There is no doubt that alcohol trends are shifting around the globe with an overall change in consumer consumption and demand in general.
Last March, the IBISWorld’s Liquor Retailing market research report, a comprehensive guide to market size and growth prospects, revealed that the Liquor Retailing industry has been affected by declining per capita alcohol consumption, rising health awareness and competitive pressures over the past five years.
Nevertheless, the Australian Retail Industry is expected to grow as we experience an increasing consumer demand for higher value, and premium beverages. IBISWorld estimates industry revenue will increase at an annualised 3.2% over the five years through 2015-16 to reach $10.0 billion. Rising discretionary incomes and increasing consumer demand for premium beverages are expected to contribute to 2.5% industry revenue growth in 2015-16. [Source: IBIS World Market Research Report, March 2016.]This paired with fragmentation of categories can make for difficulties in inventory and stock control.
Liquor retailers are faced with the challenge to control their stock, limit their buying and manage their excess stock to make room for new, premium value beverages. The same report suggests as one of the key factors to retail success is the ability to control stock on hand, and avoid overbuying.
But what happens when retailers are already faced with excess liquor stock? Similarly to any other retailer, Liquor businesses face the challenges of surplus, unsold stock or excess inventory, or simply are striving to improve ROI. Apart from going down the path of liquidation, a strong alternative is corporate trade that eliminates excess inventory and frees up space to make way for the new liquor product.
How does it work?
Excess stock is purchased with cash or trade credit and payment is equal to the wholesale cost of the inventory. In return, the retailer allocates a percentage of their media spend or other business expenditures using the trade credit as partial payment.
When the corporate trade business is an independent operator with a global footprint the offering is very powerful. Not only does it presents a guaranteed solution to their excess stock challenge but also allows them access to new distribution channels and remarketing solutions for excess or slow moving products – not limited within Australia.
“All clients are eager to grow revenue and maximise their returns for slow moving or excess inventory. There is a real opportunity for us to work with clients and combine their challenges and commercial objectives to create financial benefits for them and deliver real results.” commented Cameron Swan, Managing Director, Active International Australia.
A liquor excess stock solution
A liquor brand was upgrading replacing one of its existing products which, in turn, requires current stocks to be cleared making way for the launch of the new variant.
Excess liquor stock solution
Active International paid for the stock at full wholesale price in Trade Credit. (Trade Credit is the corporate trade currency that is equivalent value to a dollar which is then used to pay for media and other services to recover the cash value). With the power of its broad remarketing network, Active was able to quickly identify a channel through which the stock could be cleared in compliance with the restrictions set out by the client.
To utilise the Trade Credit issued and recover the cash value for the liquor client, the Active team worked with the manufacturer’s media agency to identify tradable media. The client was able to pay for the media plan partly in cash and partly using their Trade Credit and save on their marketing spend.
A win-win-win solution
A win for the client – increased marketing campaign by part paying in excess stock.
A win for the media agency – received increased spend from client and delivered client’s ROI. Happy client = happy agency.
Whether it is a surplus or unsold stock challenge, or simply the need for an ROI, corporate trade is the business model which creates extra value from unwanted inventory delivering real results to liquor businesses no matter what the challenge.