Retailers have to adapt on the fly to remain competitive in today’s marketplace. Consignment selling models have gained serious traction with the rise of e-commerce and with trends in traditional buy-sell operations, with scan-based trading (SBT) emerging as a particularly attractive option. This model, in which retailers only pay for inventory once it is sold, offers numerous benefits for both retailers and suppliers.
The Rise of Scan-Based Trading
Scan-based trading has evolved significantly over the years. Initially adopted by large retailers to streamline inventory management (you can read more about the history of consignment selling in our other blog), SBT has now become more widespread across various retail sectors. The consignment selling model’s ability to reduce financial risk and improve operational efficiency has driven its adoption. Many of the world’s largest e-commerce platforms and major suppliers rely on versions of consignment selling to increase financial and operational efficiencies.
In line with this rise, Fintech provides its own robust SBT platform to help retailers and suppliers by directly addressing pain points associated with unsold inventory, data misalignment, shrinkage, and more.
How Retailers Are Using SBT
One of the primary benefits of SBT for retailers is the reduction in financial risk. By not paying for inventory upfront, retailers mitigate the financial burden of unsold stock. This frees up cash tied to stagnant inventory and reduces the burden of inventory-level decision-making. With improved cash flow, more capital is available for investment in technology and customer experience.
SBT also greatly reduces the risk of shrinkage, which describes the “difference between recorded inventory and actual inventory.” With outsourced SBT, as opposed to internally-run SBT, retailers have access to a dedicated team that drills into product movement to identify the cause of shrinkage. The team delivers UPC-level data insights that track product movement from delivery to shelf placement to point of sale.
In one example, a retailer facing shrinkage at a rate of 25% was able to reduce that number to 10% by relying on the data available through its SBT model. SBT removes the burdens of not only finding the source of shrink but also rectifying the situation with supply chain partners to identify potential challenges and use data-driven insights to adjust accordingly.
How Suppliers Are Using SBT
Suppliers gain value through SBT thanks to the point-of-sale (POS) systems that can be leveraged to optimize inventory and ordering. SBT models reduce out-of-stocks, suggest high-demand products, and improve order accuracy by ensuring accurate on-hand quantities of goods. Suppliers are more efficient with delivery planning via SBT and reduce the time and cost associated with inventory restocking.
They can also reduce the need for warehousing excessive inventory and optimize their distribution networks by focusing on the products that move rather than wasting resources on a wider selling net.
Another impactful benefit for suppliers is easier market entry. SBT allows suppliers to bypass traditional market barriers like slotting fees and offer a broader range of products. For example, a local supplier can use SBT to gain more shelf space at retailer locations, creating a pathway to challenge more dominant competitors in the space.
Avoid Hurdles with SBT by Outsourcing
Despite these benefits, SBT still has plenty of room to stretch its legs into more retail industries. SBT’s largest blocker is a general lack of knowledge about the model and its applications. Some of the world’s biggest e-commerce platforms use consignment selling models to enhance their operational efficiency, and those benefits can trickle down to midsize retailers and suppliers.
Another hurdle with SBT adoption is the perceived notion of its complexity. However, retailers and suppliers can look to dedicated third-party SBT models that handle onboarding and system integration between all supply chain partners. This involves having a team on hand to align retailers and vendors on a consignment selling model in a timely fashion.
Having an SBT partner reduces the integration management workload, establishes an accurate price book by vendor and business unit, and allows retailers and suppliers to enjoy the benefits of a robust SBT model faster.
Learn More About Fintech SBT
Whether you are a retailer or supplier, Fintech SBT has the resources to implement a program and reel in vendors for seamless invoice data exchange.
Click here to learn more about Fintech SBT and how businesses can modernize their vendor agreements with a consignment selling model.
