Homeplus Co. has introduced a system to settle payments for goods up to three times a month to restore trust with suppliers.
According to the retail industry on the 6th, Homeplus Co. has been paying a considerable number of suppliers for goods at intervals of at least 10 days to as long as 30 days since resuming operations on the 13th of last month. For some fresh food suppliers, the settlement period is as long as 60 days.
Homeplus Co. is known to have paid some fresh food suppliers about three months late in the past. Compared with that, the pace of payment has quickened in recent transactions.
At the time operations resumed, it also paid advances to some suppliers to secure inventory. It was reported to have paid about 1 billion won per supplier in advance before receiving the initial volume.
Homeplus Co. is seen as improving payment terms to normalize transaction relationships with suppliers that were shaken after the rehabilitation process.
During the corporate rehabilitation process, Homeplus Co. failed to pay for goods on time as its finances deteriorated, and some suppliers halted deliveries or demanded prepayment. Since resuming operations, it has been rebuilding volumes mainly for fast-turnover foods such as fresh produce and ready-to-eat meals.
Unresolved legacy payables to suppliers at Homeplus Co. total 503.2 billion won. Some suppliers are said to be carrying tens of billions of won in outstanding receivables. Even if settlement of new supplies is normalized, concerns among suppliers are unlikely to be fully resolved because unpaid past-due amounts remain.
Along with normalizing the product supply chain, Homeplus Co. is also pushing a store revamp centered on groceries. Under its rehabilitation plan, it will convert multilevel stores to single-floor formats and reduce floor space to around 1,000 pyeong, while streamlining assortments to focus on fresh foods, processed foods, and fast-turnover essentials. It also plans to expand the share of private brand (PB) products.
The idea is to boost the competitiveness of groceries and PB products while trimming store size and the number of items, similar to U.S. grocer Trader Joe's.