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Brand name manufacturers and retailers alike each make a significant investment in the products that they sell their buyers. Historically, both parties have used Return-to-Vendor (RTV) agreements to help ensure that they’ll minimize financial losses and potential damage to their reputation. Since many businesses rely on these agreements, it’s possible you’ve used the RTV process or at least have come across the term before.
In this article, we dive deeper into the RTV, its pros and cons, as well as a great solution that you as a manufacturer can leverage to guard against loss.
RTV simply stands for “Return to Vendor.” This concept indicates any situation in which a retailer arranges to return merchandise to the vendor who sold it to them. There are usually specific processes in place and certain conditions that determine the details of the return.
One critical concept for understanding RTV policies are RTV agreements. An RTV agreement is a contract that a manufacturer of goods and their retail partners sign. The agreement allows the retailer to return a portion of unsold inventory to the brand that made it. Likewise, it obligates you as the manufacturer to accept back the unsold product. The agreement also lays out terms of this merchandise return. Terms may include what percentage of the unsold stock the brand will buy back, at what percent of its value, the timeline of the returns, and anything else the parties want to negotiate.
For example, say that a regional department store buys 1,000 jackets from a designer brand. The buyer and seller will negotiate and sign an RTV agreement. After a time, the store is only able to sell 200 of them to shoppers. Whether the jackets’ sales lag due to a dip in demand, a product defect, the store going out of business, seasonality, or something else, the RTV agreement comes into effect. The maker will now have to buy back some or all of the remaining 800 units in the agreed-upon number for the agreed-upon price.
While this may simply seem designed to bail out low-performing stores, RTV’s are actually beneficial to both sides.
As said, RTV agreements help stores avoid getting stuck with thousands of dollars worth of product. It offers a sense of security, guarding against a 100% loss. This is especially reassuring when considering some sales challenges may be beyond a store’s control. They can take calculated risks and provide varied products to attract shoppers that demand a wide selection.
Further the hard-to-move goods won’t cost precious space on their sales floors or in their warehouses. Finally, the retailer avoids the costs of shipping it place to place as they wonder what to do with aging merchandise.
These benefits aren’t complimentary, however. There is a tradeoff: when negotiating an RTV agreement, retailers generally pay more per unit for covered products. Ultimately, RTV is an insurance policy—while you do your best to avoid relying on it, you’ll be glad you paid up front if the need ever arises.
So what’s in it for you as a manufacturer?
Aside from bringing in higher up-front prices, RTV agreements offer a major benefit for your brand, and it all comes down to one word: reputation.
Consider the apparel example above. This manufacturer considers itself a premium clothing brand. As much care and money as it puts into design and execution, it puts as much or more into maintaining a stylish, high-end image. Especially for a fashion brand, protecting reputation can be everything.
Perhaps they’d prefer that their product doesn’t appear in discount stores that don’t uphold their aesthetic standards, or where sales staff isn’t trained on their brand. It’s possible a production defect is causing low sales, and the company wants to keep an inferior batch off the shelves if it might damage consumer perception. They may want to donate them in bulk. Or perhaps the company’s mission is sustainability and it hopes to recycle units to keep them out of landfills.
No matter the exact motivation behind an RTV agreement, the result is the same. The manufacturer can maintain as much control as they can negotiate over their product and reputation.
Even top brands and popular stores make missteps and miscalculations, or simply suffer bad luck from time to time. For one reason or another, you may find that your brand has come back into possession of its own merchandise under an RTV agreement. As a result, you likely already have methods of clearing this inventory—but how efficient are they? Is there a better option to drive higher recovery?
If you’re a brand manufacturer that relies on RTV agreements, consider a change in how you handle the goods you receive back. Specifically, transitioning from traditional liquidators to a robust, full-featured online auction platform could be a wise business decision on multiple counts.
Are you managing relationships with multiple liquidators and shipping goods from warehouse to warehouse? If so, an online auction solution like B-Stock can help sell all of your RTV merchandise from a single online marketplace, saving time and logistics consideration.
Even if you’re dealing with a single liquidator, you undertake significant risk with a single point of failure in your liquidation model. What if your contact leaves? Or if the operation shuts its doors? With an online network of thousands of bidders on one platform, you’ll never miss just one buyer.
It may be true that traditional brick-and-mortar outlets may be effective at moving stock. But staffing and maintaining retail space is a distraction from your primary business. Selling RTV merchandise through an online auction marketplace eliminates this step entirely. You can focus more tightly on your core function: designing and making the goods that consumers love.
We’ve established that an online auction solution can save your business the hassle of shipping to wholesalers or stocking and staffing outlets. Additionally, you can now cut out the added expenses of the RTV process, meaning lower overhead costs. This ultimately raises profit margins when a buyer purchases your stock.
Unsold inventory ties up your business’s cash and takes up costly warehouse space. But there’s another drain on your finances that you may not have taken into account. Almost all inventory loses value as it ages. You and your competitors alike are constantly developing new styles and technology, and naturally old ones fall out of demand.
You need to move this merchandise before depreciation takes its cut. Luckily, you can drive down your carrying costs and increase your liquidity quickly by auctioning that unwanted stock.
With the very best online recommerce solutions, sellers can require buyers to sign agreements detailing how and where the items must be sold. You can request the labels be removed, that your lots are only sold within certain geographical regions, and more.
These seller agreements guarantee that resale of the items complies with your branding preferences. They also ensure that resale doesn’t intrude upon your primary sales channels.
A diverse pool of buyers from all over the world will alway be there to provide a competitive solution for inventory that comes back from your customers. Each transaction provides unmatched transparency and you will see your inventory recirculated into the secondary market.
Feeding the circular economy with your quality, superior-condition products is a sustainable option that attracts a global base of buyers. And businesses have definitely caught on.
According to Marcus Shen, B-Stock’s COO, in a recent PYMNTS.com article “brands, manufacturers and retailers are being smarter about putting more inventory available for sale on B2B marketplaces” as demand for affordable goods peaks. As supply chains delayed order delivery and e-Commerce returns rose during the pandemic, businesses and, in turn, manufacturers had more unsold inventory than ever. And small businesses capitalized. For example, the last year has driven the secondhand market for apparel toward a projected $77 billion by 2025.
With this demand in mind, know that your reputation could benefit as you consistently supply great products to your bidders.
If you’re interested in clearing RTV merchandise faster and more efficiently, an online auction solution is your best bet. And B-Stock needs to be at the top of that list.
With a single platform, our partners—enterprise-level manufacturers and smaller retailers alike—gain access to a network of over 500,000 buyers. This gives you enormous reach into the worldwide secondary market buyers and a chance to sell across 18 different product categories, covering most anything you might have.
What’s more, B-Stock creates competition over your RTV, meaning your lots fetch the highest price that the market will supply. This approach can earn you an additional 30% recovery over traditional liquidation methods—and fast. In fact, you could see recovered revenue in as little as 15 days after signing up.
Further, you can build custom seller agreements and private marketplace open only to vetted buyers that you authorize, putting your business in full control. As a B-Stock seller partner, you have the final say as to who can buy your inventory, where they’ll sell it, and how it’s remarketed.
Been frustrated by any of the common problems within the RTV process? Learn how B-Stock can help today.