How a corporate trade model can help your company in a year when the effects of COVID-19 have created unforeseen circumstances, financial turmoil and uncertainty.
By Selina Martin, Head of Commercial, Active International
Managing stocks is one of the most difficult commercial challenges facing Australian retailers. This happens in a regular market without unusual circumstances.
Selina Martin
It is never easy to find a solution for inventory that is moving slowly, out of date, delisted or suddenly undesirable. To make things even more complicated, the retail market is in a phase of unforeseen circumstances, such as the enormous impact of COVID-19 and the adaptation to competition through e-commerce growth and new technologies. Existing players are forced to find ways to keep up with changes and challenges without doing more business as usual.
Efficiently managing excess inventory is one of the key strategies you can implement in a challenging marketplace to maintain the health of the company, balance costs, and ultimately increase sales. More and more entrepreneurs are turning to corporate trade models as financial options to deal with business pressure.
With Corporate Trade, you can grow your business, make sure it's ready for the post-COVID-19 period, and turn the issue of unforeseen stock issues upside down. But some of you may be wondering, "What exactly is corporate trade?"
In simple terms, corporate trade is a way for retailers to add value to their bottom line by using existing assets to offset significant business costs such as marketing expenses. With a corporate trade model, you can add value from excess inventory, increase your marketing budget with inventory or assets, generate guaranteed new or incremental sales, or develop new ways to market.
At Active International, we have developed three bespoke financial solutions that deliver on the promises of corporate trading: value recovery, additional media, and cross purchase. Each of these strategies is fully customizable and can be tailored to the individual needs of our customers.
The first, Value Restoration, is ideal for companies that hold slow or obsolete inventory, decrease in value, and take up valuable shelf or storage space. This also works if you use marketing expenses for above-average media such as TV, digital, out-of-home, radio or various sponsoring and partnerships.
The way it works is simple. Active buys the stock from your company at market value through trade credits. We then market this inventory with clear restrictions as agreed. Working with your marketing or procurement team, and sometimes your media agency, we use these trade credits to partially fund your media expenses and other business expenses.
By issuing trade credits, your company receives the full original value of the share in the form of additional expenses or as compensation for higher business costs. The result is that the value of otherwise dead shares is released back into your company and write-downs on your balance sheets are prevented. In addition, your shelf and storage space becomes free, so that other high-margin, faster-selling products are the focus instead.
Looking at one of our recent success stories, Active was able to optimize the value of assets by trading for one of our customers. Working with a large company stocked with excess inventory, obsolete products and excess raw materials, Active immediately relieved the investment by paying the company a commercial loan at full market value.
All of the products we trade have been contracted to be sold in an overseas market through previously unavailable retail and wholesale channels. Our customer then committed to buying media through Active in the form of combined cash and trade credits.
As a result, the company's media agency secured advertising placements for FTA TV, Subscription TV, cinema, radio digital and print. The result was that the company received full compensation for otherwise below-average assets at full market value and ensured the placement of the media within strictly defined and monitored guidelines.
The approach clearly worked, since the customer has since been working with a corporate trade solution for several brands and has repeated transactions since the first campaign.
How can you support your company in a challenging market with undesirable factors such as excess inventory and make the most of a commercial opportunity?
Regardless of how difficult the situation is, Active will find a way to offer sophisticated, bespoke financial solutions to problem solving and maximize the return on your business.
2020 turn the tables and find yourself in a stronger position in this unprecedented time.
About Selina Martin
Since joining Active in 2015, Selina has built a strong trading team and helped shape Active's trading offering. Her experience spans a range of media, including television, cinema, radio, magazine, digital, and retail.
About Active International
Active International is a global commercial innovation company and business solutions partner with 35 years of global business. Active is a leader in the retail industry of companies in 14 countries, supported by a team of exceptional talents, financial experts and media experts in every market as well as well-established relationships with customers, media providers and media agencies. More information is available at www.activeinternational.com.au.
