Sales & Distribution
Scan-Based Trading (SBT) is a retail partnership where a CPG brand retains ownership of its products on a retailer's shelves until they are scanned and sold to a customer. The brand then only pays the retailer for the items that have actually been sold.
Full Definition
Scan-Based Trading (SBT) is a collaborative inventory management and payment model between a CPG brand and a retailer. Unlike traditional purchasing, where the retailer buys inventory upfront, with SBT, the CPG brand maintains ownership of the goods in the store. The retailer only pays the CPG brand (or is compensated by the brand, depending on the agreement) for products as they are scanned and sold at the checkout. This system shifts the risk of unsold inventory from the retailer back to the brand, requiring robust inventory tracking and sales data sharing.
Why It Matters for CPG Brands
For CPG brand operators, SBT can significantly impact cash flow and inventory risk. It means you aren't paid until your product sells, but it also reduces the barrier to entry for retailers and can lead to more shelf space. Understanding your sales velocity and managing inventory effectively becomes even more critical.
In CPG Operations
A snack food brand might implement SBT with a regional grocery chain to get its new line of healthy chips onto shelves without the retailer taking on upfront inventory risk. This allows the brand to test market performance and gain distribution more easily, while the grocery chain benefits from not having to purchase potentially slow-moving new items.
Example
A small-batch artisanal jam brand with 8 unique flavors implements Scan-Based Trading with a local gourmet grocery store. Instead of the store buying cases of jam upfront, the jam brand keeps ownership of the jars on the shelf, restocking as needed and receiving payment from the store weekly based on POS data showing exactly how many jars of each flavor were sold to customers.
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Frequently Asked Questions
How does SBT affect my cash flow?
With SBT, your cash flow is directly tied to actual sales, meaning you only get paid when a product sells. This can smooth out payments but requires strong sales forecasting and can delay revenue compared to traditional wholesale models.
What are the main benefits of SBT for a small CPG brand?
SBT can help small CPG brands gain distribution more easily by reducing the retailer's upfront inventory risk. It can also provide valuable real-time sales data, helping you understand product performance at the store level.
What are the biggest challenges of SBT for a CPG brand?
Key challenges include managing inventory at multiple retail locations, ensuring accurate sales reporting from retailers, and potentially longer payment cycles. You also bear the risk of unsold inventory and product shrink.