Fascinated by retail. Avid follower of Retail news. Keen observer as a customer.

(IMP: All comments and opinions voiced in this blog are purely based on my understanding of things. I do not intend promote or defame any particular brand/company.)

Thursday, October 27, 2011


Of course you have noticed the board that says discount!! Ever wondered what all goes behind extending that discount to you?

Before we get into the promotions we should know theses promotions can be interpreted in two ways based on who is extending the promotion? Is it the vendor or the retailer?  It makes a hell lot of difference.

Possibility 1: Customer oriented promotions

Who gets the discount- The end customer

The retailer communicates with the Vendor, informs him/her about the event calendar (which logs all the events/promotions to take place in the outlets) The vendor either decides to participate or not to participate in these promotions. If the vendor is willing to participate he/she will have to inform the retailer the nature of promotion, on what SKUs/items is the promotions being offered, for how long and for which specific retial outlets? That’s not all, also the advertising inside the stores and the kind of racks and display of the product is decided in advance and the vendor pays for those ads.  So, the retailer is getting benefited too. Not only that, the vendor may also choose to offer his products at a lower price to the retailer if achieves a specific sales target. e.g if Big Bazaar sells,  4lakh packs of Oreo, Ores will waive off a small percentage of the cost price to Big Bazaar.

Possibility 2: Vendor Promotions

Who gets the discount-The Vendor

There are many scenarios where this could happen but I will explain with one example. A retailer is expanding his product portfolio. If a specific product has a high brand value the retailer will approach the vendor of that product and offer a price at which he/she will purchase the product to stock it in their retial outlets. This is a plain vanilla explanation there is more to it but lets keep it simple for now. The retailer will offer some freebies like free in-house publicity for a month, Central display for two week without additional cost a higher margin percentage and so on. So the vendor is offered a benefit. This usually happens only when the vendor product is on high demand and the retailer is not large enough. Also, there may or may not be a benefit for the end customer.

There is more to come on this topic.


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