Top 50 Common sales Words Used in fmcg business by salesmen
What Are Fast-Moving Consumer Goods (FMCG)?
Fast-moving consumer goods are products that sell quickly at relatively low cost. These goods are also called consumer packaged goods.
FMCGs have a short shelf life because of high consumer demand (e.g., soft drinks and confections) or because they are perishable (e.g., meat, dairy products, and baked goods). These goods are purchased frequently, are consumed rapidly, are priced low, and are sold in large quantities. They also have a high turnover when they’re on the shelf at the store.
- Fast-moving consumers goods are nondurable products that sell quickly at relatively low cost.
- FMCGs have low profit margins, but they account for more than half of all consumer spending.
- Examples of FMCGs include milk, gum, fruit and vegetables, toilet paper, soda, beer, and over-the-counter drugs like aspirin.
What Are Fast-Moving Consumer Goods (FMCG)?
Consumer goods are products purchased for consumption by the average consumer. They are divided into three different categories: durable, non durable goods, and services. Durable goods have a shelf life of three years or more while non durable goods have a shelf life of less than one year. Fast-moving consumer goods are the largest segment of consumer goods. They fall into the non durable category, as they are consumed immediately and have a short shelf life.
As mentioned above, fast-moving consumer goods are nondurable goods, or goods that have a short lifespan, and are consumed at a rapid or fast pace.
FMCGs can be divided into several different categories including.
- Processed foods: Cheese products, cereals, and boxed pasta
- Prepared meals: Ready-to-eat meals
- Beverages: Bottled water, energy drinks, and juices
- Baked goods: Cookies, croissants, and bagels
- Fresh, frozen foods, and dry goods: Fruits, vegetables, frozen peas and carrots, and raisins and nuts
- Medicines: Aspirin, pain relievers, and other medication that can be purchased without a prescription
- Cleaning products: Baking soda, oven cleaner, and window and glass cleaner
- Cosmetics and toiletries: Hair care products, concealers, toothpaste, and soap
- Office supplies: Pens, pencils, and markers
The Fast-Moving Consumer Goods Industry
Because fast-moving consumer goods have such a high turnover rate, the market is not only very large, it is also very competitive. Some of the world’s largest companies compete for market share in this industry including Tyson Foods, Coca-Cola, Unilever, Procter & Gamble, Nestlé, PepsiCo, and Danone.2 Companies like these need to focus their efforts on marketing fast-moving consumer goods to entice and attract consumers to buy their products.
That’s why packaging is a very important factor in the production process. The logistics and distribution systems often require secondary and tertiary packaging to maximize efficiency. The unit pack or primary package is critical for product protection and shelf life, and also provides information and sales incentives to consumers.
FCMGs are sold in large quantities, so they are considered a reliable source of revenue. This high volume of sales also offsets the low profit margins on individual sales as well.
As investments, FMCG stocks generally promise low-growth but are safe bets with predictable margins, stable returns, and regular dividends.
Special Considerations
Fast-Moving Consumer Goods and E-Commerce
Shoppers across the globe increasingly purchase things they need online because it offers certain conveniences—from delivering orders right to the door to broad selection and low prices—that brick-and-mortar stores can’t.
The most popular e-commerce categories, not surprisingly, are non-consumable goods—durables and entertainment-related products. The online market for buying groceries and other consumable products is growing, as companies redefine the efficiency of delivery logistics which shorten delivery times. While non-consumable categories may continue to lead consumable products in sheer volume, gains in logistics efficiency have increased the use of e-commerce channels for acquiring FMCGs.
When shopping for non-consumable goods where consumers typically have something in mind, there is mostly a one-to-one correlation between online searching and shopping. Consumable products have lower online browse/buy intention than non-consumable ones, but they do boast just as strong browse-to-buy correlations, which may be a factor in their increasing online sales.
What are some of the largest FMCG fast-moving consumer goods companies?
What Do You Mean by Consumer Goods Sector?
Some basic FMCG sales terminologies for the freshers who are planning to start their careers in sales:
FMCG: Fast Moving Consumer Goods, goods that moves faster from a retail outlet.
For example rice, dal, sugar, soap, etc.
Why Factory Orders Matter In Fmcg Business?
Primary Sales: These are sales from the company to the distributor e.g. the amount of product that a distributor purchases from the company. Normally Area Manager’s and Regional Manager’s targets are set on Primary Sales.
Secondary Sales: These are sales from the distributor to the retailer. Usually, TM/TSM’s targets are always based on secondary sales.
Offtakes (Tertiary Sales): These are sales from the retailer to the customer. While offtakes are not tracked by the company, trends of offtakes are tracked by some market research agency like Nielsen.
Beat: This is the route that a salesman (DSR/SO/SR) follows on a particular day. For example, beat on Saturday is Location X, and beat on Sunday is Location Y. If the salesman visits his each beat on every alternative day, all the retailers/stores/outlets in his sales territory will be covered in two days. Thus, he will visit the same outlet of his beat thrice per week.
Numeric Distribution: The number (or percentage) of outlets where company’s product is present (outlets that have at least one SKU of a product) e.g. at how many outlets a company’s product are available is measured by numeric distribution.
Weighted Distribution: The percentage of the total sales volume that comes from the served outlet.
Let’s clear this by an example,
For example, you have 10 outlets in a beat, now out of these 10 outlets if your product is present in 4 outlets then numeric distribution is 40%. If that 4 outlets contributes 75% of your total sales, in that case weighted distribution would be 75%. Numeric distribution gives you an idea of the reach of distribution whilst weighted gives you an idea of the quality of distribution.
Stock Keeping Unit (SKU): This refers to a specific product from a range of product of a company. For example, 100 gram Dettol original soap is an SKU of Dettol soap of Reckitt Benckiser (Reckitt Benckiser has other SKUs of dettol soap like 50 gram Dettol soap, 200 gram Dettol soap, etc.).
Sales Representatives (SR) or Sales Officers (SO): SR/SO can be employed either by company or by distributors depending on company policy who are responsible for collecting sales order from their assigned routes. After collecting sales orders from the outlets of his assigned route, a SR/SO makes a summay of this total order and submits it to the distributor for delivery. Based on this collected order (summary sheet) product delivery happens on the next day by DSR or Deliveryman of distributor. In Bangladesh usually local companies keep SR/SO on their own payroll but MNCs do not keep this layer with their own payroll.
DSR: Distributor’s Sales Representatives are employed by distributors but managed by TM/TSM; DSRs are the salesmen who are responsible to make sales of company’s products (SKUs) to retailers. Typically where SR or SO concept is available, DSRs are the deliverymen who are employed to deliver company’s products to outlets according to previously collected orders by SR/SO. Where SR/SO concept is not practiced (e.g. not employed by company itself) DSR plays the role of SR/SO and in that case distributor employs a separate delivery unit for distributing products to retail.
Sales is the only function in the company that brings revenue and still it is much looked down by most of the job aspirants. If you ask any Marketing student, majority of them will say that they aspire to become a Brand Manager and only few (if you are lucky!) will say that they intent to go into sales and then grow.
It is not just a coincidence that the field, you aspire to rock one day, is called “Sales and Marketing” and not just Marketing or just Sales. S&M comprises of three pillars, which are
1. Sales: Basic function of sales is to generate revenue for the company. It revolve around reaching to customer, convince them to stock your product, give them discount to pass(sell) product to end consumer, achieve monthly sales target and keep everyone happy(!!!).
2. Marketing: Marketing revolve around creating desire among customers to consume your product and there are many ways. Marketing includes decision like selling 50gm pack or 56gm pack, charge 100Rs and give 10% discount or charge 91Rs. It also includes media planning, promotion and tactical activities planning. To accomplish all task you need market data and that comes from Market research and your on-ground employees (salesmen).
3. Innovation: Innovation is long term strategy that includes new product development, positioning and how do you want your product/brand to be perceived in long term.
A company can be classified as
Sales driven: Balaji wafers, Ghadi detergent etc
Marketing driven: Pepsi, Coca-cola etc
Innovation driven: Philips, Apple etc
Marketing and Innovation are cost function and their cost is paid by revenue generated by Sales function of the company. Companies like Pepsi spends 6-7% of revenue on marketing. Last year Pepsi’s market share increased by 2%(click here) and they doubled promotion spend considering increase in revenue will be able to sustain these massive spend. Philips spends nearly 7% of the revenue in R&D to develop next generation products and over the period the R&D spend has increased with increase in revenue. Thus to increase or continue its dominance, companies need to keep investing in their core competency (marketing/innovation) and these increased investment comes from the revenue which is function of sales department.
Basic Responsibilities of Sales Manager:
- Deliver volume
- Exploit maximum market potential
- Ensure stable distribution infrastructure
- Ensure relationship distributors and customers (retailers)
- Develop a capable team
Basic Responsibilities of Sales executive:
- Reach outlet on time
- Sell product
Maximize LPC and BPC - Keep product availability in store
- Maintain Visibility of product in store
- Highlight promotions (promotional schemes)
- Keep product neat and clean
- Build and maintain relationship with retailer
- And deliver volume
Glossary of Sales Terms:
- RTM (Route To Market): Route To Market is the critical link between manufacturing and market. It is a distribution system employed by the company.
- Primary Sales: It is a sales from company to distributors
- Secondary Sales: Sales from distributor to retailers
- Tertiary Sales: Sales from retailer to end consumers. It is also known as “Off-take“.
- Trade schemes: These are promotional schemes that are offered to boost sales from time to time. They can be classified in two categories:
- Primary Scheme: These are deducted while the invoicing is done to the distributor from the company’s end. This may be done to give the distributor an additional margin.
- Secondary Scheme: Distributor is supposed to first extend to the market and then claims it back from the company Qualitative Purchase Schemes: These are schemes which company offers to distributor based on volume he buys
eg. 5% discount on 100 pieces, 7% discount on 150 pieces - Quantitative Purchase Schemes: These are schemes which company offers to distributor based on value of total items bought
eg. 5% on items worth 10000Rs, 7% discount on items worth 15000Rs
- Landing Price: It is a price that buyer pays to seller for purchase of the product
1. Distributor landing price: Per Unit Price distributor pays to compny for purchase of product
2. Retailer Landing Price: Per Unit Price retailer pays to distributor for purchase of product - ROI (Return on Investment): Return on Investment is money earned for the investment made over one year
ROI = 100*(Earning – Expenses)/Investment - Beat Plan: Beat plan is a pre-defined route for sales executive to follow to service the outlets.
- Outlet universe: Total number of outlets which stores product same product category or related product category to which our product belongs
- Coverage: Coverage is number of outlets covered from universe of outlets.
1. Numeric Distribution: Absolute quantitative distribution ie if outlet universe is 100 and my product is present in 60 outlets then Numberic Distribution is 100*60/100 = 60%
2. Weighted Distribution: It is measured based on volume. ie if total volume sales by all outlets in outlet universe is 1000unit and my product is present in outlets which sells 700units then Weighted Distribution is 100*700/100 = 70% - MCP (Master Coverage Plan): At the time of product introduction, MCP is performed to identify and understand market and design distribution plan to meed objectives.
- EDS (Every Dealer Survey): EDS includes visiting every retailer of the are and mapping market potential to design effecient route for coverage
- LPC (Lines Per Call): Number of order lines per order
- BPC (Brands Per Call): Number of brands per order
- FDFT (Fixed Date Fixed Time): Ensuring the Distributor Salesman visits all the potential outlets on a FDFT. This helps to establish DSR reliability
- OOS (Out Of Stock): When product is sold out and retailer is left with no inventory to sell.
- POS (Point of Sales)
- Merchandising: Arranging our Products and POS neatly and prominently so that they are easily noticed by the customer
- PJP (Permanent Journey Plan): It is detailed plan for Sales Manager describing his monthly activities.
Wholesalers: An outlet of a beat is considered as wholesaler if that outlet contributes more than 50% sales of that particular beat (this assumption may differ for different companies).
Modern Trade: Super shops who mainly sell to premium customers e.g. Agora, Swanpa etc. (Modern Trade is managed by the dedicated sales channel)
Trade Schemes or Trade Promotions (Widely Known as TP): These are schemes that are given out in the market to boost sales from time to time. Trade Schemes are designed for the trade i.e. Retailers/Wholesalers and the Distributors.
Trade Promos can be of different types based on the needs of the company:
Typically FMCG companies do have many SKUs in their product portfolio. To create retailer’s loyalty (trade advocacy) companies offer frees or bonuses with some of their SKUs for their retailers. These bonuses are named as TP. For example 12+1 free means that with this particular product an extra item (same product) will be offered to a retailer if he buys 12 items in a single invoice/memo. If another item is given as free the same promotion may be named as Cross Promotion.
Quantity Purchase Schemes (QPS): To inspire the retailers to buy more, sometime company offers QPS.
These typically look like this: Purchase of 144 pieces at a time and get 8% discount
Basically these are discounts offered on purchasing a particular quantity of products.
Value Purchase Schemes (VPS): These are same as QPS, the only difference is that these are offered on value purchased instead of quantity.
These would look like this: Purchase of Tk 10,000.00 at a time and get 8% discount.
These are discounts offered on purchasing products of a predefined value.
Trade schemes are further divided into two types depending on who they are offered to:
Primary Schemes: These are those that are deducted while the invoicing is done to the distributor from the company’s end. This may be done to give the distributor an additional margin.
Secondary Schemes: These are those which the distributor is supposed to first extend to the market as per company declared trade scheme and then claims it back to the company.
Trade Schemes: These are schemes that are given out in the market to boost sales from time to time. Trade Schemes are designed for the trade i.e. Retailers/Whole-Salers and the distributor is supposed to comply with them and extend it to the trade and the company’s sales force are expected to utilize it in the right spirit and ensure market hygiene.
These can be in terms of discounts on the bill (hence translating to higher margins) or in terms of goods that may be enticing for the retailer/distributor. An example of this would be a free air conditioner on purchase of a particular value of goods, or a free holiday package on achieving the target that is given.
Trade schemes are of two types:
Quantity Purchase Schemes (QPS): These typically look like this:
144 pieces – 8% discount
72 pieces – 6% discount
48 pieces – 4% discount
24 pieces – 2% discount
Basically these are discounts offered on purchasing a particular quantity of products
Value Purchase Schemes (VPS): These would look like this:
Purchase of 10,000 – 8% discount
Purchase of 8,000 – 6% discount
Purchase of 6,000– 4% discount
Purchase of 4,000 – 2% discount
These are discounts offered on purchasing products of a predefined value
ROI (Return of Investment): This is calculated on monthly/quarterly/yearly basis to understand distributor’s profitability. ROI calculation is very important as it is a tool to negotiate with your distributor to manage/deploy required investments.
The equation is simple: ROI= Return/Investment, Return = (Earnings – Expenses).
FOC: Free of Cost (Goods offered as free). Sometimes company offers FOC goods to retailers as a part of special promotion.
Display: This refers to Shelf of an outlet that a company pays for (can also be a floor standing unit (FSU) in Modern Trade). Company usually hires shelf space of an outlet on monthly rental basis to display its products.
Strike Rate or Productivity: It is the % of all successful sales calls out of total calls made by a Sales Representative. This is generally measured on daily basis.
ECO: It stands for Effectively Covered Outlet or Effective Coverage which means how many outlets out of total outlet of a route or market or territory are making at least one memo in a month. With ECO a company measures active outlet number over the period of time (normally a month).
Other Popular Terms:
EC: Effective Coverage, PC: Productive Call, LPC: Lines Per Call, LPD: Lines Per Day, LPM: Lines Per Month, LPI: Lines Per Invoice, KPI: Key Performance Indicator, TBTL: Time Bound Trade Load, DLTL: Display Linked Trade Load, NPLP: New Product Launch Process, DP: Dealer Price, TP: Trade Price, TP: Trade Promotion, CP: Consumer Promotion, CO: Consumer Offer, L&D: Leakage & Damage, DD: Direct Distributor, SD: Super Distributor, OSDP: Out Stationed Distribution Point, JC: Journey Cycle, TMR: Town Market Report, Discounts: Primary Discounts, Secondary Discounts, Cash Discounts, ADS: Average Daily Sales, RADS: Required Average Daily Sales, RTM: Route to Market, VTM: Value to Market, BTL: Below the Line, ATL: Above the Line
Which is the task of salesman?
Salesman Job Description. A Salesman, also called a Sales Representative or Salesperson, sells products or services to businesses or consumers. They explain how a product works or what services are available, provide sales materials such as brochures or pamphlets, create sales leads and follow up with new customers.
What is line per call in fmcg?
What is total line sold?
The total number of products sold in all lines is referred to as length of product mix. If a line of products is sold with the same brand name, this is referred to as family branding. When you add a new product to a line, it is referred to as a line extension.
What is drop size in FMCG?
Drop Size means the volume of Unit of all Products in a single delivery to a Restaurant.
1. Outlet Coverage
This metric is directly related to the number of outlets getting covered by an FMCG salesman within his quota of outlets to be covered in a specified time frame. Most often, this metric is measured on a day-to-day basis. If the salesmen are unable to meet their defined coverage area mainly on account of ineffective beat planning. On the other hand, an effective beat plan will enable a salesman to effectively handle order collection and visual merchandising in outlets allotted to them.
Outlet coverage is also impacted by improper outlet segmentation and poor beat health. To improve this metric, a salesperson must focus on improving the number of Total Calls (TC) by being able to average at least 40-45 calls per day. The onus should be on improving the number of productive calls as it can significantly improve coverage. This sales activity can be easily done by using the power of real-time data and effective tracking.
2. Productivity (Effectively Covered Outlet- ECO)
In the FMCG sector, ECO or Effectively Covered Outlet is a metric that defines the number of outlets out of a total number of outlets on a route, market, or territory that are making at least one sales memo in a month. This metric allows the sales team to assess the number of active outlets within a given territory, route, or market. With our recently launched module, beat-o-meter, sales teams can unlock the beat potential to convert inactive and dormant outlets to active ones effectively.
3. Product Line Sold (Range Selling)
Among FMCG sales teams, product line sales, or range selling refer to the marketing strategy associated with selling several related products. It is an effective strategy wherein similar products with close functions are sold to the same outlet. The outlet acquires such products with the belief that they will be able to persuasively sell such products to the customer related to the customer’s original choice. For instance, a company would sell hair care products that could include Hair Shampoo, Hair Wax, and Hair Gel within the same product line.
This tactic allows an FMCG company to diversify its product base, brings in more visibility in the shelf space, and enables the brand to attract more footfalls to the outlet. It is a metric that can incentivize primary and secondary sales force when they sell a stipulated number of lines per call.
4. Bill Cut (Lines Cut per Call)
This refers to the metric that defines the number of calls a salesman would undertake within a given month. Bill cut is calculated by multiplying the total number of outlets within the territory by 4 (one visit to an outlet in a week, four weeks in a month). This gives the total number of possible calls that can be made by a salesman. To arrive at the bill cut target, this total number is multiplied by the productivity norm of 60% (variable) to give the expected number of calls to be undertaken by a salesman in the assigned territory.
Mathematically expressed as:
Total Number of Calls = Total Number of Outlets x 4
Bill Cut Target = Total number of Calls x 60%
This metric will allow the sales head to set targets for his salesmen. The more number of calls a salesman can make per week, the better his chances to reach targets within the stipulated time.
5. Throughput (Average Sales)
This metric is calculated by dividing the quantum of sales done by a salesperson for an entire day by the total number of outlets visited by him during the daily beat. Throughput is directly dependent on the outlet stock levels, predicted consumption patterns, drop size of the outlet, and even the launch of new products. This value is known to peak during the festive season. And it is considered best to record this data immediately at the end of the day for analysis of consumption patterns and market forecasting.
6. Must Sell Products (MSPs)
This metric refers to the tactic of selling the right product to the right outlet. It is a given fact that an FMCG salesman would not be able to sell all products to an outlet. But he can be sure about the sale of specific products that the outlet would readily buy because of the existing demand. Such products are known as Must Sell Products or SKUs (MSP or MSS).
An FMCG company can improve this metric by selling SKUs or products to outlets based on the economic demography it’s catering to. For instance, certain kinds of chocolates are only known to sell only in outlets that cater to the upper-middle-class customer segment. Hence the company can make those chocolates an MSP in those types of outlets.
As we talk about going digital more than ever before, it’s imperative for FMCG brands to include these metrics in their sales automation and business intelligence tools. For an organization like ours, tracking these metrics for our clients through mobile apps and personalized dashboards has always enhanced their team performance and improved brand visibility. We are helping 400+ FMCG organizations improve their sales process with real-time and measurable data. Reach out to us as we will help you transform your sales today!
What is numeric reach in Fmcg Distribution?
Numeric distribution refers to number of stock keeping units or stores which contains a particular brand of product. Numeric distribution helps to calculate reach of brand in terms of percentage in relevant market. Numeric distribution does not have relation with sales volume of the brand of product. Thus numeric distribution determines in how many locations a particular brand is available to customers.
What is Numeric Distribution?
Numeric distribution refers to number of stock keeping units or stores which contains a particular brand of product. Numeric distribution helps to calculate reach of brand in terms of percentage in relevant market. Numeric distribution does not have relation with sales volume of the brand of product. Thus numeric distribution determines in how many locations a particular brand is available to customers.
Numeric Distribution Formula
Numeric distribution is calculated as follows:
Numeric distribution = (Number of shops carrying a particular brand) ÷ (Total number of shops)
All these are a part of distribution metrics, which are performance indicators.
Example of Numeric Distribution
If we consider an example of Colgate toothpaste selling in a store and its sales volume in particular store.
STORES | STORE 1 | STORE 2 | STORE 3 | STORE 4 |
SALES VOLUME | 5% | 10% | 15% | 70% |
So if we want to calculate numeric distribution of product from stores 1 to 3 then we calculate it as:
Numeric distribution = ¾ =75%
Thus it shows that Colgate toothpaste is available in 3 stores out of 4 giving numerical distribution as 75% .If we take any decision based on this figure it could be misleading as we can see Stores 1 to 3 contribute to only 30% of sales volume while store4 gives 70% sales volume. This anomaly can be eliminated in weighted distribution which considers quality of distribution thus giving weighted distribution as 30% for stores 1 to 3. So both numeric and weighted distribution should be looked at while making any decision based on distribution of product.
This article has been researched & authored by the Business Concepts Team.
Factory orders are economic indicators, meaning they signify an overall direction of the market and economy. When factory orders increase, it usually means the economy is expanding as consumers demand more goods and services, which in turn requires retailers and suppliers to order more supplies from factories.
An increase in factory orders doesn’t always mean good news as such a change can also be a sign of inflation. Alternatively, when factory orders decrease, it typically means the economy is contracting—consumers are showing less demand for goods and services and thus fewer supplies need to be ordered.
Understanding Factory Orders
Factory orders are released monthly in a report by the Census Bureau of the U.S. Department of Commerce. The full name of the report is “Full Report on Manufacturers’ Shipments, Inventories and Orders (M3),” but it is more commonly known as Factory Orders.12 This report typically follows the Advance Report on Durable Goods, which provides data on new orders received from about 5,000 manufacturers of durable goods.3
More comprehensive than the Durable Goods Report, the Factory Orders Report examines trends within industries. For example, the Durable Goods Report may account for a broad category, such as computer equipment, whereas the Factory Orders Report will detail figures for computer hardware, semiconductors, and monitors. This lack of detail in the Durable Goods Report is attributed to the speed at which it is released.
The factory orders report includes four sections:
- New orders, which indicate whether orders are growing or slowing
- Unfilled orders, which indicate a backlog in production
- Shipments, which indicate current sales
- Inventories, which indicate the strength of current and future production4
Figures within the factory orders report are reported in the billions of dollars and also as a percent change from the previous month and previous year.4 Factory order data is often mundane, mostly because the report of durable goods orders comes out a couple of weeks earlier and includes orders for capital goods, a proxy for equipment investment.25 However, the factory orders report reveals more detailed information than the durable goods orders report.
The factory orders report includes information about durable and nondurable goods. Durable goods have an expected life of at least three years and often refer to items not purchased frequently, such as appliances, lawn and garden equipment, motor vehicles, and electronics.6 In contrast, nondurable goods include fast-moving consumer goods, such as food, clothing, footwear, medication, cosmetics, and cleaning supplies.
Because the performance of investment markets is heavily influenced by the overall economy, investors recognize the importance of monitoring indicators such as factory orders to gain insight into growth trends. As with other indicators that monitor manufacturing and production, factory orders reports showing an increase in production positively affect equity markets.
In Fmcg Industry What Is Wholesale Trade?
Wholesale trade is an economic indicator that measures the value in U.S. dollars of all merchant wholesalers’ sales and inventories. Wholesale trade is one component of business sales and inventories. Only those firms that sell to governments, institutions, and other businesses are considered part of wholesale trade.
- Wholesale-trade data gives investors a closer look at the consumer economy, as wholesalers’ sales and inventory numbers can be a leading indicator of consumer trends.
- By looking at the ratio of sales to inventories, investors can see whether or not production may grow or slow in the future.
- Only those firms that sell to governments, institutions, and other businesses are considered part of wholesale trade.
Understanding Wholesale Trade
According to the Bureau of Labor Statistics (BLS), the wholesale trade sector includes the sale of merchandise that is outputted from manufacturing, agriculture, mining, publishing, and some other information industries.
Wholesaling is considered to be an intermediate step in the overall distribution of merchandise and goods. A wholesaler sells or organizes the transaction for the resale of goods to other wholesalers or retailers. They might also arrange the sale or purchase of raw materials, supplies for production, or durable consumer goods.
Typically wholesalers operate from a warehouse or office facility and sell goods to other businesses. Such transactions are rarely done through walk-in business as the operation is not established, nor advertised for, that type of activity. Traditionally, wholesalers do not market their services to the general public. They conduct business with vendors or retailers who are part of the overall supply and sales chain.
While wholesale trade is separate from consumer sales transactions, wholesalers are part of the channel that feeds consumer trade. The relationships between wholesalers and their customers may be long-standing with new orders and follow-ups coming in as those retailers and vendors need more merchandise.
The United States Census Bureau furnishes monthly and annual wholesale trade reports.
How Wholesale Trade Data Is Used
Wholesale-trade data gives investors a closer look at the consumer economy, as wholesalers’ sales and inventory numbers can be a leading indicator of consumer trends. By looking at the ratio of sales to inventories, investors can see whether or not production may grow or slow in the future.
For example, if inventories are growing more slowly than sales, producers will have to make more product so that no shortages occur. Alternatively, if sales growth is slower than inventory growth, there will be an excess of supply, and production should slow in the coming months.
Because manufacturing is such a large part of gross domestic product (GDP), the wholesale-trade data can be a valuable tool for keeping a finger on the pulse of the economy. Equity markets are positively affected by an increase in production, as corporate profits tend to increase. The bond markets, on the other hand, prefer moderate growth so as to stem inflation.
What Is Inflation? And How Does It Affect Fmcg Sector?
Inflation is the decline of purchasing power of a given currency over time. A quantitative estimate of the rate at which the decline in purchasing power occurs can be reflected in the increase of an average price level of a basket of selected goods and services in an economy over some period of time. The rise in the general level of prices, often expressed as a percentage, means that a unit of currency effectively buys less than it did in prior periods.
Inflation can be contrasted with deflation, which occurs when the purchasing power of money increases and prices decline.
- Inflation is the rate at which the value of a currency is falling and, consequently, the general level of prices for goods and services is rising.
- Inflation is sometimes classified into three types: Demand-Pull inflation, Cost-Push inflation, and Built-In inflation.
- The most commonly used inflation indexes are the Consumer Price Index (CPI) and the Wholesale Price Index (WPI).
- Inflation can be viewed positively or negatively depending on the individual viewpoint and rate of change.
- Those with tangible assets, like property or stocked commodities, may like to see some inflation as that raises the value of their assets.
Understanding Inflation
While it is easy to measure the price changes of individual products over time, human needs extend much beyond one or two such products. Individuals need a big and diversified set of products as well as a host of services for living a comfortable life. They include commodities like food grains, metal, fuel, utilities like electricity and transportation, and services like healthcare, entertainment, and labor.
Inflation aims to measure the overall impact of price changes for a diversified set of products and services, and allows for a single value representation of the increase in the price level of goods and services in an economy over a period of time.
Causes of Inflation
An increase in the supply of money is the root of inflation, though this can play out through different mechanisms in the economy. Money supply can be increased by the monetary authorities either by printing and giving away more money to the individuals, by legally devaluing (reducing the value of) the legal tender currency, more (most commonly) by loaning new money into existence as reserve account credits through the banking system by purchasing government bonds from banks on the secondary market.
In all such cases of money supply increase, the money loses its purchasing power. The mechanisms of how this drives inflation can be classified into three types: demand-pull inflation, cost-push inflation, and built-in inflation.
Demand-Pull Effect
Demand-pull inflation occurs when an increase in the supply of money and credit stimulates overall demand for goods and services in an economy to increase more rapidly than the economy’s production capacity. This increases demand and leads to price rises.
In Fmcg What Is Consumer Price Index For All Urban Consumers (CPI-U)?
The Consumer Price Index For All Urban Consumers (CPI-U) measures the changes in the price of a basket of goods and services purchased by urban consumers. The urban consumer population is deemed by many as a better representative measure of the general public because most of the U.S. population—approximately 89% according to the U.S. Bureau of Labor Statistics—lives in highly populated areas.1
- The Consumer Price Index For All Urban Consumers (CPI-U) measures the changes in the price of a basket of goods and services purchased by urban consumers.
- The all-urban consumer population consists of all urban households in Metropolitan Statistical Areas (MSAs) and urban places of 2,500 inhabitants or more.
- The CPI-U is used to measure inflation and operates as an indicator of the effectiveness of government fiscal and monetary policy.
Understanding the Consumer Price Index for All Urban Consumers (CPI-U)
The Consumer Price Index (CPI) is the most frequently used statistic for identifying inflation or deflation. The CPI-U only considers the prices paid for goods and services by those that live in urban areas. Rising CPI-U figures mean that the prices of goods/services within the urban population are becoming more expensive, and this may be a sign of rising inflation.
All variants of the CPI are similar to the cost of living indexes as they assess prices in the market based on the goods and services needed to achieve a given standard of living. Different measures of the CPI differ from the cost of living indexes because they do not account for changes in other facets of standard of living, such as changes in environmental factors.
The all-urban consumer population consists of all urban households in Metropolitan Statistical Areas (MSAs) and urban places of 2,500 inhabitants or more. Non-farm consumers living in rural areas within MSAs are included, but the index excludes rural consumers and the military and institutional population.21
The CPI-U was introduced in 1978 and is representative of the buying habits of approximately 80% of the non-institutional population of the United States, compared with 32% represented in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The methodology for producing the index is the same for both populations.34
Uses of the Consumer Price Index For All Urban Consumers (CPI-U)
The CPI-U is used to measure inflation and operates as an indicator of the effectiveness of government fiscal and monetary policy. Business executives, labor leaders, and other private citizens also use the CPI-U (and other CPI components) as a guide in making economic decisions. The CPI-U is also used to adjust other economic series for price change and to translate those series into inflation-free dollars.
The CPI-U and its other CPI components are also used as a means for indexing populations. For example, over 2 million workers are covered by collective bargaining agreements, which tie wages to the CPI or CPI-U. Changes in the CPI-U can also affect the cost of lunches for the 26.7 million children who eat lunch at school.5
Can Fmcg Accept And Treat omnichannel as omnipresent?
In the challenging physical store environment of 2020, consumers wanted little more than to find what they needed and to leave the store. But online, with more time and no health concerns, they became more open to finding deals. The expanding pool of omnishoppers—particularly constrained consumers—will keep leveraging online channels as an essential way to research, compare prices, and hunt for the right deals before deciding whether to leave home to make the purchase at a physical store, buy it online, or click-and-collect their purchase.
Retailers would be wise to capitalize on their omnichannel capabilities as more shoppers compare products online in an effort to find the best deal before they make a purchase decision that may ultimately still be fulfilled offline. Recognizing there are many consumers who are new to online grocery shopping will be important in this context. Those who can deliver positive and successful user experiences will win online and offline.
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