sale or return

Definition:
To help the MARKETING and distribution of certain goods, some manufacturers and distributors make their PRODUCTS available to RETAILERS on a 'sale or return' basis. If the merchandise is sold to ultimate customers the retailer retains a previously agreed proportion of the sales revenue and remits the balance to the supplier. In the event of the merchandise not being sold, after a previously agreed time period, they are returned to the supplier at no charge to the retailer. Some manufacturers and distributors of merchandise are prepared to operate on this basis as they are convinced that once their merchandise is on display to the public it will be purchased. Retailers are willing to accept goods on a 'sale or return' basis as they do not have to pay for items until the merchandise is actually sold. Under a 'sale or return' agreement both supplier and retailer can potentially benefit, although the financial risk is borne by the supplier. 'Sale or return' is a common practice among suppliers of fashionable items of clothing to departmental stores and boutiques, for example, but is also adopted with some perishable foodstuffs. Suppliers have to consider their pricing practices and to calculate whether they will make profits even if a proportion of the merchandise is returned. Many retailers are willing to display and promote items on a 'sale and return' basis rather than run the risks associated with outright purchase, which include having to take more care over merchandise selection and the possibility of being left with outdated or slow-selling STOCKS.

Cross-References:
[marketing] [product] [retailer] [stock]

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