Payment Culture in the UK Digital & Mobile Sector
In 2023, large digital and mobile businesses in the UK are continuing to dominate the digital marketplace, and many small businesses are struggling to keep up. These small businesses often act as suppliers to larger companies, providing goods and services that are essential to the operation of these digital giants. However, the relationship between large digital businesses and their small business suppliers is not always straightforward.
One issue is the power dynamic between large digital businesses and small suppliers. Large companies often have significant bargaining power, which they can use to negotiate favourable terms with their suppliers. This can include lower prices, longer payment terms, and more stringent quality control requirements. For small businesses, this can create a difficult situation where they feel pressured to accept less-than-favourable terms in order to secure business with a larger company.
Another challenge faced by small business suppliers is the unpredictability of demand. Large digital businesses often have fluctuating demand for their products and services, which can make it difficult for small businesses to plan their operations and meet the needs of their customers. This can be particularly challenging for small businesses that have limited resources or rely on just-in-time inventory management.
Looking at the payment culture statistics last year versus this year, we notice the five slowest payers, all big online retailers, all taking longer to pay their suppliers than this time last year. In the retail sector, Asos, Net-a-Porter, Shop Direct are all taking more than 70 days to pay, with mobile retailers Vodafone and AO Mobile taking as long. However, we see many online retailers and services businesses choosing to pay in well less than 20 days, so this seems to reinforce our view that payment time is a matter of choice. In digital and mobile businesses, most of their work is transacted through speedy technology, so we would expect to see that reflected in their payment practices. But that is not the case for all.
Overall, the relationship between large digital businesses and their small business suppliers in the UK is complex and evolving. While there are certainly challenges to be faced, there are also opportunities for small businesses to succeed by adapting to the changing needs of the digital marketplace.