Stocklots, special items and promotional goods – what are the differences?

14.07.2020

You’re certain to have heard of the following terms: promotional goods, stocklots and special items. Despite this, the business with these goods is pretty much “hidden”, and takes place under the radar. To provide you with a basic overview and an introduction to this topic, however, in this article, we provide an explanation of the differences and the classification. This will make your potential start in this area of business easier or strengthen your background knowledge.
The current economic situation is such that, for example, it was not possible to sell goods from Easter, etc. readily, resulting in a large amount of stocklots. This extends to a number of economic sectors.

Definition

Firstly, a brief definition of what an “item” actually is: An item is the specific quantity of a product.

The market for stocklots – what are stocklots?

In the area of retail, remaining stocks of goods are generally referred to as stocklots. These items include products that will either be phased out in the near future, or are no longer available in the product range.
The disadvantage here is that these items have a negative impact on the balance sheet, and should therefore be sold to retailers of stocklots as quickly as possible. After all, the unnecessary costs of storage and other problems associated with this should not be allowed to arise.

Retailers of stocklots then export the goods abroad, for example, so as to avoid a possible threat to the brand image in the domestic market. They can also be distributed via online shops or offered for sale on a market for stocklots.
Under certain circumstances surplus stocks, insolvency goods and defective production runs, etc. can also be described as stocklots.

Special items – what is to be considered?

Special items are referred to as those goods which are sold at special conditions for specific reasons.
For an item to be given the name special item, it is necessary for one of the following reasons to be present:

  • A defective production run. This means goods that were not manufactured according to the requirements of the client, and were not therefore accepted by them
  • Items with damage to their packaging
  • Insolvencies and liquidations, i.e. goods that are still in the company’s warehouse
  • Surplus production runs or surplus stocks
  • B-goods, second choice items (more on this below)
  • Returns
    Another essential piece of information is that special items are generally excluded from product exchanges.

Promotional goods – Aldi, Lidl, etc.

Promotional goods are all goods which are explicitly offered for a short, and usually temporary, period of time. This may be for a few days, for a few weeks, or until the goods have been sold out.
Once this type of product is sold out, it is highly likely that no further supplies will arrive because these goods usually consist of seasonal and/or fast-moving items, such as bathing and holiday accessories, or similar. In most cases, their objective is to encourage impulse purchases.
These products are ideal for advertising purposes (online and offline ads), as promotional goods aren’t just designed to encourage more customers to buy the promotional goods in the shop, but to buy more goods in general.

Quality of goods and their classification

1A goods (A-goods)
A-goods are goods which are completely free from defects and faults.
This refers to both the packaging of the product and to the product itself. In this respect, the retailer must not be aware of any restrictions on the quality characteristics.
In addition, the goods must comply with the requirements of the EU, which can be demonstrated with a CE declaration of conformity. In many cases, there is also a guarantee or a manufacturer’s warranty for this type of goods in the wholesale trade.

1B goods (B-assortment)
The difference between 1B goods and 1A goods is that, at most, there may be minor restrictions or minimal defects in the product or packaging which do not, however, affect the usability or the quality of the product in any way. 1B goods therefore only differ very trivially from 1A goods.

C-goods
With C-goods, the situation is different. C-goods are products which can be defective, but do not necessarily have to be defective.
They often consist of unchecked customer returns, which are offered as pallet goods, for example. An important factor in this respect is that C-goods must not be pre-sorted by the supplier to be unable to remove unopened returns beforehand.
If the supplier offers C-goods nevertheless, where the unopened returns have been removed, these C-goods must be offered with the clear notification of “return pallets only, no A-goods”.

For a detailed overview on this topic, we recommend that you read the article from our partner of Restposten.de. We have only provided a brief summary of the article here.
Further information is available here: https://www.restposten.de/warenqualitaeten.php

Summary of key facts

In general, stocklots are remaining stocks of goods; it is necessary to distinguish these from special items, which are goods that are sold at special conditions because of certain characteristics.
A somewhat more nuanced view should be taken of promotional goods, which are “fast-moving items” that are only offered for sale over a short period of time in comparison with the rest of the product range.
Once again, here is a small example for illustrative purposes:
In the 2014 World Cup, the popular promotional items included fan items such as the Germany towel or the German flag for cars. Aldi, for example, sold these as promotional products, or as additional products for prize draws. The flags and towels which were eventually left over, however, had to be cleared out of the warehouse after some time, and the surplus stock was sold on at a lower price to retailers of stocklots, as these retailers still had the opportunity to sell these items successfully in their online shops or stores.
However, during this promotion, two pallets of the products were damaged during transport, which given their B-goods status were not then sold in the actual shop and therefore became a special item.
This is, of course, a very simple example, but it illustrates the principle.

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