Channel stuffing
Business practice used to inflate sales
Channel stuffing, also known as trade loading, is a business practice in which a company, or a sales force within a company, inflates its sales figures by forcing more products through a distribution channel than the channel is capable of selling. This can be the result of a company attempting to inflate its sales figures. Alternatively, it can be a consequence of a poorly managed sales force attempting to meet short-term objectives and quotas in a way that is detrimental to a company in the long term.
Channel stuffing has a number of long-term consequences for a company. Firstly, distributors will often return any unsold goods to the company, incurring a carrying cost and also developing a backlog of product inventory. Wildly fluctuating demand, combined with the excess inventory, leads to costly overtime and factory shutdowns. Even mild channel stuffing can spiral out of control as the sales department works to make up for prior overselling. Discounts used to drive trade loading can greatly affect profits, and even help establish gray market channels, because salespeople no longer adequately qualify their prospects.
Occasionally, distribution channels such as large retailers have been known to identify the practice of channel stuffing by their suppliers, and use the phenomenon to their advantage. That is done by holding back on orders until the end of a supplier's quota period.
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This entry incorporates text from “Channel stuffing” on English Wikipedia. Contributors are listed in the page history. Text is available under the Creative Commons Attribution-ShareAlike 4.0 License. Selected authority identifiers and statements are retrieved from Wikidata under CC0; their references and qualifiers remain part of the verification path.