For some reason I was under the impression that this is exactly how it works at some physical retailers? Can someone confirm that this is not the case? Does Costco/Walmart/CVS/etc. eat the cost if the items don’t sell?
Costco, to my knowledge, is actually one of the more strict retailers with IIRC 6 month delay between a product sale and the vendor being played. Mostly due to their generous return policy.
I don't know of any large retailer that eats the cost of unsold goods. It's typically the retailers who pressure the supplier/brand into offering discounts and coupons in order to keep product moving.
It's interesting that food is an exception, perhaps because it's perishable, and if you don't pay for a delivery of ingredients... no soup for you. And restaurants may actually be competing for access to high quality materials. Of course the larger chains can manage their supply chains differently, partly by using less perishable ingredients in the first place.
I personally have been a chef and a manager in retail food businesses from movie theaters to coffee shops. I have a friend who owns an upscale boutique that sells many types of products, another that sells products through her salon, several more that own vintage stores (admittedly entirely different supply chain,) a friend who discussed his well-researched, in-depth business plans to open a gun accessories retail shop, another who sells wood crafts and other products direct to customers, a couple full-time artists who sell their art either through galleries or from the walls of businesses, and several food purveyors that only sell to businesses for resale.
In that entire pool, only the artists selling their art through galleries and coffee shop walls, and one of the vintage shops that does consignment sales, differ from the norm of retailers owning their inventory. Some wholesalers or manufacturers will afford well-behaved businesses lines of credit— but that's not the same thing as not owning your inventory. You can't just return it if you don't sell it. Once you sign that delivery sheet, it's pretty much yours.
I've heard of retailers selling new products on manufacturer consignment. I wouldn't be surprised if some specific industries operate like that as a norm. Maybe phone vendors? Maybe software/computer game stores, possibly, because the content is license-based and the material cost is relatively small compared to the price? (Amusingly, as a long-time software developer and someone with a lot of experience in the retail end of business, I have no idea how retail software sales work.) But there's no way Nordstrom is going to order a skid of this spring's collection from major brands and designers and be like "sorry, we decided to give the floor space to other items, so either mark these down to bargain rack prices or we're not paying for them." If that were the way it worked, nobody would sell them anything.
I get the sense that the original commenter just extrapolated based their understanding of business practices that weren't as common as they thought.
Edited to make it clear that I'm saying the retailers I'm well-acquainted with do not get reimbursed for unsold items except from a few specific suppliers.
Also "return it back" doesnt mean the company got the same value. Some companies only give credits for the returns and sometimes those credits are less than MSRP.
If you ever see something on clearance it means A) they cant return it to get credit or B) the credit amount they will get is less than what the clearance price they are offering is
For books some can go to half priced books type stores, but if there are a lot unsold it probably isn't worth the shipping.
You may be conflating payment terms of trade with sales/revenue recognition.
In general for consumer goods (unless it's a consignment model), revenue is recognized by the manufacturer the day products are billed and shipped to the retailer. In other words Store inventory is usually on the retailers balance sheet.
The retailer may actually pay the manufacturer 30/60/90 days later (I've never heard of 6 months but it's possible) and that's subject to negotiation. But that's cash/working capital management, not P&L.
Trader Joe's does this. Though they also rebrand the products they sell.
There are a few different models. What you're describing (stocking a product owned by another entity and giving them a cut of the sale price) is frequently known as consignment. It has minimal risk for the retailer, and typically involves non-perishable goods (clothes, electronics, etc).
Other retailers purchase the product at a discounted price from another entity and then sell it at their location for a higher price. This is the wholesale model where a producer is selling so much product to a retailer that they'll give them a discount on the price.
Wholesaling comes in 2 main forms: As described above, or "buyback". With a buyback contract, risk is shifted back onto the producer, as any unsold stock at the end of the contract term is "bought back" by the producer, typically at price they sold it to the retailer (possibly minus stocking/shipping fees).
I have no idea how the specific places you mentioned run their shops, but having been involved with several companies that produce physical goods for market, it's VERY common to sell to major retailers, and not just run consignment contracts (in fact, we ran VERY quickly away from anyone offering such deals because we would have to tie up inventory on their shelves that we may never be paid for).
The stores were really more like real estate companies and payment processors than what most people think of when they think "retailer". They rented shelf space to manufacturers/distributors and handled the money when someone bought something. (For the catalog companies, replace "shelf space" with "page space").
This was why when after you decided in late 1995 to upgrade to something better than Windows 3.1 and walked into Egghead to buy a new OS you'd see Windows 95 somewhere prominent visible from the door, probably with banners touting how great it is, and OS/2 Warp would be on the bottom row of some shelf in the back of the store with poor lighting and enough dust to suggest that not even the person who is supposed to vacuum bothers to go back there.
Microsoft paid for prime real estate in the store and in-store advertising for Windows 95. IBM did the minimum possible that would get OS/2 Warp to be somewhere in the store.
But merchandising and stocking the shelves was also 100% our responsibility.
on edit: of course book stores don't compete with publishers.
(Fun Fact for anyone not familiar with this practice: in publishing the covers were shipped back as the proof because whole books are heavy/costly to ship and take up a lot of space/costly to warehouse so the retailer with them on hand would just have the rest of the book pulped).
Most products in stores today that aren't sold in bulk have a bar code on the packaging, which can be sent back as symbolic proof the item was "destroyed" (about as meaningful as the; for smaller objects, send back the entire front of the package.
I'm not saying this is a good idea. (I think this is a terrible idea, and that we create too much waste already) I'm just saying it's entirely possible.
Enjoyed a lot of cheap sci-fi and fantasy that way.