Uchumi Supermarket chief executive Julius Kipng’etich wants suppliers to drive the change of payment structure to ensure they get their money on time.
He told small and medium enterprises being trained by the Common Market for Eastern and Southern Africa (Comesa) Business Council in partnership with the Kenya Association of Manufacturers, to form an organisation and set terms with retailers.
The Uchumi boss said with one body, suppliers will have a bargaining power to come up with a Memorandum of Understanding with supermarket lobby Retail Trade Association of Kenya (Retrak).
“Use the power of numbers, do not come as one to the big boys, sign an MoU with Retrak on a financing cycle so we can pay you in time because we need you to survive as a business,” he said in Nairobi yesterday.
Delays in payment were at the centre of Uchumi’s troubles last year, which saw suppliers stop delivering goods to its stores owing to a Sh1 billion debt.
Mr Kipng’etich said there should be a sustainable payment system that would have an agreeable cycle, which will make it convenient for both suppliers and retailers. Under the current model, supermarkets have negotiated credit terms of between 30 and 90 days.
However cash-flow problems mean that some supplies are only paid after the commodities have been sold, which may take longer.
Some retailers have, however, shifted focus on leasing space instead, passing the burden of inventory to suppliers in return for prompt payments, a situation that ensures shelves are not left empty while attracting and retaining reliable customers.
This model may lead to improved product quality since it attracts quality suppliers and eliminates carrying of dead inventory.
Uchumi also operates a similar model for part of its floor space, allowing specialty shops to rent space on condition that they don’t sell foods and products sold by Uchumi to avoid direct competition.