In addition to the distribution of magazines and newspapers, Smiths News & Menzies Distribution have an agreement in place with thousands of their retailers to automatically 'allocate' any suitable 'non-news' product to their stores, on the same terms as their magazines and newspapers i.e. full Sale-or-Return (providing it fits into certain criteria).
Via the allocation process, 6000 independent retailers will be sent an outer/case of a new product delivered to their door with their newspapers, on Sale-or-Return (SOR), in order to stock on their shelves for a fixed period of time (on-sale period), after which they can return any unsold items for credit. The wholesalers then simply add the cost of the goods sold onto the retailer's newspaper invoice.
Innzone together with Smiths News & Menzies Distribution will identify and target the most suitable retailers for any new product, out of their 25,000 independent customers, based on historical data and sales of similar products. The product is then sent out automatically to upto 6000 stores, on one given weekend. The retailer then makes a buying decision for the first time upon seeing the product when his newspapers and magazines are delivered. If he likes the look of the product and see potential, he will accept it and stock it on his shelf for the onsale period. If he doesn’t accept it (due to issues such as store capacity, cashflow, competition etc), he leaves the product in his tote box for collection the next day. The more attractive the product, the higher the acceptance rate. The higher the acceptance rate, the higher the overall net sales of the product are. So Merchandising, Point of Sale and Branding are all key to a successful product using the allocation process.
Once retailers accept the product and sell out of their outer/case, both the retailer and the consumer will gain confidence in the new brand. The consumers will return to the store and ask for more, and the retailers will be looking for another case. Innzone can re-stock the stores requiring an additional case during the on-sale period (using the early returned ‘mint condition’ stock from those who did not accept the original allocation), however it is preferable to have a wholesale presence (Cash & Carry) to compliment the allocation process.
The majority of our independents will shop regularly at Cash & Carry and commit to products by buying them on firm sale. In return they expect greater margins than the SOR margins offered through the allocation process. That is why the allocation process compliments a wholesale presence so well. Retailers first try selling the new product on a risk free basis via allocation, gain confidence that is sells, and then take the leap of faith in the Cash & Carry and purchase at wholesale with more favourable margins on firm sale.
A major issue that suppliers of new SKUs often have, is that independent retailers will only usually buy brands and SKUs they know will sell i.e. they are risk averse. And unless they have successfully sold a new SKU in store, they will often walk straight past it on the Cash & Carry shelf in favour of a more well known FMCG brand. So having paid the substantial listing fees demanded by the wholesalers to be on their shelves, suppliers must combine their wholesale presence with promotional activity to ensure their product is sells through at wholesale and does not find itself de-listed after 6 months. The allocation process does exactly that, by driving brand recognition & consumer awareness, retailer confidence and subsequent sell through at wholesale.
All potential products and commercials are vetted and approved first by Innzone. They are then presented to Smiths News and Menzies Distribution for their company approval, including suitability, risk management assessment, in addition to commercial and logistical viability. If positive, Innzone agree between the news wholesaler and the supplier on:- the number of stores suitable to automatically receive the product for the allocation which can be anywhere between 1000 and 6000; the length of the "on-sale" period for the product in terms of weeks and/or months); and the most suitable on-sale date/timing of year.
The supplier delivers the whole order in one drop directly to Innzone's warehouse. Innzone then break down the order into the correct quantities per region and then deliver the product to the 25 regional depots (belonging to Smiths News and Menzies Distribution) across the UK. The news wholesaler then fulfils the 'final mile' by delivering the goods from depot to the high street store. Once the on-sale period expires, the goods are returned by the retailer, collected by the wholesaler and returned to the depot and scanned in to produce the end result. The difference between the quantity of units initially supplied to Innzone and the quantity finally returned by retailers and scanned at the depot, is called the "Net Sale figure" and it is on this number of sold units that all suppliers are paid after each allocation.
Innzone then collect all the unsolds from the 25 depots, and recycle all the 'mint' returns into new outers (e.g. Counter Display-Units) ready for a second allocation just a matter of weeks later (from the original allocation). The allocation process above is then repeated a second time, which increases the overall net sale figure from the original supply. The allocation process is then repeated a third and final time - after which the majority of the original stock (usually 80%+) should have sold through, leaving a minority number of unsolds at the end of the cycle - which are usually returned to the supplier or destroyed and written off.
Naturally after each allocation, the process becomes more and more scientific - with learned trade history of which stores sold the stock best after each allocation, such that by the third allocation, only the best selling stores receive the product which results in a significantly better net sale percentage than the first allocation (when the best selling stores are unknown) and a nucleus of 'premium' retailers who regularly accept and repeat order on the product.
Our total margin requirement is based on the retail price of the product and it is substantial. To such an extent that many of our suppliers only break even and some in fact sell below their cost price, and lose money on each unit sold. In return for this ‘cost’, your product will be stocked on 6000 retail shelves and purchased by 100,000+ consumers. This is often therefore categorised under ‘promotional activity’ (or paid-for sampling) and falls within the marketing budget and not sales, which ultimately enhances growth, brand awareness and trade.
Please contact us if you would like more detailed information regarding the commercials and logistics.