Discounts – An Alternative Option

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Discounts – An Alternative Option

It’s probably about time that we face up to the fact that the discounting and buy deals of the last half of the decade have now become the expected norm – the trade does not expect to pay list price, that’s just a starting point for negotiations.

Given the reduced return distributors and wineries are seeing from deals –  for a deal stand out in today’s market it needs to involve a great deal of margin sacrifice or a disproportionate about of bonus stock – other approaches need to be trialled. The theory behind a deal is increased volume at the cost of some extra discount or bonus stock; the retailer can then offer the product at a lower price while still making required margins and has stock weight on the floor to help sales (and remind him he needs to move the stock quicker to recoup his spend). It should be a win win.

Unfortunately while retailers might be purchasing stock in deals, they then don’t feel obliged to move it quickly; if for example,  a retailer sells an average of one carton of Wine A per week, they’d happily buy a 6+1 deal every 7 weeks, which simply costs the seller a carton every couple of months with no real increase in volume. It’s this cycle that many distributors need to get their customers out of, a very difficult process.

One option that the Wine Rep recently came up with (and admittedly is as yet untried), is time or frequency based discounts. Simply put, buy at discount X today and if you reorder within a certain time period you will get improved discount Y. The onus is then on the retailer to move sufficient stock to be able to regularly reorder within the required period, effectively shifting a retailer’s focus to your products.

There are a lot of caveats that need to be well thought out before such a deal structure is put into place, but it does offer an option for shifting the responsibility of pulling through stock back onto the retailer – if they want the extra discount/bonus, they don’t necessarily have to buy more (which is how most deals work), they just have to buy more often.

This type of deal structure also offers a significant point of difference in the trade which alone might be worth the effort, retailers love trying something new if it means they can get (or think they can get) something extra. Worth a go if current trading tactics are not yielding sufficient growth.


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