5 ms·

> It would be like if Costco instead of buying 1000 legos, just stocked legos in it's warehouse, then paid Lego company everytime a single unit sold. For some

• bryanrasmussen 5y ago
  It's somewhat similar in books IIRC, if the books don't sell you send back covers of the books and get reimbursed? (based on info from 20 years ago, pretty static industry so probably still the same) on edit: of course book stores don't compete with publishers.
  • moate 5y ago
    Not all industries have buybacks, and many producers won't take on contracts that involve them. (Fun Fact for anyone not familiar with this practice: in publishing the covers were shipped back as the proof because whole books are heavy/costly to ship and take up a lot of space/costly to warehouse so the retailer with them on hand would just have the rest of the book pulped).
    • bryanrasmussen 5y ago
      I would expect it's pretty uncommon sure, I mean how would you do buybacks of canned goods. It works because of the many historical features of publishing, and the physical realities of books (removing cover to send back) and doesn't seem like it could work in most industries.
      • efreak 5y ago
        Peel off the label and send that back. As for destruction, there's the easy option of making the expiration untradable (marker or alcohol) so anyone opening it doesn't know what's inside or if it's good, and the more time consuming option of puncturing it (this option would work on most food items). Working at a grocery store, if the outer packaging of an item is damaged by a tear or even a dent, nobody will buy it unless it's the only one left and they're desperate, even if the contents are in a stronger inside container (microwave meals, cereal, multipacks, etc). I was asked to replace an item for someone once because the package coloring was off. Cosmetically damaged product sits on the shelf until it gets scanned out, and customers only touch it to move it so they can get the item behind. Most products in stores today that aren't sold in bulk have a bar code on the packaging, which can be sent back as symbolic proof the item was "destroyed" (about as meaningful as the; for smaller objects, send back the entire front of the package. I'm not saying this is a good idea. (I think this is a terrible idea, and that we create too much waste already) I'm just saying it's entirely possible.
    • wincy 5y ago
      I used to love browsing through books at the local flea market that were $0.25, had the cover ripped off, and of course the notice “don’t buy this book if the cover is ripped off!” Enjoyed a lot of cheap sci-fi and fantasy that way.
  • 101008 5y ago
    It is. Fun fact: when Harry Potter 7 was published in the United Kingdom, the publisher didn't allow this, so bookstores had to purchased the stocks from the publisher. This wasn't that bad because most people preordered it, but independendt bookshop had to took the risks to order a few extra copies.
• moate 5y ago
  Depending on the retailer, yes. There are a few different models. What you're describing (stocking a product owned by another entity and giving them a cut of the sale price) is frequently known as consignment. It has minimal risk for the retailer, and typically involves non-perishable goods (clothes, electronics, etc). Other retailers purchase the product at a discounted price from another entity and then sell it at their location for a higher price. This is the wholesale model where a producer is selling so much product to a retailer that they'll give them a discount on the price. Wholesaling comes in 2 main forms: As described above, or "buyback". With a buyback contract, risk is shifted back onto the producer, as any unsold stock at the end of the contract term is "bought back" by the producer, typically at price they sold it to the retailer (possibly minus stocking/shipping fees). I have no idea how the specific places you mentioned run their shops, but having been involved with several companies that produce physical goods for market, it's VERY common to sell to major retailers, and not just run consignment contracts (in fact, we ran VERY quickly away from anyone offering such deals because we would have to tie up inventory on their shelves that we may never be paid for).
  • GordonS 5y ago
    This is a great summary, thanks!
• reilly3000 5y ago
  I don’t think that they are really in the consignment business. Its more that they do small orders in test markets and measure turnover carefully, negotiate suppliers down HARD, and cut them off if sales don't happen. They may have a return clause in their contract too, but usually the sale is final… hence markdowns/closeouts.
• KingMachiavelli 5y ago
  It is exactly how it works for physical retailers. In most cases, they even delay payment for a few months to account for returns and the cost of returning unsold products. Costco, to my knowledge, is actually one of the more strict retailers with IIRC 6 month delay between a product sale and the vendor being played. Mostly due to their generous return policy. I don't know of any large retailer that eats the cost of unsold goods. It's typically the retailers who pressure the supplier/brand into offering discounts and coupons in order to keep product moving.
  • chefandy 5y ago
    I’ve never worked in large consumer goods retail, but smaller retail outlets, food, clothing, etc. do not commonly operate like this. Most don’t have the storage to pre-buy even two months worth of merchandise. In food, purveyors won’t hesitate to ask for cash up front if you’ve been late a couple of times or have a bit of an outstanding balance. The places you describe sound like they act as both distributors and retailers and are large enough to have leverage in their negotiations with suppliers.
    • analog31 5y ago
      I think it's certainly a matter of leverage, and could also be why smaller retailers struggle to survive. For suppliers, getting involved with one of the big retailers is a calculated risk. The retailers work their suppliers against one another, and if you don't play along, you vanish from the shelves. I worked with one of those suppliers long ago. It's interesting that food is an exception, perhaps because it's perishable, and if you don't pay for a delivery of ingredients... no soup for you. And restaurants may actually be competing for access to high quality materials. Of course the larger chains can manage their supply chains differently, partly by using less perishable ingredients in the first place.
      • chefandy 5y ago
        Food isn't an exception— it's just the example I used because I'm most familiar with it. Restaurant purveyors are particularly strict because a restaurant with a 1% or 2% profit margin is considered pretty successful, and that's why 60% of restaurants fail in the first year, and 80% fail by the fifth. But my non-restaurant experience suggests any retailer not required to own their inventory is the exception. I personally have been a chef and a manager in retail food businesses from movie theaters to coffee shops. I have a friend who owns an upscale boutique that sells many types of products, another that sells products through her salon, several more that own vintage stores (admittedly entirely different supply chain,) a friend who discussed his well-researched, in-depth business plans to open a gun accessories retail shop, another who sells wood crafts and other products direct to customers, a couple full-time artists who sell their art either through galleries or from the walls of businesses, and several food purveyors that only sell to businesses for resale. In that entire pool, only the artists selling their art through galleries and coffee shop walls, and one of the vintage shops that does consignment sales, differ from the norm of retailers owning their inventory. Some wholesalers or manufacturers will afford well-behaved businesses lines of credit— but that's not the same thing as not owning your inventory. You can't just return it if you don't sell it. Once you sign that delivery sheet, it's pretty much yours. I've heard of retailers selling new products on manufacturer consignment. I wouldn't be surprised if some specific industries operate like that as a norm. Maybe phone vendors? Maybe software/computer game stores, possibly, because the content is license-based and the material cost is relatively small compared to the price? (Amusingly, as a long-time software developer and someone with a lot of experience in the retail end of business, I have no idea how retail software sales work.) But there's no way Nordstrom is going to order a skid of this spring's collection from major brands and designers and be like "sorry, we decided to give the floor space to other items, so either mark these down to bargain rack prices or we're not paying for them." If that were the way it worked, nobody would sell them anything. I get the sense that the original commenter just extrapolated based their understanding of business practices that weren't as common as they thought.
• legitster 5y ago
  I worked a route at Frito Lay. The store bought the goods, but was rebated on anything that didn't sell. We bit the bullet on product that didn't move. But merchandising and stocking the shelves was also 100% our responsibility.
• tzs 5y ago
  That was how it worked in the US with software retailers back in the days when most of us got our consumer software from the local Egghead, CompUSA, etc or from mail order companies like PC Warehouse, CDW, etc. The stores were really more like real estate companies and payment processors than what most people think of when they think "retailer". They rented shelf space to manufacturers/distributors and handled the money when someone bought something. (For the catalog companies, replace "shelf space" with "page space"). This was why when after you decided in late 1995 to upgrade to something better than Windows 3.1 and walked into Egghead to buy a new OS you'd see Windows 95 somewhere prominent visible from the door, probably with banners touting how great it is, and OS/2 Warp would be on the bottom row of some shelf in the back of the store with poor lighting and enough dust to suggest that not even the person who is supposed to vacuum bothers to go back there. Microsoft paid for prime real estate in the store and in-store advertising for Windows 95. IBM did the minimum possible that would get OS/2 Warp to be somewhere in the store.
• jeltz 5y ago
  No, that is pretty rare. It os mostly books which works like that.