Target To Follow Amazon, Walmart In How They Pay Vendors
MINNEAPOLIS (WCCO) -- One of Minnesota's largest companies is making changes in order to stay competitive.
Target will pay vendors for items you see in the store later, and at a discount. The changes go into effect on Sunday, July 30.
New payment terms for vendors means some businesses that provide products will now be paid 30 days later, at least twice as long as before.
And Target will now take a 2-percent discount across the board.
"It's one in which they are getting what I call 'vendor squeezed,'" said University of Thomas Professor Dave Brennan. "It's a way to enhance profits for Target at the expense of particularly-smaller vendors who have very little chance of getting much influence with Target."
Target said it is updating and standardizing the terms to simplify the payment process, aimed at helping the company and vendors operate more efficiently.
Brennan says this move should improve Target's profitability, which in turn helps shareholders -- but it will hurt the vendors.
"Two percent here, 2 percent there, suddenly a small vendor becomes unprofitable," Brennan said. "They can demand it, and for the case of the vendor, it's a lose-lose situation."
Brennan says Target follows Walmart and Amazon in this practice.
"They are the leader, and as a result what happens is other retailers look to the leader for what direction that they're going in," Brennan said.
In the end, the change should give Target more cash flow, and could translate into lower prices for customers.
Target spokesperson Joshua Thomas gave this statement to WCCO:
In May, we notified a number of our vendors that Target would be updating and standardizing our payment terms, effective July 30.
These updates simplify the payment process and are aimed at helping us and our vendors operate more efficiently.
A standardized approach like we are implementing is consistent with retailers of Target's size and scale across the industry.
We don't anticipate these updates will have any impact on guests who shop at Target.