What is Slotting Allowance?
Slotting allowance or slotting fee is the fee charged to producers/manufacturers by the supermarket retailers for various reasons like keeping their products, stocking the product in its warehouse, or inventory and IT support. The slotting allowance may also be charged on the marketing expenditure incurred by the company for the product.
Although disputed by some retailers, observers contend that slotting fees can represent 20%-50% of the profits of some chains (Gay 2001;Jenkins 1999;Lee 2000, p. 578) and that these fees have. The Court of Appeal directed the legal question in this scope to the Supreme Court which in its resolution of 18 November 2015 under file ref. No III CZP 73/15 stated that monetary bonuses that are dependent on the turnover in the form of the volume-related discount should not be qualified up front as a prohibited slotting fee. 248 (5) Payments of slotting fees for alcoholic beverages shall not be made to vendors. A slotting fee is defined as any form of assistance given by an industry member to a vendor to purchase or rent additional, particular, favorable, or dedicated display, shelf, cooler, storage or warehouse space for alcoholic beverages.
Every year the producers suggest various new products to the retailers, generally to the concerned category manger. The category manager then decides on whether to stock the product or not depending on profitability and then charges the producer for stocking it. It is a very common practice in the United States where the stocking fee per product per manufacturer per year may be as high as $50000. It is a very important source of revenue for the retailers.
Accounting For Slotting Fees
The slotting fee charged depends on the kind of retailer, his merchandizing range, producer, product category, rate of consumption of product, margin offered to retailer etc. Many people believe it is a wrong practice as it seriously inhibits the entry of new and smaller manufacturers in the market. According to retailers who are in support of the charged fee, it is charged to efficiently allocate scarce retail space, mitigate product failure risk, it makes manufacturers to signal their expectations form the product and many more.
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This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
Every year the producers suggest various new products to the retailers, generally to the concerned category manger. The category manager then decides on whether to stock the product or not depending on profitability and then charges the producer for stocking it. It is a very common practice in the United States where the stocking fee per product per manufacturer per year may be as high as $50000. It is a very important source of revenue for the retailers.
Accounting For Slotting Fees
The slotting fee charged depends on the kind of retailer, his merchandizing range, producer, product category, rate of consumption of product, margin offered to retailer etc. Many people believe it is a wrong practice as it seriously inhibits the entry of new and smaller manufacturers in the market. According to retailers who are in support of the charged fee, it is charged to efficiently allocate scarce retail space, mitigate product failure risk, it makes manufacturers to signal their expectations form the product and many more.
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This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
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