Stick to code of practice for vibrant retail sector

Ideas & Debate

Stick to code of practice for vibrant retail sector

A Tuskys Supermarket branch in Nairobi. FILE PHOTO | NMG 

Kenya’s retail industry has in the recent past faced challenges, key among them being delayed payments and trade dealings which have adversely affected the business environment for both retailers, manufacturers and suppliers.

To mitigate this, retailers, manufacturers and suppliers came together to draft a retail code of practice which guides business dealings between the parties.

The code, which was signed last year, has led to improved business relations between retailers, manufacturers and suppliers but we feel more needs to be done and we are urging all stakeholders to adhere to the code of practice to ensure a vibrant sector, especially at this moment when the world is facing a pandemic and to also avoid some of the challenges that the retail sector has experienced in the past.

The code of practice contains various elements which are undergirded by the principle of fair and ethical dealing.

These elements include ensuring that retailers do not delay payments, do not obligate suppliers to pay for marketing costs, shrinkage, better positioning of goods and guarding against unfair delisting of suppliers among other things.

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Suppliers also have certain responsibilities under the code, which include undertaking actions required by a retailer in response to ordinary commercial pressures, dealing with the retailers fairly and lawfully and in recognition of the retailers’ need for certainty as regards the risks and costs of trading, particularly in relation to stocking levels, cash flow and product movement.

Maintaining trade confidentialities, communicating to the retailer on any anticipated shortages and supply constraints and assisting retailers in training in product knowledge and handling to reduce shrinkage, among other things.

All these elements though are only effected through supplier agreements and joint business plans which the code states are mandatory.

We therefore, as the Retail Trade Association Of Kenya (RETRAK) are asking suppliers and retailers to ensure that such signed agreements are in place especially as we all work to mitigate the effects of Covid-19 on the retail sector and the economy in general.

These agreements and joint business plans will contain finer details of the above elements and especially what the payment terms are and when suppliers should expect payment.

Retailers stand to benefit from this because they can plan their cashflows, negotiate with suppliers for better margins, focus on profitability and not just sales which will lead to cautious growth plans that ensure that suppliers’ money is not diverted. Sound financial management by retailers has long term benefits not just to them but also to the economy at large.

Suppliers are also an obvious winner for many reasons once all parties adhere to the retail code of practice and sign negotiated agreements that are respected.

If all this is done correctly, one of the benefits is that the supply agreement that stipulates a legally backed payment period can be converted to an asset that suppliers can use to negotiate trade credit from financial institutions.

That is also the beauty of the retail code of practice, it is not just a self-regulation tool but it will soon be backed by law under the recently assented to amended competition act. However, we do not envisage having to use the law to regulate the retail industry. We believe that adherence to the code of practice will lead to mutually beneficial relationships that will help keep the industry vibrant.

In the event that a supplier and a retailer do not agree, the code provides for a dispute settlement committee which is comprised of seven persons, two from RETRAK, two from the Association of Kenya Suppliers and the Kenya Association Of Manufacturers, one person from the Council Of Governors and one person from the Ministry of Trade.

This will ensure timely resolution of payment and fair-trade related cases in the retail sector thus saving the affected parties costs associated with delayed justice.

This self-regulation tool has been a document that has been arrived at after about four years of hard work, fall outs between the stakeholders during the negotiations, stalled talks, heated discussions and angry walk outs but also successful mediations by the Ministry of Trade specifically Dr Chris Kiptoo, former Principal Secretary at the State Department Of Trade all in a bid to ensure that we have a vibrant retail sector.

It is, therefore, only prudent that all parties involved adhere to the code because this so far seems to be a tool that seems to be working after many failed attempts over many years of trying to find a solution to some of the challenges affecting the retail industry.

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