As you are likely aware, Walmart Canada’s recent announcement that they will be implementing a new Vendor Investment Program (1.25% Infrastructure Development Fee & 5.0% E-commerce Development Fee) effective September 14th has led to discussion by a number of manufacturer/supplier associations, including the CHHMA, to lobby the Federal and Provincial Governments for the need to establish a Code of Conduct/Supply Code of Practice between Retailers and Suppliers in Canada.  This new measure needs to create an enforceable code of practice that will ensure fair and equitable treatment of suppliers.  

The below copy is being sent in letters to several Federal Ministers as well as the Premier Offices of Ontario and Quebec.

Dear Minister X,

Re: Retailer – Vendor Supply Code of Practice

As some of Canada’s leading and most trusted manufacturers/distributors of Housewares and Hardware products Canadians rely on every day, we, the members of the Canadian Hardware & Housewares Manufacturers Association (CHHMA), urge you to take action to correct damaging practices in the retail sector that limit our ability to invest, innovate, and create jobs in Canada.

Our companies’ long histories and significant operations in Canada are at risk. We directly employ tens of thousands of Canadians, and our sector is present in every province. We transform Canada’s resource into products that add value to homes, condos, offices, and schools and are exported around the world. As the COVID-19 crisis has made it clearer than ever before, our employees and the products we make are truly essential.

Unfortunately, years of government-approved mergers have left just a few retailers in control of more than 80 percent of retail sales in Canada. These giants have long implemented unfair practices that contribute to high costs – up more than 20 percent since 2012, while costs remained flat in the United States – and make Canada increasingly uncompetitive and severely limit manufacturing investment and job creation.

Since long before the pandemic, the power imbalance exploited by large retailers has hurt Canadian manufacturers, limited employment, driven capital investment away from Canada, and has left consumers with fewer, less innovative, more expensive choices at check-out. More than 80 percent of new branded products on store shelves were developed abroad, representing lost investment, innovation, and growth that have fled our shores. As Canada strives for the strongest possible post-COVID recovery, that imbalance simply cannot be allowed to continue.

In just the most recent and egregious example, Walmart Canada announced on July 24 that it will soon force suppliers to fund the chain’s physical and e-commerce expansions by unilaterally withholding payments owed to suppliers. This arbitrary payment reduction will shrink suppliers’ already slim margins by approximately 30 percent, forcing large companies to further withdraw investments from Canada and shuttering small Canadian businesses.

As we expected, other retailers quickly followed suit, publicly demanding the same forced “discounts.” We fully expect all the dominant chains to impose similar damaging fees, putting suppliers in a truly impossible situation, particularly as many are still struggling with the profound impacts of the pandemic.

Canada is not the first or only country to experience such damaging practices in a highly concentrated and powerful retail sector. When the grocery retail sector weakened manufacturing to an unsustainable level, the United Kingdom implemented a Groceries Supply Code of Practice (GSCOP) that governs fair practices for how retailers manage their relationships with suppliers. [1]

Since the implementation and enforcement of the UK GSCOP, it has freed suppliers from fears of retribution and held dominant retailers accountable for upholding fair contract negotiations, invoicing, and payment terms.  The GSCOP makes the UK’s food and consumer packaged goods supply chain more equitable and predictable, keeping unfair costs from negatively impacting consumers’ access to affordable and innovative products.

Since implementing the GSCOP, the UK has seen dramatic improvements in retailers’ adherence to fair practices. Since 2014, Code-related complaints from suppliers have fallen by more than half, with just over one-third of suppliers reporting Code-related issues in the last year (down from 41 percent in 2019 and a remarkable decline from nearly 80 percent in 2014). The number of suppliers reporting issues with retailers’ unfair order forecasting, payment delays, and product de-listing has fallen by about two-thirds since 2014, alone. [2]

The UK’s Grocery Code Adjudicator and a recent statutory review have confirmed that this remarkable improvement in retailers’ compliance with fair business practices is a testament to improvements made possible by the GSCOP, which has fostered improved communication while maintaining flexibility in the supply chain. [3]

It is past time for Canadian law makers to take seriously the negative consequences of unfair retail practices and work together to urgently implement an enforceable code of practice that requires fair, equitable treatment of suppliers. Without improvements, Canada risks closing plants, losing jobs, and gutting domestic manufacturing and supply chains at exactly the moment they are needed most to power sustainable post-pandemic resilience, recovery, and growth.

Yours sincerely,
Sam Moncada
President
Canadian Hardware & Housewares Manufacturers Association

Footnotes:
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Please respond to Sam by email at smoncada@chhma.ca if you would like to add your support to this effort or give him a call at 416-282-0022 ext.125 if you would like to discuss further.