Retail and consumer goods
Trade spend
The money brands pay retailers and distributors to stock, display and discount their products.
Facts checked against sources onWhat does Trade spend mean?
Trade spend is the money a consumer goods company pays to its retail and distribution customers: price discounts, promotion funding, listing fees for shelf space, display fees and volume rebates. For many packaged goods companies it is one of the largest costs after cost of goods, often larger than advertising. Example: a brand sells to a retailer at a list price of 10 per unit, funds a promotion that costs it 1.50 per unit and pays a 0.50 volume rebate, so trade spend is 2 per unit, or 20 percent of list price. Because some promotions lose money when measured properly, reviews of trade spend effectiveness are a common consulting project.
Where does it come up in case interview prep?
- Channel economics across industries: direct, retail, marketplaces, distributors and sales teamsLesson in Customers and growth: the economics of marketing
- How consumer goods companies make moneyLesson in Consumer packaged goods (FMCG)
- Distribution, promotions, private label, and innovationLesson in Consumer packaged goods (FMCG)
- Consumer goods players, trends, and how to crack the casesLesson in Consumer packaged goods (FMCG)
- How the drinks industry works: brands, bottlers and the route to marketLesson in Beverages: soft drinks, water, beer, wine and spirits
- Drinks economics: the unit case split, excise and price and mixLesson in Beverages: soft drinks, water, beer, wine and spirits
- Drinks players, trends 2024 to 2026, and how to crack the casesLesson in Beverages: soft drinks, water, beer, wine and spirits
Related terms
- Gross-to-netThe gap between list price and the net price a company actually keeps.
- Price elasticity of demandHow strongly the quantity sold reacts to a change in price.
- Modern tradeOrganized retail chains such as supermarkets, hypermarkets and e-commerce.
- Private label (own brand)Products sold under the retailer's own brand rather than a manufacturer's.
- Like-for-like sales (LFL)Sales growth from stores open in both periods, leaving out new and closed stores.
- Sales per square metreStore sales divided by selling space: how productive the space is.
- Shrink (shrinkage)Inventory lost to theft, damage, errors or spoilage.
- MarkdownA lasting price cut to clear stock that is not selling.
Learn it in context
See Trade spend at work in a lesson from Customers and growth: the economics of marketing, with checks as you go.
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