Web-based trade funds management arising as new tool for retailers
Although still in its early stages of use by retailers, web-based trade funds management technology lets merchants better show the details and results of marketing programs funded by their suppliers, putting the two camps on better terms, analysts say.
"Retailers need to do a better job of managing the flow of trade promotion money from suppliers," says Rob Garf, an analyst with AMR Research Inc. In the worst cases, retailers have gotten into trouble with accounting regulations by misrepresenting trade promotional funds as revenue, he adds. But more commonly, retailers are unable to show suppliers how funds were used, creating friction with suppliers who may tighten their purse strings on promotional funds, Garf says.
Trade funds have long been awarded to retailers by suppliers in cooperative marketing programs as a means of helping to promote the suppliers’ goods. In recent years, however, retailers have gained more direct control of using these funds, as many suppliers have opted to just take 10-30% off their invoices to retailers, with the understanding the merchants would use the savings for product promotions.
But some manufacturers are now complaining their trade promotion funds are not leading to increased sales, and they’re demanding more accountability from merchants, AMR says. Retailers are responding with tests of new web-based trade promotion management systems that consolidate data on promotional funds with information on sales and expected demand levels, providing greater visibility and control over how funds are used and their impact on sales.
"Retailers are becoming more proactive around their promotional plans," Garf says. "It enables them to go back to the manufacturer and say, ‘I used the trade funds in this manner, and this is the impact we had.’ It gives them more power and clout if they can prove the effectiveness of certain promotions, and makes it more likely that they’ll get more trade funds."
Retailers have begun to test web-based trade funds management systems from vendors including Soft Solutions, Global eXchange Services and JDA Software Group, though no single application has emerged as a leading system, Garf says.
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