Evaluating Secondary Wholesale Price Distortion in Multi Tier Channels
Secondary wholesale price distortion is solved by eliminating unearned volume rebates and conditioning all back-end margins on verified point-of-sale data.
Sell through Auditing
Meaning
Verification processes track the movement of inventory from a retailer to the end consumer to confirm actual sales volume. Through sell through auditing, a manufacturer ensures that the discounts and rebates provided to a distributor are based on products actually sold rather than those sitting in a warehouse. This data prevents the manufacturer from overproducing based on false signals of demand.
The audit is restricted to the specific products and time periods defined in the trade agreement.
Data Integrity
Accuracy in reporting is the primary goal of inspecting the sales records of a retail partner. By performing sell through auditing, a company can identify discrepancies between the reported sales and the actual stock levels at the storefront. This transparency is necessary for the fair distribution of marketing funds and performance bonuses.
Rebate Accuracy
Financial settlements are finalized only after the sales figures have been confirmed by an independent or internal review. In sell through auditing, any overpayment made to a distributor based on estimated volumes is recovered through a credit note. This process ensures that the manufacturer only pays for performance that has been successfully achieved.
Supply Visibility
Forecasting becomes more reliable when the manufacturer has access to real-time sales data from the point of purchase. With sell through auditing, the production schedule can be adjusted to match the actual rate of consumption in the market. This alignment reduces the risk of stockouts and the accumulation of obsolete inventory.