Make more of your surplus stock

Dean Wilson 05 Jan 2011

Make more of your surplus stock in the New Year

With Christmas almost a distant memory, one of the key issues that faces both online and offline retailers in the New Year is dealing with excess stock that is left over following the festivities. The choice of Christmas-branded products seems to get larger each year and varies from the staples of Christmas pudding and advent calendars to Santa outfits for children and Christmas monopoly.

Each year retailers face the task of managing their stock levels and dealing with surplus stock which loses value as soon as the festive period is over. Of course, this isn’t simply an issue related to Christmas, but is a year-round dilemma that applies to summer stock, Halloween products, Easter eggs and more.

Excess stock can be a huge problem for all retailers, ultimately damaging their bottom line. Whether you are an online or offline retailer, the problem of dealing with excess stock exists to varying degrees. The good news is that there are steps that can be taken, one of which is the use of corporate trade, which is in essence a form of barter, to minimise the negative impact.

More from media spend

Corporate trade companies allow brands to maximise value from their excess stock by buying these assets in return for “trade credits”--for more than they would achieve in cash in the open market--which the brand can spend on a range of services from media campaigns and printing to conference facilities and corporate hospitality. To provide an example of how much value can be unlocked from surplus stock, we were able to release over £91 million in value globally via trade credits last year.

In a typical deal a retailer is paid three times more than the stock’s “realisable” cash value in trade credits. Typically trade credits can be used to pay for between ten and 25 percent of the cost of an advertising campaign, highlighting the potential gains that retailers stand to make.

Despite corporate trade being a well-established industry, not enough retailers make the most of the opportunity to generate extra value from their media spend. As a result, retailers are often left having to “cut their losses” with their surplus stock, which they could use to boost their ad spend. The growth of corporate trade has led to more and more media agencies working with these organisations when planning and buying campaigns on behalf of clients and forming partnerships with them.

According to recent figures by Nielsen, retailers spent £998,838,485 across TV, press, radio, cinema, outdoor and online advertising over the last twelve months. Using our proprietary formula which calculates how much retailers can boost their advertising spend by if they take advantage of being paid in trade credits for underperforming or excess stock, we worked out that retailers have potentially missed the opportunity to boost their advertising spend by £100 million or more over the last year alone.

But what are the key factors for retailers to bear in mind when partnering with a corporate trade organisation to make more of your excess or unwanted stock?

Firstly, retailers should only deal with the largest, established operators in the marketplace. It’s these that have the financial stability that ensures they will be around in the long term. For brands it means they can safely spend their trade credits at their leisure without worry that the corporate trade partner might not be around to spend it through.

The corporate trade company should have a worldwide presence. It’s highly likely that at your agency you have various clients who want you to implement cross-border campaigns. A corporate trade company with operations around the world can help generate extra value for media spend within the countries it operates in. It’s this reach that also provides added flexibility and value.

Ask which media agencies and also brands the business currently works with. If they don’t work closely with the top media agencies, across the likes of Omnicom, Havas, WPP, for example, they are probably not well thought of or experienced enough, so it’s worth giving them a miss.

These corporate trade organisations are also unlikely to have strong relationships across a broad range of media owners, which they can leverage to ensure advertisers generate the best value from their trade credits.It’s vital that brands only sell their stock via approved resellers to avoid seriously damaging their brand. To this end it’s the larger and more established corporate trade businesses that are more likely to have the contacts to sell a brand’s excess stock onto approved resellers.

Ensure the corporate trade business is open and honest. To find this out meet up with them, before making an appointment, to see what they can offer all parties. If they can’t deliver a deal which includes and benefits everyone involved, move on.

In this day and age technology has progressed sufficiently for corporate trade organisations to offer 24/7 reporting on how trade credits are being spent. This knowledge can be used to easily tweak trade credit spend in real time to ensure the brand constantly generates the best results from their campaigns. Generally it’s the larger companies that have this technology. Always ask what reporting procedures are in place before making an appointment.

Dean Wilson is vice president, international division, at corporate trade company Active International.

Dean Wilson


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