If retailers could get away with delaying payments to vendors in the past, the pandemic and its devastating ripple effects on the industry may have lowered suppliers' tolerance for the money-preserving maneuver. Struggling retailers often delay payment to their vendors, but the pandemic saw a sharp rise in the number of retailers who were suddenly strapped for cash amid mass store closings and seismic shifts in consumer behavior. Sudden retail bankruptcies left vendors with huge losses, and credit insurance and factoring companies were stuck with losses of their own when these vendors' policies called for reimbursement. As a result, they scaled back, removing the safety net for many suppliers. And the effects continue to trickle down. Vendors are taking a hard line with retailers at a critical time, when the industry is just beginning to bounce back.
Vendors are “shell-shocked” after a string of Covid-era bankruptcies left them with large losses, and more concerned about guaranteeing they’ll be paid, said Perry Mandarino, head of restructuring and investment banking at B. Riley. “Late payments are not being tolerated,” Mandarino said.