How Corporate Barter Converts Slow-moving Inventory Into Cash
This post was written in conjunction with NACDS, the national conference for drug store retailers and suppliers. If you’re reading this article, then perhaps you have more inventory in your warehouse than you would like, or maybe you are interested in tips to avoid this situation. Whether your stock is flying off the shelves or just sitting there, we don’t have to tell you that slow-moving inventory is a scenario to avoid not only for drug stores but for all manufacturers and channels.
Total pharmacy and drug store sales are growing steadily and are over a quarter trillion dollars (approximately $251 billion in 2015). Future growth is expected to be driven by the aging population as more than 41 million people were enrolled in a Medicare Part D plan in 2015. However, a less obvious trend is that prescriptions are becoming a smaller piece of the pie, and retailers and manufacturers need to understand that profitable growth in this class of trade will be generated by focusing on the overall value of the shopper. More products should be offered, but not all of them will justify their placement.
What is the first thing you think about when you analyze the risks of carrying more and more products to maximize potential sales? Probably liquidation, right? Well, while liquidation clears the warehouses and opens slots for the next big thing, there is nothing positive about the negative impact of write-offs on your bottom line.
The more modern approach for disposing of inventory is by letting a corporate trading company integrate a barter program, which increases the recovery value of the unproductive assets. Imagine getting 100% of wholesale price for even the most stagnant products in your line. The products will disappear with the help of a trading company, but your profit will be there to stay.
So, why exactly does it make sense for a drug retailer or supplier to sell off that extra inventory in partnership with a corporate trading firm? In addition to asset recovery via enhanced sales revenue, keep reading below to find out about four other financially sound benefits of barter.
(1) Your advertising budget and creative will get a boost.
The best-case scenario in this situation is to recover the full value for inventory in lieu of typical liquidation, while preserving marketing programs that otherwise might be at risk. In other words, get rid of the bad stuff without encumbering your ability to sell the good stuff. If this is the goal, then the solution is straightforward.
When you work with a trading company to manage underperforming inventories, you can use the sales revenue to fund your advertising campaigns. And the best barter companies like Sherwood Integrated Solutions will be able to put you into the most innovative advertising channels. For example, in addition to efficient buying of cable and broadcast, you can improve your access to visual content marketing such as video, social media, and animation, as well as other unique marketing tools such as podcasts and games.
How does this work? When a trading company purchases your assets using cash, trade credits, or a combination, you in turn work with them to activate media plans and produce advertising content, without disrupting your existing agency relationships. How great does that sound?
(2) Other marketing activities will finally see the light of day.
Another benefit that is especially worthwhile to the drug store channel: corporate trading relationships can result in the provision of incremental essential marketing services. Let’s look a few examples:
- Think of the best possible in-store consumer experience you have ever seen. It probably includes point-of-purchase installations. A barter transaction can fund merchandising programs that implement virtual reality, 3D, and animation.
- Both retailers and manufacturers of drug store products have the need for website design, development and e-commerce. With the credits you receive from a barter trade with a trading company, you can fund more of these activities and take advantage of the 92% of US adults who use search engines to find products and services. You’ll be able to properly optimize your site and bring more people to purchase your inventory.
(3) Supply Chain and other business costs such as freight and logistics will be streamlined and optimized.
In addition to expanding your marketing and media activities with a leading barter company, you can convert distressed inventory into funding for any number of freight and logistics activities – global logistics, freight forwarding, customs brokerage, purchase order management, ocean freight, air freight, and even trucking. And with a logistics industry that’s changing faster than ever, you will need that funding. (For example, some studies have shown that self-driving shipping trucks will become the norm in the next decade or so!) Beyond freight and logistics, other services such as “big data” analytics can be provided.
There’s more to selling off your inventory to a trading company than just boosting your marketing and advertising activities. Utilizing a trading company can help your company at every single stage of the product lifecycle from production to shipping to marketing and finally, to the sale.
(4) You can even sell off assets other than your unsold inventory.
The chances are high that a portion of inventory isn’t the only unproductive item on your balance sheet. Retailers and suppliers normally have a variety of assets that might not be contributing to profitable growth. For example, a drug manufacturer might have an old plant or equipment that is underused or even dormant. Or there’s an office lease that should be jettisoned. In addition to capital assets, your company might have marketing assets that aren’t contributing to your bottom line, like sponsorships or gift card programs.
The value of each of these unused or underused assets can be recovered when you work with a trading company like Sherwood Integrated Solutions to dispose of them.
Whether or not you are attending NACDS, working with a trading company is one of the best things you can do to empty your shelves, optimize your assets and procure marketing and business services more efficiently. All undervalued assets –overproduced, short-coded, slow-moving, dormant, obsolete — can be disposed of at a full recovery value. Done right, there’s an art to barter, and the rewards are yours to reap.