Historically, retailers put in purchase orders with their vendors and were contractual committed to the delivery of a set amount of merchandise at a specific time. But nearly all big chains now are giving their suppliers “forecasts” of their estimated requirements that carry no obligation for the retailer to purchase the goods once they are ready, says Stevan Buxbaum, of consultant firm Buxbaum Group.
"With nothing but a forecast in place, it's not uncommon for a retailer to buy only a fraction of what the manufacture produced or to stretch out deliveries over a much longer period of time, and the manufacturer doesn't have a leg to stand on," said Buxbaum.
The problem is especially acute in apparel. "In many cases, those goods carry the retailer's private label, and the chain is not going to want them in circulation," Buxbaum says. "That creates issues.”
The move to the forecast approach also puts some stress on the manufacturers’ secured lenders. "They are lending against this merchandise, but there is no guarantee that the purchaser will take it.”
So far, the practice is limited to the major retail chains, and few outdoor dealers carry the kind of clout required to get forecast terms from their vendors. But the report from Buxbaum is a reminder that “merchandise” and “inventory” do not equal “asset,” at least not until one is able to sell it.
It also reignites the question of who ultimately has the clout. Or better yet, who owns the customer. The retailer who faces the customer or the brand/SKU they came to the store to buy?
"With nothing but a forecast in place, it's not uncommon for a retailer to buy only a fraction of what the manufacture produced or to stretch out deliveries over a much longer period of time, and the manufacturer doesn't have a leg to stand on," said Buxbaum.
The problem is especially acute in apparel. "In many cases, those goods carry the retailer's private label, and the chain is not going to want them in circulation," Buxbaum says. "That creates issues.”
The move to the forecast approach also puts some stress on the manufacturers’ secured lenders. "They are lending against this merchandise, but there is no guarantee that the purchaser will take it.”
So far, the practice is limited to the major retail chains, and few outdoor dealers carry the kind of clout required to get forecast terms from their vendors. But the report from Buxbaum is a reminder that “merchandise” and “inventory” do not equal “asset,” at least not until one is able to sell it.
It also reignites the question of who ultimately has the clout. Or better yet, who owns the customer. The retailer who faces the customer or the brand/SKU they came to the store to buy?
No comments:
Post a Comment