How to manage costs without jeopardising value

Posted by Cameron Swan, MD, Active for Retail World Corporate Trade
19 7 2015

Never has a business complained of too much cash and too little costs…?

More frequently businesses are attracted to corporate trade to help them with growing costs and pressures on inventory sales. Corporate trade allows companies to extract more value from excess, slow moving or even first line inventory.

Never has a business complained of too much cash and too little costs…?

More frequently businesses are attracted to corporate trade to help them with growing costs and pressures on inventory sales. Corporate trade allows companies to extract more value from excess, slow moving or even first line inventory.

The value of excess stock

There are many retail and FMCG companies who still have piles of excess stock taking over their warehouses waiting to be sold, while new stock is on its way. Managing excess stock could ultimately become a living nightmare for many businesses. The two obvious solutions are to either mark downs or liquidation both of which come at a significant cost.

In a bespoke corporate trade solution, payment for inventory is typically equal to its full value and not the diminished market value for the stock. Corporate trade companies such as Active International pay for this stock using “trade credit” (corporate trade currency) which businesses  use to part fund costs such as media advertising, travel and events, freight and logistics, and retail marketing – releasing the capital or realising extra value from their under-performing assets.

"There are countless ways to utilise the corporate trade business model to create extra value for clients with plenty of success stories to tell. For instance, Active helps a range of FMCG clients in Australia and overseas to tackle the challenges of being over-stocked, or carrying short-dated or delisted stock or simply using their inventory to generate extra media value for their business" commented Cameron Swan, Managing Director, Active International.

Corporate Trade companies have helped thousands of businesses around the globe earn new-found revenue or restore value to underperforming assets equalling billions of dollars. 2013 saw a record of  400,000 companies worldwide that utilised their excess stock and underperforming assets, to earn an estimated USD12 billion dollars in previously lost revenues*.

What’s in it for marketing and brand managers?

Marketers and Brand Managers see their media budgets constantly shrinking while they tirelessly chase an ROI on their media spend. To make the two ends meet, corporate trade is used as a strategic tool that makes their marketing dollars go further.

 “We work with more than 80% of the media agencies in Australia, and across the board we experience the constant battle marketers have as they look for ways to create efficiencies and squeeze more out of their decreasing budgets and we are in a position to offer tailor made solutions that will help them meet their objective” Andrew Rogers, Head of Media, Active International commented.

In essence, corporate trade allows marketers and brand managers in any industry category (FMCG, Retail, Automotive etc) to use their unwanted stock, inventory or assets to part-pay for their media without jeopardising the quality of media they receive. Corporate trade companies work with their client’s media agency to ensure the extra value is delivered. This process, however, has no effect on how the media agency sets and executes the media strategy for their client or the quality of media bookings they receive.

What's in it for procurement?

Today’s procurement professionals also feel the pressure; mainly juggling competing priorities on a daily basis. They are simultaneously challenged with securing the highest value services while negotiating for the lowest prices. There are, however, a number of solutions that can help procurement lower the total cost of services they purchase without diluting service quality, and corporate trade is one of them.

While procurement should always make managing costs a top priority, a singular focus on slashing vendor pricing could expose the company to greater risk long-term.

“It is impossible to negotiate a 15 per cent discount on a service with a 5 per cent profit margin without compromising either the quality of the service or the solvency of the vendor. There aren’t too many companies that can sustain their business by operating in this way” commented Kevin Farkas, Executive Vice President of Sales at Active International.

With corporate trade, businesses have a powerful tool to address the demand of reducing business costs, budgets and managing excess stock without jeopardising the value they need and expect.

www.irta.com (International Reciprocal Trade Association).

 


Photo of Cameron Swan

Contact us

If you'd like to find out more about Corporate Trade and explore our business models, get in touch with Cameron Swan, our Managing Director by email or phone.

+61 2 9466 9116