Who owns the inventory in the big box stores ?

DDoug · Feb 28, 2014

I have heard of all manner of scheme's, factory owns inventory, pays rental space.

I have heard of local plastic mold shops only getting paid for mold after
molding company gets paid for product.

I have heard the big three don't pay for parts even when sitting on assembly floor,
until vehicle goes out the door.

I hear that when dealing with imported goods (like from china) it's the opposite,
they (chineese manuf) demand payment up front, for whole boatload.

HiNi · Feb 28, 2014

Our of the possibilities you listed, only one sounds like good business, hint it's the manufacture that gets paid on delivery.

Scruffy887 · Feb 28, 2014

Are you hearing all this from voices in your head? I do a fair amount of international business and nothing leaves my floor until paid if full. Not even to Canada.

DDoug · Feb 28, 2014

Scruffy887 said:
Are you hearing all this from voices in your head? I do a fair amount of international business and nothing leaves my floor until paid if full. Not even to Canada.

WOW.....I have heard...I'm sure you "Have heard" rumors, and the like on all manner of subjects before.

Just because YOU don't operate this way, doesn't mean the whole world does what you do.

toolsteel · Feb 28, 2014

Many of our consumable supplies where I work are owned by the supplier until we remove it from the cabinet that the supplier keeps in our shop. Similar to the "candy machine" that sits in our shop with inserts in it. The inserts are owned by the insert manufacturer until we remove them from th machine.

hanermo · Feb 28, 2014

All above are correct, imo-ime.

I price accordingly.
My credit costs about 100% of cash-before-anything.
Ie my cheap price is juts like the exporters.
100% all up front, and I do it with time. But its cheap.

The big box stores have so much leverage, and so many foolish suppliers, many have let themselves be bankrupted by not insisting on cashflow.
If you want a bank, you know where to go.

Contrary to many stories, I have been able to get payment on delivery from telcos, nokia, ibm, large corporations and hotel chains.
I just explain the pricing and credit policies.
Very very politely and carefully.

When I was younger I did not. Now I hope I am wiser, and at least more experienced.

moonlight machine · Feb 28, 2014

I know for sure that all the plants sold in B B stores and Walmart are owned and maintained by the grower / greenhouse. When the SKU is read at the checkout the store will pay for them. All risk of the plants dying is on the grower as is responsibility for keeping track of stock, stocking shelves and watering them.

tdmidget · Feb 28, 2014

digger doug said:
WOW.....I have heard...I'm sure you "Have heard" rumors, and the like on all manner of subjects before.

Just because YOU don't operate this way, doesn't mean the whole world does what you do.

Has it occurred to you that once goods cross the border there is NO WAY to collect that debt legally? What kind of luck do you think you would have in a Chinese court? IF you got a favorable ruling what would make you think that you could collect it?

tdmidget · Feb 28, 2014

thermite said:
Ordinarily it isn't courts and governments involved anyway. 'Irrevocable Letter of Credit' and its functional cousins.

There are scams and attempted scams, and more disagreements than a few. But day-to-day bank-to-bank networks see to it that it mostly JFW without need of going to court.

If you expect to fight the mostly-global banks who issue them? Better to just go and use a different loo.

Bill

That is why there are no courts involved. That letter of credit, The Captains acknowledgement that the goods were loaded, draft survey for bulk or tank commodities and those papers are as good as cash and very likely will be at the bank before the vessel is under way.

Mcgyver · Feb 28, 2014

digger doug said:
I have heard of all manner of scheme's, factory owns inventory, pays rental space.

I have heard of local plastic mold shops only getting paid for mold after
molding company gets paid for product.

I have heard the big three don't pay for parts even when sitting on assembly floor,
until vehicle goes out the door.

I hear that when dealing with imported goods (like from china) it's the opposite,
they (chineese manuf) demand payment up front, for whole boatload.

Its hard to sum up every conceivable global trade scenario and nuance in a single post.

as to the give credit or not discussion, what you can negotiate is simply a function of how much power you have in the relationship. I get RFQ's from big firms stating its 60 day terms (means 75-90). I either no-bid, comply or propose a discount for faster payment...but I'd be an idiot to discount for fast payment more than my WACC (cost of capital). That assumes you're comfortable with the covenant.....if you are not you don't give any terms

RebHawk · Feb 28, 2014

I dated a girl for a short time who worked at Lowe's Hardware corporate. From her I learned two things about Lowe's:

1) No product can be sold unless dual-labeled in Spanish and English.

2) Dewalt, etc, *pay Lowe's* (or pay for) the displays of their products in every store. This came up when I asked her about the costs of reconfiguring a store. Her reply was "that's the great part about this... the suppliers pay for most of that".

Cheers,
--Hawk

Mcgyver · Feb 28, 2014

RebHawk said:
2) Dewalt, etc, *pay Lowe's* (or pay for) the displays of their products in every store. This came up when I asked her about the costs of reconfiguring a store. Her reply was "that's the great part about this... the suppliers pay for most of that".

that is standard in retail. All big ones charge manufactures for advertising, shelf space, promo's, being at eyelevel, being on the endcap etc.

I didn't know about the plants being owned by the greenhouse. Typical model is invoice on shipping but the retailer of course will pay in 90 days or some long time. Of course they charge back for any returned items then toss them in the dumpster. One electronics retailer (the big one) would just simply cheat on received goods counts. So bad that the supplier I knew would fly a rep out to count at the dock when large shipments arrived to avoid being cheated. I remember reading that Costco made their money with the cash float; sales are cash but suppliers are paid in 120 days.....100's of millions to invest in commercial paper for 4 months.

For all the bitchin about the B2B market, thank you lucky starts you're not selling B2C via retailers

Rex TX · Feb 28, 2014

AutoZone tried to implement Pay-On-Scan a few years ago. The whole industry watched to see how that would pan out. Last I heard it was a limited success, with a lot of manufacturers rebelling.

specfab · Mar 2, 2014

As Mcgyver stated, the negotiation aspect is driven by the power balance between buyer and seller. This is the crux of most commercial relationships today, and it is weighted very heavily toward the large companies with lotsa dough. That makes it even more absurd that the GMs and Chryslers of the world want to get NET 90+ out of their suppliers, if the suppliers want to get the work. It basically locks out any smaller company that might be willing to work on reasonable credit terms - net 30 vs COD - from doing business with these larger companies. Basically, the suppliers need to have their own finance arms to do that sort of business. The large company buying the products, though, just look at this as "supply chain management", and view the suppliers as their indentured servants....

Davis In SC · Mar 2, 2014

A person I know started a brand of household cleaner, which is now a big seller. 25 or so years ago, when he started, he had to pay large fees to "buy" shelf space, as well as give retailers entire truckloads of product just to get in the door. This was just to get the market tested.

There are plenty of tricks they use to beat suppliers down. He said they almost always claim that there was at least one pallet short on a load. Also, there were always those claims that once in their warehouse, they poked a box with a forktruck, so the entire pallet was scrapped. BTW, these charge-backs were at full retail, instead of cost. Glad I do not sell to big retailers.

toolsteel · Mar 2, 2014

A friend of mine is in packaging......he has told me that on many items stores like wal mart or target, come up with a price point on products. Then they decide what size product to sell. Basically they know that a guy like myself will be willing to spend 3 or 4 dollars on a bottle of shampoo....but I am not likely to spend 8 dollars on a bottle of shampoo even if the cost per ounce goes down. So they base the size of the product on what the customer is willing to pay at one purchase. This is the same reason why when steak prices are low all the steaks seem to be 2 inches thick....but when the per pound price is high the steak is paper thin.....I guess the only reason I mention it is because even when we think we are making decisions for ourselves.....it seems somewhere in the background we have been limited or steered in a particular direction by someone.

RebHawk · Mar 2, 2014

MSNBC had a special on Costco. The founder explained that they generally only carry one size of any given item. Why? His contention was that by having one size, he sold more. One reason was obviously that that one size was bigger, but it was also because apparently some people look at a shelf with 3 size offerings, become confused, and don't buy any of that product. Hey, I know, makes no sense, but that was his contention, for which he claimed to have market research studies to back up.

Another anecdotal story of mine comes from the local Fastenal manager (we actually get pretty good pricing from them, about 40% of list due to being a University). I asked him about a Dewalt battery drill. Before he even gave me a price, he said "I know this is more than the same one at Lowe's, but Lowe's, Home Depot, WalMart, etc bascially "buy the factory" and dictate what the price will be". So even Fastenal is a relatively small player in all this.

Cheers,
--Hawk

Ludasmith · Mar 2, 2014

My buddy does some stuff for Publix. I'm not sure when they are paid but the manufactures definitely pay to have shelf space and location. If they want 4 wide at eye level is more than 4 wide at ground level.

BobRenz · Mar 2, 2014

While we're talking about buying selling space, have you ever found a brand new grocery store with nice wide aisles? A year down the road, every aisle is clogged with those blasted free-standing displays, so we have to dodge our way around them with our carts. I know it wasn't my idea to put them there....

RebHawk · Mar 2, 2014

BobRenz said:
While we're talking about buying selling space, have you ever found a brand new grocery store with nice wide aisles? A year down the road, every aisle is clogged with those blasted free-standing displays, so we have to dodge our way around them with our carts. I know it wasn't my idea to put them there....

Yeah, those are a pain in the ass. We inquired about them here and were told the local store had nothing to do with them. They were put there by vendors on floorspace sold to them by corporate.

--Hawk

Who owns the inventory in the big box stores ?

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