September 23, 2019
Trading up in the What's Next Economy
Published in the September issue of Retail World magazine
How corporate trade is solving supply chain challenges and safeguarding business innovation
Disruption, volatility, and speed of change; accompanied by ever-increasing complexity - these are the hallmarks of the What's Next Economy. It’s no wonder supply chain professionals are doing everything they can to keep costs down, gain more control and agility, and deliver new forms of value to add longevity to their business.
As a company with commercial innovation at its core, Active International is colouring outside the lines: we’re making use of corporate trade as a tool to solve challenges with excess stock and/or improve the ROI delivered from existing media spends With us, adjustments and write-downs can become a discussion of the past. So, what exactly is corporate trade? In practice it’s simpler than it sounds.
Brands engage Active to solve several common commercial challenges:
- Slow-moving or excess inventory which is unable to return the anticipated value for their business, recovering their value without the financial burden of balance sheet adjustments
- Ongoing management of slow moving or excess inventory, significantly improving returns and freeing up valuable resource
- Improving the ROI on media budgets that ultimately are targeting better consumer sales, engagement and acquisitions.
Businesses have been engaging in corporate trade for decades now and over time, innovators within the supply chain circle have use it as a strategic tool to help them realise greater value for their inventory, general assets and media spends. While all these challenges are different and require unique solutions a well-designed corporate trade plan can eliminate operating losses and positively impact many aspects of their business.
Think of corporate trade as a financial insurance plan for excess or seasonal inventory, as well as a genius way to free up warehouse space for product that is higher-margin or faster-selling. The challenges that come with managing slow moving inventory and obsolete stock can -not only- be addressed but its value can be used to part-pay for media improving marketing budgets and reducing running costs. Not having to worry about inventory turnover, shrinking marketing budgets or business expenses is just one of the many benefits, allowing brands to focus more on business growth and innovation, and expand their market presence with larger advertising budgets.
We have been working with a top 5 global FMCG client since July 2018, managing their surplus stock exclusively. Within the first six months we were able to double their revenue on surplus and obsolete inventory while our client saved on resource time which now has been deployed into first-line sales strategy. The partnership results were outstanding as they continued to grow with a 12-month delivery 120% up YOY.
Another recent success story proves that it’s possible to achieve more from cash media spends without having to pay more. A national retail client wanted to embark on a brand exercise but typically was focused on offer-based campaigns they could quantify. Engaging Active during the agency briefing process was the first step. All parties were able to collaborate and guarantee 25% of the media investment to be returned in cash gift-card sales prior to the media even running. Over a 12-month period of investment collaboration the concept resulted in +$800,000 in gift card purchases. This result doesn’t include the additional value the media exposure delivered from the media agency’s strategy.
Guaranteeing ROI before spending a cent is a powerful and strategic tool for any commercial marketing team.
To find out more about the work we’ve been doing with Australian businesses, have a read of some of our success stories.
A marketing tool
Corporate trade has traditionally been deployed as a financial solution tool to solve any inventory problems. What we’re seeing is that more and more marketers are starting to build corporate trade into their annual planning as a smart strategy to amplify media and boost sales. In an increasingly fragmented media landscape, marketers are being challenged to bring more to the table with less spend and are asked to deliver a better bang for the proverbial buck. When done right, corporate trade unlocks value across the business where others can’t.
The winners of the “what’s next” economy will be those with the strongest organisational resilience - the ability to navigate volatility and continue to innovate while they operate. At Active International, we excel at helping business owners unlock hidden value in their assets and achieve new levels of financial flexibility. No matter what category, we simply help businesses to future-proof their business against supply chain challenge and prepare them for what comes next.