If I have a product that is sold at Walmart, so to say, do I make money when someone buys my product from Walmart or does Walmart buy my product in bulk to sell and that’s how I make my money? This question has bothered me for decades, thanks!
In: Economics
Yes, the basics of it is that the brand sells the product to the store, and the store sells it to you.
There is an additional layer of complexity – grocery stores have extremely low profit margins of usually 2-3 percent. This does not allow them to take on inventory risk of products not selling. So the arrangement that stores have with most volume brands is that the stores give the brands shelf space and the brands only gets paid for what is sold. This is most prevalent for sodas and snacks, where the guy stocking the shelves is actually a Pepsi/Coke employee. This is also why they build those fancy displays for games and holidays – because the brands have the time and training for their drivers and display builders to do that. The brands take all the inventory risk and are responsible for making sure that they keep a good balance of products on the shelves for good turnover. Brands can also pay the stores for end-cap space to promote sales and move inventory that may be slow.
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