In one line
Sell-in is what you ship to retailers; sell-out is what shoppers buy from them. Trade loading pushes extra stock in, usually with a discount, so sell-in runs ahead of sell-out.
What it does
- Companies book revenue on shipments, so loading lifts reported sales in the quarter it happens.
- Retailers normally hold four to five weeks of stock. Extra stock sits on their shelves and in their warehouses until shoppers work through it.
- Next quarter they order less while they sell down the overhang, so sell-in falls below sell-out.
Business and brand
Impact on the businessP&L, cash, share price
- One strong quarter is paid back by a weak one, and the loading discount costs margin.
- Auditors and regulators treat repeated loading to hit targets as channel stuffing.
- Investors who see stock weeks rise discount the sales that came with it.
Impact on the brandMemory, loyalty, pricing power
- Shoppers buy nothing extra: sell-out does not move.
- Old stock on shelf can hurt freshness and rate of sale.
- Retailers trust a supplier less after being stuffed.
Try it
Load the trade
Push extra stock into retailers in the first quarter. Compare what you ship with what shoppers buy.
| Q1 | Q2 | Q3 | Q4 |
|---|---|---|---|
| 7.3 | 4.0 | 4.0 | 4.0 |
- Q1 net sales▲ 22.3%
- Q2 net sales▼ 22.6%
- Q3 net salesno change
- Q4 net salesno change
Notice: Q1 net sales ▲ 22.3% and retailers end it on 7.3 weeks of stock. Q2 net sales ▼ 22.6% as they sell it down. Shoppers bought exactly the same. Over the year gross profit is −€0.69m against no loading: the discount.
Runs Countermove's market engine: the reference soft-drinks market, three brands, rivals holding their plans so only your change moves the result.
Sources
- US Securities and Exchange Commission (2005), In the Matter of The Coca-Cola Company: channel stuffing in Japan
- Blattberg & Neslin (1990), Sales Promotion: Concepts, Methods and Strategies, Prentice Hall