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Scan-based Trading Basics – Why, Who, and How

Posted on September 5, 2019

Scan-based Trading Basics – Why, Who, and How

The omnichannel explosion has created enormous pressure on retailers to reduce inventory and cut carrying costs while offering high in-stock levels and product variety. Major chains like Target, Dollar General, Walgreen’s and CVS are turning to scan-based trading as an option to stay competitive.

But what is it? And, how does it work for retailers and suppliers?

The traditional inventory stocking method for retailers is purchasing their inventory from suppliers. Retailers then recoup their initial cost outlay by selling the goods to consumers. However, in scan-based trading, the retailer does not pay for products until they sell.

Figure 1.

Unlike traditional retail, inventory managed by scan-based trading is owned by the supplier.

Figure 2.

Point-of-sale data (e.g., dates, days of the week, time ranges) is collected by the retailer and transmitted to the appropriate supplier.

Figure 3.

Using the point-of-sale data, the supplier generates an invoice and sends to the retailer.

Benefits of Scan-based Trading

  • Retailers reduce their financial risk by not purchasing inventory until it is sold to the consumer.
  • Because retailers do not pay for scan-based products until they are sold, there is less risk in dedicating shelf space to new, unproven products.
  • Suppliers have more control of what product (sizes, colors, etc.) is stocked at retail locations. This also presents opportunities for targeted assortments for specific locations.
  • By combining point-of-sale data with sales promotions, suppliers can better identify consumer-purchase habits.

It’s important to note that although scan-based trading is becoming prevalent within retail, there have been some issues with data synchronization and legacy point-of-sale systems. These factors have slowed adoption for some product categories. However, the benefits of this option are so appealing, that retailers are updating their point-of-sale and business systems to have them seamlessly synchronized.

We know the challenges, because TrueCommerce Datalliance has been a pioneer and a leader of this trend. If you are a supplier or retailer exploring scan-based trading, please contact us – let’s talk!

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