Econet Asks Its Suppliers To Cut Prices By 20% Starting ‘Today’

So this happened:

It’s difficult for everyone

As much as we understand the argument given by Econet in this letter, the story is not that simple. They are asking suppliers to cut prices by a hefty 20% in an environment that they themselves admit is characterised by inflation and deterioration in the value of the currency.

In business, a business that doesn’t increase its prices is effectively lowering its prices and margins. To then go a step further and actually reduce pricing and by 20% at that is near impossible. Where did Econet get the number 20? Out of a hat right? What makes them think their suppliers have enough margin to cut prices this way?

Desperate times

This letter by Econet does not make sense at all and when you see such a letter being drafted by people you know to be cleverer than you, it tells you how bad things have become.

I don’t think Econet’s idea will work. Reliable suppliers will not be able to accept this and remain reliable. Econet will start getting inconvenienced or some suppliers will just drop out. Econet will get ‘other’ suppliers- not B class but D class suppliers who will do worse. End result: they will be left with a higher cost structure than before their big idea.

Still, I wish them and their suppliers all success.