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Tesco faces supplier backlash over fulfilment fee to cover online costs

By Nagasunder in UK Business News, posted March 10, 2023

A plan from Tesco to introduce fulfillment fees for online and Booker wholesale operations have not gone down well with its suppliers.

According to The Grocer, the supermarket giant has written to its suppliers to explain the new charges, which go into effect on March 13.

They are being implemented to help cover the cost of serving customers online as its digital operations grow and become more complex.

Suppliers who do not comply with the new fees may face range reviews or price reductions, according to the retailer.

While the fees have not been disclosed in detail, they are believed to be "significant," with the supermarket's "smallest suppliers" exempt from the charges.

The fulfilment fee for Tesco UK suppliers will be charged per unit on all products sold through Tesco.com or the app.

Suppliers for Booker and those for the Republic of Ireland will be contacted separately.

Suppliers were told in a letter seen by The Grocer from Tesco's chief product officer Ashwin Prasad that the group needs to charge the fee to share a fairer burden of the costs for online fulfilment.

It said: “Tesco shoulders the majority of fulfilment costs – whether it’s serving more than one million online orders a week in the UK or getting essential products to thousands of independent retailers and catering customers. We need to achieve a more balanced approach.”

The letter goes on to caution suppliers that failure to comply will result in a number of potential sanctions.

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“This fee is essential as we work to fulfil more orders for our customers across the group and we are asking suppliers to engage on this request and to support us.

“Without introducing a supplier contribution, we would need to take additional decisions on range optimisation, differentiated price and trade plans. It is important you work with us on the fulfilment fee as we both look to benefit from the investment into serving customers.”

Source: Retail Gazette