Fourth quarter is upon us and before we know it we will be immersed in the holiday season. Seasonal products, in some cases, are already hitting the shelves.
With everyone excited for cooler weather and pumpkin spice flavored fill-in-the-blank, it’s still hard to know how the season is going to end.
Although there are some glimmers of hope, it seems that there are predominantly predictions of weakness based on the lackluster Back-to-School season.
According to a recent NRF survey, people were spending less on Halloween decorations this year in comparison to last. Compounding matters, thousands of consumers may be unemployed (or just coming off forced, unpaid vacation) and tighter with their purse strings this holiday season, depending on the length of the government shut down.
So what do you do if you find yourself with excess holiday inventory on the shelves? What if this year’s Black Friday is less green and more red?
Whether you’re a retailer or a manufacturer, you have a couple of options. In a Chain Store Age article earlier this year, Kevin Farkas, Executive Vice President, discussed two solutions that should be considered if you find yourself in this situation: liquidation and corporate trade.
Liquidation of inventory results in selling assets off quickly, often for less money than originally paid for them. Companies can either use their normal distribution channels at dramatically reduced prices, or sell entire inventories to a liquidator, also known as an off-price buyer, who will pay a lower price for the products, paying for them immediately and taking possession.
In corporate trade, 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 making expenditures through the corporate trade company, using the trade credit as partial payment. Expenditures often purchased through a corporate trade company include advertising, travel & events, freight & logistics, retail marketing.
Do you have a contingency plan in place? When will you start thinking about alternative solutions?
DID YOU KNOW:
- According to Mobile Commerce Daily, 800,000 employees out of the 2.9 million federal workers will be furloughed as a result of the government shutdown..
- Average spending on Halloween has increased 54.7% since 2005, with total spending estimated to reach $6.9 Billion in 2013.
- 30% of consumers surveyed by the NRF are confident there are chances for a strong economy during the next 6 months. 44% have little confidence, 18% have no confidence.