Forward buying is a practice where retailers and wholesalers stock up on a product being offered by a manufacturer at a lower deal or off-invoice price and resell it to consumers once the marketer’s promotional period has ended.
Further discussion on forward buying:
The act of forward buying is considered an abusive practice by a manufacturers channel partners (wholesalers, retailers and distributors). These channel partners will often stock up on goods offered by the manufacturer at the lower promotional deal or off-invoice prices, but will not pass those savings on to consumers. Instead, the channel partners will hold on to the goods until the wholesalers promotion has ended and then offer the goods at the regular or higher price.
Forward buying is a widespread practice by the manufacturers channel partners that accounts for 40% of the partners profits.
While the advantage of forward buying for channel partners increases profits, the practice has a negative impact on the manufacturer. Such an impact may include, huge swings in demand that cause production scheduling problems for manufacturers.« Back to Glossary Index