Howard, We talk about channel stuffing mostly in the pc area, but it occurs in many different types of cos. Basically, it is loading down distributors, the sales channel, with more inventory than they can sell in a reasonable amount of time. A couple of questions arise:
1. Why would mfr.s do this? Two reasons. When they ship to a distributor, that item is "sold," and the profits are booked, even if they have to give the channel kickbacks or incentives later on. Secondly, when the channel is stuffed, it hurts sales in the future, so, you want the channel stuffed with your product and not a competitor's.
2. Why would the channel take a stuff? Incentives. When they are offered rebates, 6 for the price of 5, marketing assistance, etc., they find it too good to resist. Also, like the mfrs., they often believe the overly optimistic sales forecasts.
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