How do companies reimburse retailers for "official" price cuts?

[vi edit]

I've always wondered this. Say a company like Best Buy is sitting on a pile of Xbox's that one day are retailing for $350 and then an official price cut comes down the pipe and they are now selling for $300. If they are sitting on a couple thousand of them nationally, that's over $50,000 in retail price differences.

What does Microsoft do to make up for the price cut? Do they cut a check back to the retailer for the difference in inventory? Offer a credit for future purchases?

Probably a really stupid question, but I've always been curious.

 

[TheInternet1980]

They send them a truckload of delicious meats, for employees and executives alike to consume.

Haven't you ever wondered why cashiers and salesman alike are stuffing their faces with honey ham, 3/4 of the time you're shopping?

Yep, payoff for official price cuts.

 

[Demon-Xanth]

They send a small sample of lube.

 

[Parasitic]

I'd suppose that a lot of those retailers don't actually pay for those units as a way to reduce inventory costs. Maybe they "lease" space to Microsoft or Apple or Sony etc to stock their shelves with products and take a commission for units sold that way?

 

[vi edit]

Originally posted by: Parasitic
I'd suppose that a lot of those retailers don't actually pay for those units as a way to reduce inventory costs. Maybe they "lease" space to Microsoft or Apple or Sony etc to stock their shelves with products and take a commission for units sold that way?

I was thinking that was a possibility. Basically they just get a truckload in, and then reconcile at the end of the quarter or something.

 

[MattCo]

They receive markdown allowances from the vendor to offset. These can be via checks or credit towards future invoices.

 

[TheInternet1980]

Originally posted by: MattCo
These can be via checks or credit towards future invoices.

Or a truckload of meats.

 

[tw1164]

Originally posted by: TheInternet1980

Originally posted by: MattCo
These can be via checks or credit towards future invoices.

Or a truckload of meats.

Or outback steak house gift certificates

 

[golfercraig]

Originally posted by: vi edit
I've always wondered this. Say a company like Best Buy is sitting on a pile of Xbox's that one day are retailing for $350 and then an official price cut comes down the pipe and they are now selling for $300. If they are sitting on a couple thousand of them nationally, that's over $50,000 in retail price differences.

What does Microsoft do to make up for the price cut? Do they cut a check back to the retailer for the difference in inventory? Offer a credit for future purchases?

Probably a really stupid question, but I've always been curious.

depends on the vendor. Some send new inventory at decreased wholesale to net down the current inventory to a level to hold the margin % the same, some offer a credit on the retailers account to make the margin% the same.

 

[TheInternet1980]

Originally posted by: tw1164

Originally posted by: TheInternet1980

Originally posted by: MattCo
These can be via checks or credit towards future invoices.

Or a truckload of meats.

Or outback steak house gift certificates

Sweet. Although I prefer it when they deliver meats to each individual store. I feel I get better service when store employees have a mouthful of honey ham, while I make my transaction.