Handling Allowance refers to a discount or special price offered by a manufacturer to a wholesaler, distributor, or retailer for the additional effort required in managing the manufacturer’s product. This can encompass various activities such as redeeming coupons, managing rebates, or handling products that require special care.
Types of Handling Allowances
Coupon Redemption Handling Allowance
- Offered when retailers accept and process manufacturer discount coupons. This involves additional steps such as verifying coupons, processing discounts, and submitting them back to the manufacturer for reimbursement.
Special Handling Fee Allowance
- Provided for products that require unique handling, storage, or display techniques. For example, fragile items, perishable goods, or items requiring temperature-controlled environments.
Promotional Handling Allowance
- Given when a retailer agrees to participate in a promotional campaign that requires extra handling efforts, such as setting up in-store displays or managing limited-time offers.
Historical Context
Historically, handling allowances have been used by manufacturers to incentivize and compensate retailers and distributors for the additional labor costs associated with specific products or promotional activities. Over time, this practice has become a standard in the retail and distribution sectors to ensure the proper handling and promotion of products.
Applicability
Retail Sector
- Grocery stores might receive handling allowances for redeeming discount coupons or managing in-store promotions that require extra effort from staff.
Distribution Channels
- Distributors who handle products that need special storage conditions might receive allowances to cover the costs associated with warehousing and transportation.
Promotional Activities
- Retailers participating in exclusive manufacturer-led promotions might be offered handling allowances to cover the additional staff time and resources required.
Calculation and Implementation
Handling allowances are calculated based on the perceived additional work required for handling the product or activity in question. This can include labor cost, time required, and any other related expenses. The specific terms and percentage of the allowance are usually negotiated between the manufacturer and the retailer or distributor.
Comparisons and Related Terms
Trade Discounts
- Unlike handling allowances, trade discounts are provided to encourage bulk purchases rather than for the extra handling of products.
Promotional Allowances
- These are similar to handling allowances but are specifically linked to the promotional activities undertaken by the retailer.
FAQs
1. How is the handling allowance amount determined?
2. Are handling allowances common in all industries?
3. Can handling allowances be considered incentives?
References
- Kotler, Philip, and Kevin Lane Keller. Marketing Management. 15th ed., Pearson Education, 2016.
- “Retail Management: A Strategic Approach” by Barry Berman and Joel R. Evans.
- The Food Industry Association (FMI). www.fmi.org
Summary
Handling Allowance is a vital component in the relationship between manufacturers, wholesalers, distributors, and retailers, ensuring that products are managed efficiently and according to specific requirements. This allowance compensates for additional effort and costs, fostering a cooperative environment for product handling and promotional activities. Understanding its types, applications, and implications is crucial for effective business operations in the retail and distribution sectors.
