It’s not necessary. Most companies will not take back as returns more than 3-5% of merchandise sold except in extraordinary circumstances, such as COVID-19 or a natural disaster that completely stops the sale.
Also, excess stock is always liquidated through direct consumer sales. Any leftover stock is moved to tier 2/ tier 3 cities, liquidated through second-sale stores, or at discounted prices at MBO stores.
Under normal circumstances, the company will not have more than 3-5% general liability. This figure is generally regarded as COGS in practical parlance but not in accounting. So, it will be included in wholesale prices at which stock is sold to franchisees/mbo’s
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