4 ms·

They actually don’t buy all the products they sell. They often only pay the manufacturers after its sold. And sometimes don’t return the units which don’t sell

jedberg 6y ago
> They actually don’t buy all the products they sell. This is not true at all. Costco buys everything they sell. > They often only pay the manufacturers after its sold. This is true, and may be where your confusion lies. They buy on net 30/60/90 terms from their vendors. This means they have 30/60/90 days to pay them. Because they move inventory so quickly, they have often sold an item before they have to pay for it. But they are still buying it and still taking the risk that it won't sell. > And sometimes don’t return the units which don’t sell This is only true because as I said before, they own the items.
- sib 6y ago
  Perhaps, but Walmart (and many other retailers) do not pre-buy all the products that they sell.
  - notatoad 6y ago
    do you have a source for that? because my understanding (from my time working in that industry) is that everything is sold in exactly the fashion that the parent describes - wal-mart purchases from suppliers and sells to customers. they purchase a lot on credit, but no supplier is giving wal-mart terms like "just hold this in inventory for as long as you want and pay us whenever it sells"
    - HenryBemis 6y ago
      I've watched plenty of Shark Tank episodes to learn/know that yes many retailers don't buy from you. They let you sell in their space, and after they get a hefty cut, they give you your share. And if it doesn't sell, you get it all back. To enhance the blackmail, they ask up front money's for a "better position in the shelves".
      - deleted 6y ago
        [deleted]
    - sib 6y ago
      It depends on the category and retailer. My source (which I understand may not be satisfactory) comes from working at two of the biggest US retailers for a total of almost 9 years.
- cosmie 6y ago
  The parent's referring to consignment inventory[1], not payment terms. The model isn't common for general consumer goods retail, but it's a fairly common practice once you get into more specialty and high-priced inventory. [1] https://www.warehouseanywhere.com/resources/consignment-inventory/ https://www.warehouseanywhere.com/resources/consignment-inve...
- hammock 6y ago
  You seem to be speaking only from the perspective of Costco, which may be true. But there are many other retailers like Walgreens who, even if they happen to be buying their stock, force suppliers to buy it back if it doesn't sell, which leads to an equivalent outcome. This process has nothing to do with payment terms (net 30 etc). I'm not making this up. There is an entire cottage industry of "product rotators" who work on behalf of suppliers to go into stores and "rotate" the product that's closest to expiration to the front of the shelf, because the supplier has to pay the retailer for any product that expires before its sold.
  - srtjstjsj 6y ago
    Ohhh. I've always wondered who are these low-English-speaking people with clipboards and scammers who seem to be stock clerking at the store, but when I ask a question they say "I don't work here".
    - hammock 6y ago
      Yes, they work for the manufacturers, or more likely, an agency of the manufacturers. Most of the retailers even require suppliers to put up their own advertising in the stores - the signage you see sticking out of shelves and on the floor and hanging from the ceiling (which, of course the retailers require minimum spends on - as a way to squeeze margins further in their favor)
- gav 6y ago
  > But they are still buying it and still taking the risk that it won't sell. I don't know about Costco, but the big box stores don't carry any risk. If the product doesn't sell then they return it and deduct that off your next invoice. The same happens for a customer return. Depending on the retailer/product category you might get charged slotting fees, pay-to-stay, plus a share of promotional costs[1]. There are also other fees for use of distribution centers, discounts for paying early (even if it's not early), fees (or extended terms) for slow-moving products, and so on. "Owning the items" feel less correct than "borrowing items with a promise to pay". [1] https://traxretail.com/blog/quick-guide-shelf-space-costs/ https://traxretail.com/blog/quick-guide-shelf-space-costs/
  - Falling3 6y ago
    > I don't know about Costco, but the big box stores don't carry any risk. If the product doesn't sell then they return it and deduct that off your next invoice. That clearly does not apply in many instances, otherwise we wouldn't have clearance sections. There are all kinds of scenarios where it's either not possible, not feasible, or just not economically viable to return products to the manufacturer.
    - cnst 6y ago
      I'm not sure what's your point here is; but the idea is that with big B&M stores, it's still the manufacturer that is ultimately liable for the product; so, if the product doesn't sell, it's probably up to the manufacturer whether they want it back or may be interested in putting it into clearance and/or straight to the rubbish or recycling bins.

jedberg 6y ago

> They actually don’t buy all the products they sell. This is not true at all. Costco buys everything they sell. > They often only pay the manufacturers after its sold. This is true, and may be where your confusion lies. They buy on net 30/60/90 terms from their vendors. This means they have 30/60/90 days to pay them. Because they move inventory so quickly, they have often sold an item before they have to pay for it. But they are still buying it and still taking the risk that it won't sell. > And sometimes don’t return the units which don’t sell This is only true because as I said before, they own the items.

sib 6y ago
Perhaps, but Walmart (and many other retailers) do not pre-buy all the products that they sell.
- notatoad 6y ago
  do you have a source for that? because my understanding (from my time working in that industry) is that everything is sold in exactly the fashion that the parent describes - wal-mart purchases from suppliers and sells to customers. they purchase a lot on credit, but no supplier is giving wal-mart terms like "just hold this in inventory for as long as you want and pay us whenever it sells"
  - HenryBemis 6y ago
    I've watched plenty of Shark Tank episodes to learn/know that yes many retailers don't buy from you. They let you sell in their space, and after they get a hefty cut, they give you your share. And if it doesn't sell, you get it all back. To enhance the blackmail, they ask up front money's for a "better position in the shelves".
    - deleted 6y ago
      [deleted]
  - sib 6y ago
    It depends on the category and retailer. My source (which I understand may not be satisfactory) comes from working at two of the biggest US retailers for a total of almost 9 years.
cosmie 6y ago
The parent's referring to consignment inventory[1], not payment terms. The model isn't common for general consumer goods retail, but it's a fairly common practice once you get into more specialty and high-priced inventory. [1] https://www.warehouseanywhere.com/resources/consignment-inventory/ https://www.warehouseanywhere.com/resources/consignment-inve...
hammock 6y ago
You seem to be speaking only from the perspective of Costco, which may be true. But there are many other retailers like Walgreens who, even if they happen to be buying their stock, force suppliers to buy it back if it doesn't sell, which leads to an equivalent outcome. This process has nothing to do with payment terms (net 30 etc). I'm not making this up. There is an entire cottage industry of "product rotators" who work on behalf of suppliers to go into stores and "rotate" the product that's closest to expiration to the front of the shelf, because the supplier has to pay the retailer for any product that expires before its sold.
- srtjstjsj 6y ago
  Ohhh. I've always wondered who are these low-English-speaking people with clipboards and scammers who seem to be stock clerking at the store, but when I ask a question they say "I don't work here".
  - hammock 6y ago
    Yes, they work for the manufacturers, or more likely, an agency of the manufacturers. Most of the retailers even require suppliers to put up their own advertising in the stores - the signage you see sticking out of shelves and on the floor and hanging from the ceiling (which, of course the retailers require minimum spends on - as a way to squeeze margins further in their favor)
gav 6y ago
> But they are still buying it and still taking the risk that it won't sell. I don't know about Costco, but the big box stores don't carry any risk. If the product doesn't sell then they return it and deduct that off your next invoice. The same happens for a customer return. Depending on the retailer/product category you might get charged slotting fees, pay-to-stay, plus a share of promotional costs[1]. There are also other fees for use of distribution centers, discounts for paying early (even if it's not early), fees (or extended terms) for slow-moving products, and so on. "Owning the items" feel less correct than "borrowing items with a promise to pay". [1] https://traxretail.com/blog/quick-guide-shelf-space-costs/ https://traxretail.com/blog/quick-guide-shelf-space-costs/
- Falling3 6y ago
  > I don't know about Costco, but the big box stores don't carry any risk. If the product doesn't sell then they return it and deduct that off your next invoice. That clearly does not apply in many instances, otherwise we wouldn't have clearance sections. There are all kinds of scenarios where it's either not possible, not feasible, or just not economically viable to return products to the manufacturer.
  - cnst 6y ago
    I'm not sure what's your point here is; but the idea is that with big B&M stores, it's still the manufacturer that is ultimately liable for the product; so, if the product doesn't sell, it's probably up to the manufacturer whether they want it back or may be interested in putting it into clearance and/or straight to the rubbish or recycling bins.