts

phoebe_soloPhoebe Garland co-owns Garland & Garland Fashion, a leading fashion agency based in Sydney, which also offers business mentoring & project management of marketing to the fashion industry. www.garlands.com.au

 Recently, Samantha Hardman, owner of Bento, an emerging fashion label posted a blog on her website “The cost isn’t about the dollars” which was reproduced in Ragtrader Online. It caused an amazing response from manufacturers and wholesalers about the issue of non-payment. Slow payment in this industry and sometimes no payment in the fashion industry has been an ongoing problem, and is only getting worse.

Whilst I am extremely sympathetic to retailers and totally understand the difficulties faced with constant discounting by department stores & influx of chain stores, her blog did raise some interesting points particularly, comments from the wholesalers and manufacturers. Most wholesale comments were leaning towards a ‘naming and shaming’ database of constant bad payers, which in some instances I have to agree with, for the very bad ones. However this is heavily controversial! (There could be some tough manufacturers who don’t give an inch to compromise and abuse this system).

bad_debtsOn the other side of the coin there is another type of retailer who may be a slow payer and genuinely can’t pay all at once and is trading through a bad patch. As I am technically considered a ‘middle-man” aka, a fashion agent, I see both sides of the problem from a manufacturers point of view and from a retailers point of view. This problem is a frustrating for all involved and can have devastating flow on effects from retailer, to manufacture to agent, to makers. Essential retailers don’t pay we don’t get paid.

I think one of the biggest frustrations we have is when a retailer is not communicating with wholesalers/manufacturers and not attempting to work out a payment system. Retailers, as much as I adore you at times, it CAN be like getting through to the royal family trying to reach some of you and it’s perhaps not the most professional way to behave, especially when payment is owed.

847837-phone-frustrationOne area I think manufacturers can help themselves is assessing each order and staggering large deliveries over a couple of months to ensure retailers can get adequate sell through before payment is due. If an order looks too good to be true it usually is. Assess it before just delivering the entire amount and expecting the retailer to pay the entire amount within 7 days. Staggering invoicing into realistic breakdowns and staggering deliveries can help cash flow for everyone. Earlier deliveries should also be looked at especially with the department stores going on sale earlier each year.

The fashion industry is getting harder and not easier and I think ultimately we need to all remember we all need each other more than ever. Playing hard-ball, is probably not the best idea at the moment, unless absolutely necessary and there has been no communication between the parties. Retailers need to think about online methods in conjunction for their businesses and also Facebook and Twitter interaction to engage potential customers and help to turn over stock constantly and get the sales in. Looking outside the square and thinking “Innovation” is imperative.

Let us remember that retailers need product, wholesalers need retailers and makers and agents need you to work together to keep our industry thriving.

Let us know your thoughts!

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