Independent Retail Europe, the association representing groups of independent retailers across the European Union, has warned that the European Commission’s proposal to shorten payment terms will hit the sector.
The association said it values the objective of the proposed regulation to combat late payments to increase the financial resilience of SMEs, but also emphasised that, in practice, the rules will weaken their financial position and favour wealthy and large international suppliers.
Payment Deadline
Independent Retail Europe explained that a 30-day payment deadline will force SMEs to sell their products rapidly and, therefore, at a lower price, to be able to settle invoices with their suppliers as retailers will generally need more than 30 days to sell any goods to consumers that they have bought from suppliers.
Its views align with EuroCommerce, which said earlier that the regulation would interfere with the established practices of retailers and wholesalers, who rely on ‘negotiating payment terms that offer advantages to all parties’, such as for products that sell over longer periods, or seasonal products.
‘Structural Squeeze’
The proposed 30-day payment deadline will put these businesses in a structural squeeze, eroding their already low net profit margins, which ranges between 1% – 3%, and increasing their fragility.
The proposal will also safeguard the interests of industry giants to the detriment of SMEs, Independent Retail Europe added.
For example, small electronic retail shops will be compelled to pay their large international manufacturers within 30 days.
The association remarked that applying the 30-day rule to non-perishable foods circumvents the Commission’s legal obligation.