What is in a corporate trade?

Posted by Selina Martin, published in Retail World magazine April 2018 Corporate Trade
7 5 2018


Corporate trade can be a scary concept for retailers but pre-determining your expectations for return on value can reduce the risk of false starts.

Striking the right balance between stock and consumer demand is critical. And for marketers, the task of juggling two seemingly contradictory goals: ensuring unlimited stock and managing cash flow is challenging.

Too often retailers are burdened with unused, out of season or under-performing assets. This could be excess inventory to capital equipment which impairs the balance sheet. Unproductively, excess inventory is often either sold at a discount or simply left stored - taking up valuable space, depreciating in value and costing the business money. Corporate trade offers a solution that will earn back the value of those assets on your balance sheet by trading them into media.

Corporate trade is a model that focuses on restoring value, allowing businesses to realise excess stock by trading it for its true value in media assets. Businesses can partner with a corporate trade company as an ongoing strategic plan to drive profitable outcomes or create scope for media spend – a clever strategy for new product launch support. It also enables advertisers to obtain a higher return on maximizing the exponential value of excess assets, which in turn, will help to offset the cost of media expenses and assist in achieving bottom-line objectives.

Though of course, the concept of corporate trade can be complicated and sometimes scary for retailers.

Retailers can be reluctant to opt-into corporate trade worrying about the remarketing process of their excess stock and realisation of its value. Yet, just as successful retailers understand the value and importance of engaging in extensive and methodical due diligence before appointing a new distributor, they too need to excess care in nominating a corporate trade agency.

Pre determining expectations including the return on stock value, can minimise risks and prevent retailers from setting aside resources & valuable time on a corporate trade option.

Making corporate trade a success in large business

Here is an example of how a client’s due-diligence and negotiation process prior to the transaction was key to their corporate trade success.

Active International - a global and independent corporate trade company - were approached by a major retailer / supplier group on a specific inventory of high value Manuka honey following a decision to not sell the product via regular channels.

Even though there were no time pressures to move the stock quickly, given the size of the inventory the main business concern was that the stock was taking up valuable warehouse space. Being the first time that the retailer had worked with a corporate trade business, they were keen to set strict parameters around the process as well as a timeline on the return.  

In this case the client wanted the ability to test Active’s corporate trade model and gauge their capabilities in the media marketplace and delivering back the value of the stock before committing to a long-term partnership. Prior to the execution the Active team worked closely with the client to understand the business needs and together designed a tailored solution to deliver what the client required to take the next step to use corporate trade.

It was essential for Active to establish the needs of the client including remarketing restrictions, timeframes and approval process, value return within a set period with a financial payment plan and process as well as understanding of procurement spends (across media, freight, travel and print) so that discussions could be had on realistic deliverables and commitments from both sides.

To ensure the client would receive the same media as planned, priced and approved by their agencies while incorporating the corporate trade value, Active worked with the client’s media team and agencies of choice. All of these details were incorporated into a bespoke agreement which ensured both sides were protected and satisfied with the outcome. Once signed, the deal saw the retailer’s inventory moved in half the agreed upon turnaround time, and allowed them to realise their media spend immediately upon signing.

Active is just one example of a corporate trade firm that focuses on delivering solutions for advertisers.  Active allows clients’ to use their products or services

to part-fund their media expenses (across television broadcast, radio, out-of-home, print, digital, programmatic, and social media campaigns).

Ultimately, the success of corporate trade requires for retailers to review their inventory investment and ensure their cash value is being realised. Retailers need to be meticulous in their search for the right corporate trade partnership, and look for an agency that will work to stringent KPIs and return on value timelines to ensure long term success partnership.

 


Contact us

If you would like to find out how Corporate Trade could benefit your business, get in touch with Selina Martin, Commercial Manager, Active International by email or phone.

+612 9466 9103