Memo -- Plus Interest?

I think this idea has a lot of merit--and one thing everyone commenting here seems to have overlooked is that Chris Ellis suggested a timeframe of 60 to 90 days for the memo, with interest being charged if the goods are kept AFTER that time. I do think that's perfectly reasonable--if it hasn't sold in that time, then perhaps it's better to try another style, or send it back for now and try again at a busier time of year.

This is not going to work. The industry is too fragmented. I know jewelers who use certain vendors because they don't charge shipping. Do you think they're going to pay interest? Too bad diamond margins are so awful, most jewelers cannot accumulate enough money to buy diamonds. So they take diamonds on memo--free money from the "Bank of New York."

Intriguing idea, but not in the scenario presented. Suppose you are a specialty manufacturer/distributor with a fairly unique product line. Your product sells well to a small percentage of the retailer’s clientele. You are constantly battling store budgets and showcase and credit constraints to put enough selection in the retailer’s case to make a statement. In this scenario, the memo plus interest is a win-win; the supplier gets inventory in the case and the retailer gets continuously refreshing stock. The goal for both is the sell-through of profitable merchandise. Memo plus interest, if managed properly, achieves this.

A guy who is doing $1 million per year with a vendor is doing the vendor a favor by even putting in an additional 150K of the vendors merchandise. He (as I would do) will tell the vendor to just keep his merchandise and the vendor can just sit on it in his office instead of having it working in stores. Million dollar sellers will have plenty of options with other vendors. Good luck to the vendors who even propose this at this time.

Considering the original source of the idea to add interest to the top of memo terms, I’m a bit surprised at their suggestion. For all its obvious advantages, memorandum pricing typically includes the highest markup of any legitimate pricing offer. The utility to the consignor of adding interest on top of memo terms is of questionable utility. That interest consideration should be naturally assumed included in the offering price of the memo merchandise. And in fact it can be so robust as to be lightly considered “vig.” Imagine one consignor who does not add interest to unsold memo vs. another who does. Which is more endearing to the retailer? Luis de Agustin

Great idea, but a couple of issue. Firstly, retailers will always shop around for the best memo deal. If only a few wholesalers charge interest, retailers will just go elsewhere. Secondly, the interest taken in I would imagine is negligible compared to the opportunity cost, that is, the ability to turn stock over at a reasonably fast pace. It's like me crashing your car and offering to pay for just the windscreen.

Great idea from Chris but I doubt that the retailers will agree or that the vendor community will force the issue.

There is no free lunch, that said, the beneficiary is the Vendor, the Retailer has product they own which must be paid for............sell what you own and what you owe others you committed to buy for. Going forward be selective, a penny saved is a penny earned.