By Selina Martin, Head of Commercial, Active International. Published in Retail World magazine April issue 2020
How a Corporate Trade model could help your business be agile in a year that has seen the impact of COVID-19 creating unforeseen circumstances, financial turbulence, and uncertainty.
Managing stock is one of the most difficult commercial challenges faced by Australian retail businesses and that’s in a regular market with no abnormal circumstances.
Finding a solution to stock that is slow-moving, has out of date packaging, been delisted or suddenly unwanted is never easy. To make things even more complicated, the retail market is going through a period of unforeseen circumstances such as the enormous impact of COVID-19, as well as in adapting to the competition from ecommerce growth and new technologies. Existing players are being forced to find ways to keep up with the changes and challenges with no such thing as “business as usual” anymore.
Efficient management of surplus inventory is one of the key strategies you can implement in a challenging market to maintain business health, offset costs and ultimately – increase revenue. More and more, business operators are turning to Corporate Trade models as financial options to address business pressures.
Utilising Corporate Trade, you can grow your business, ensure it’s ready for post-COVID-19, and turn the tables on the problem of unforeseen stock issues. But some of you may ask “what exactly is Corporate Trade?”
Put simply, Corporate Trade is a way for retail businesses to drive extra value towards their bottom line by using existing assets to offset significant business costs, such as marketing spend. A Corporate Trade model allows you to realise extra value from excess stock, increase your marketing budget using stock or assets, drive guaranteed new or incremental sales, or develop new routes to market.
At Active International, we have created three bespoke financial solutions that deliver on the promises of Corporate Trade: Value Restoration, Additional Media, and Cross Purchase. Each of these strategies is fully customisable and can be tailored to our clients’ unique requirements.
The first, Value Restoration, is ideal for businesses holding slow-moving or obsolete stock which is depreciating in value and taking up valuable shelf or warehousing space. It also works if you’re allocating marketing spend towards above-the-line media, such as TV, Digital, Out-of-Home, Radio, or various sponsorships and partnerships.
The way it works is simple. Active purchases the stock from your business at the market value, via Trade Credits. We then remarket that stock, under clear restrictions as agreed. Working with your marketing or procurement team and sometimes your media agency, we use those Trade Credits to partly fund your media spend and other business costs.
By spending the Trade Credits, your business will receive the full original value of the stock in the form of incremental spend, or as an offset to wider business costs. The result is that the value of otherwise dead stock is released back into your business and prevents any write-downs in your balance sheets. Plus, your shelf and warehouse space is freed up for other higher-margin, faster-selling products to take centre stage instead.
Looking at one of our recent success stories, Active was able to optimise asset value through trade for one of our clients. Working with a major company weighed down with excess inventory, outdated products and excess raw materials, Active provided immediate investment relief by paying the company a Trade Credit at full market value.
All products we traded were contracted to be sold in an overseas market via previously unavailable retail and wholesale channels. Our client then committed to purchasing media through Active in the form of combined Cash and Trade Credits.
As a result, the company’s media agency secured advertising placements across FTA TV, Subscription TV, Cinema, Radio Digital and Print. The result was that the business received full compensation for otherwise underperforming assets at full market value, and secured media placement within strictly established and monitored guidelines.
The approach clearly worked, as the client has since returned to work with a Corporate Trade solution across multiple brands and repeat transactions since the initial campaign.
So, how can you support your business in a challenging market from unwanted factors like surplus inventory and make the most of a commercial opportunity?
No matter how challenging the situation, Active finds a way to offer sophisticated, bespoke financial solutions to problem solving and maximise return to your business.
Turn the tables in 2020 and find yourself in a stronger position during this unprecedented time.