A new year brings everyone excitement for a fresh new start. As we aspire to make the New Year bigger and better, we’re not always clear of inventory from the year that was.
Managing excess inventory can ultimately become a living nightmare for many businesses.
The obvious solution is to mark down inventory in store, often multiple times, which can often result in significant loss against the excess inventory. Other solutions may include Liquidation or Corporate Trade (also known as barter).
Retailers and manufacturers often turn to liquidation because of its ability to generate cash immediately. It’s a solution by default to excess inventory issues. While the benefits are clear, liquidation does come with significant costs.
With Corporate Trade on the other hand, excess inventory is purchased with cash or a trade credit. Payment is typically equal to the wholesale/acquisition cost of the inventory. In return, the retailer commits to allocating a portion of their media spend or other expenditures through the corporate trade company, using the trade credit as partial payment.
For liquor businesses Corporate Trade can be very powerful. Not only it is a strong alternative solution to liquidation, but also it can offer new distribution channels and remarketing solutions for excess, slow moving or short dated products. It has the ability to unlock additional media value for brands by allowing them to part pay for advertising using their unwanted liquor stock, and therefore making their marketing budgets work harder in the New Year.
New distribution channels
Corporate trade enables retailers to receive more value for their excess inventory versus traditional liquidation, as the value received –in cash or in trade credit– is typically higher than the liquidation value of the goods. And, in many cases, corporate trade companies will sell the inventory to the same distribution channels that the retailer has in place, meaning that supply chain disruptions are minimal. In addition, since corporate trade companies have partnerships across multiple categories, they provide access to new, global or local distribution channels – ones that may otherwise be currently unexplored.
What would your New Year’s resolution be?
Liquidation is straightforward and widely accepted, but is limited in the financial benefit it delivers.
Corporate trade delivers higher financial benefits, additional media, new distribution channels, unique remarketing opportunities with long-term benefits, leading to new product sales and added value for inventory.
Ultimately, it comes down to the individual liquor retailer, their business needs and their determination to explore alternative ways to go about their business; possibly the best New Year’s resolution for 2016 and beyond.