Red Sheds eyeball suppliers

New Zealand's biggest retailer is staring down its suppliers with plans for a 10 per cent discount on prices as well as slashing supplier numbers by 50 per cent.

As a result, one disgruntled supplier is planning to contact others to fight the strategy collectively.

The Warehouse's top 50 suppliers were called in for one-on-one meetings last week and 150 to 200 smaller suppliers were summoned to a group meeting. (The Warehouse has more than 3000 suppliers locally and internationally, 20 per cent of which provide 80 per cent of the stock).

"It's basically showing an arrogant attitude from retailer to suppliers. They see it as non-negotiable. It's the old Wal-Mart way of doing business," one angry supplier said.

Speaking on condition of anonymity, the supplier said he was called in for a meeting last week and asked to cut prices by 10 per cent.

"It's been put down as non-negotiable. We've been told we have to reply by March 1," he said, adding he was making contingency plans to walk away - despite The Warehouse being one of his biggest customers.

"We don't like it - we don't like the culture change."

Another supplier - also wanting to remain anonymous - said he could not afford to lose The Warehouse contract as it made up almost 20 per cent of business, worth millions of dollars annually.

He was also called in last week and has been asked to respond at a second meeting planned for tomorrow night.

"They outlined a number of initiatives they're implementing including consolidating suppliers - cutting them by half. What they indicated was [it] was to fund their changes to the stores," he said.

Two other suppliers confirmed meetings, saying not only price cuts were on the agenda but "other issues" such as delivery, quantity and service.

"There is a plan but they're no different to any other retailer, they're all looking to cut costs," one said.

Another supplier said his meeting was "very productive" and also addressed The Warehouse cutting its costs and searching out the best deals. He said the retailer talked about cutting the number of products it stocked.

"It was definitely not a negative meeting. It was not a 'we're out to screw you meeting'," he said, adding that his company would now look at its own cost structures.

"It probably gives us all a jolt back down to reality."

The Warehouse chief executive, Ian Morrice, did not hide the fact the company had been speaking to suppliers - but said it had contacted only about 200 of the 3000 so far. Eventually, this would be followed by its Australian stores as well as Warehouse Stationery.

"This is a private and confidential initiative shared with our suppliers, some of whom have chosen to come to you," Morrice said. He expressed concern some suppliers would learn of the changes via the media.

Dubbing the initiative the "strategic supplier management programme", Morrice said the aim was not only to provide the cheapest product, but also to back it up with service and quality.

"It's the start of us taking a much more strategic, long-term approach to building a closer, more mutually profitable relationship," he said.

"The profitability is only one aspect of what we're asking our suppliers to achieve. We're also looking to improve the quality of product, the quality of service that we get into our distribution points."

About 35 per cent of The Warehouse's stock is locally sourced.

Figures are not available on how much the company spends on product each year - but its revenue in this country is around $ 1.4 billion, so such spending has to be in the hundreds of millions.

Morrice would not answer questions about 10 per cent supplier bill cuts, supplier number reductions or what the money saved will be spent on.

Last month, The Warehouse issued a warning saying profit for the six months to January 30 would be between $50 million and $54 million - a drop on last year of between 3 and 10 per cent.

Full-year earnings would be between $66 million and $71 million - a drop of up to 19.5 per cent on expectations in September last year.