Trade spend is one of the biggest drivers of retail growth, but it’s often misunderstood. Simply put, trade spend is the money manufacturers invest in helping retailers sell more.
This article explains what trade spend is, why it matters, its common forms, and how to manage it effectively. Along the way, we’ll show how KORONA POS helps retailers track ROI and maximize every dollar of trade spend.
Key Takeaways:
- Trade spend is how manufacturers fund discounts, promotions, and retailer support to sell more products.
- Retailers benefit through marketing support, inventory turnover, and higher profitability.
- A smart POS system like KORONA POS makes managing, tracking, and maximizing trade spend seamless.
What is Trade Spend?
Trade spend is the financial investment manufacturers make to push their products in retail stores. It covers promotions, discounts, advertising support, and co-marketing campaigns.
Without trade spend, many new products would never make it onto shelves — or into carts.
Why do Manufacturers Invest in Trade Spend?
Trade spend is one of the largest line items in consumer goods budgets. Here’s why it matters so much:
Consumer Awareness
New products don’t sell if nobody notices them. Trade spend funds displays, endcaps, and signage that put products in customers’ paths. Often, this includes investing in retail store equipment for displays — from shelving and racks to branded fixtures — all designed to grab attention and drive sales.
Sales Boost
Discounts and bundles push shoppers to act fast. These short-term spikes help brands hit volume goals and clear stock.
Strategic Partnerships
Retailers rely on manufacturer support to fund promotions and reduce risk. Manufacturers who invest wisely build long-term loyalty with their retail partners.
PRO TIP!
Use POS data to test which placements actually drive sales, and POS reporting to share transparent results with suppliers.
Common Types of Trade Spend
Trade spend shows up in different forms. The most common types of trade spend include:
Promotional Allowances
Manufacturers reimburse retailers for discounts or buy-one-get-one deals. This keeps products affordable for shoppers without hurting retailer margins.
Another form is swell allowance, which compensates retailers for unsold or damaged goods. This ensures stores don’t take a financial hit when products can’t be sold, while also encouraging them to keep stocking new items.
Slotting Fees
Brands pay retailers to secure shelf placement, especially in premium spots like eye-level shelves or endcaps. Better placement = higher visibility and more sales.
Cooperative Marketing
Retailers and manufacturers split costs for ads, flyers, or online promotions. Both benefit from greater reach and stronger branding.
Trade Spending Strategy
The smartest trade spend strategies balance short-term promotions with long-term brand building. Manufacturers must target promotions around consumer demand, while retailers need to ensure campaigns move inventory without over-discounting.
PRO TIP!
Sync promotions with seasonality and local demand, then track performance with your POS to refine strategy over time.
How Trade Spend Benefits Retailers
Trade spend isn’t just free money — it’s a tool that can make or break retail performance.
Promotional Support
Manufacturers fund campaigns so retailers can run strong promotions without eating the cost. This levels the playing field for smaller retailers competing with big-box stores.
Inventory Management
Promotions help move products quickly, especially perishable or seasonal items. Overstock clears faster, freeing up shelf space for new products.
Profitability
Shared costs and higher sales volume both boost retailer margins. It’s a low-risk, high-reward system—when managed well.
Relationship Building
Manufacturers want reliable retail partners. By leveraging trade spend, retailers build stronger ties, which can lead to better pricing, exclusive launches, and higher support.
Inventory management a headache?
KORONA POS makes stock control easy. Automate tasks, generate custom reports, and learn how you can start improving your business.
Example of Trade Spend in Retail
Here’s what trade spend looks like in real-world retail settings:
Promotional Campaign
A soda brand funds a summer campaign with discounts, branded coolers, and in-store signage. Customers notice — and sales spike.
Financial Support
A snack company covers 50% of the cost for an endcap display. The retailer gets prime visibility without a major financial hit (see swell allowance in retail).
Tracking Sales Performance
KORONA POS tracks SKUs before, during, and after the campaign. Retailers see if promos worked or fell flat — no guesswork required.
Reaping the Benefits
Retailers get higher sales and free marketing, while manufacturers lock in customer loyalty (see retail store equipment for displays).
Challenges in Trade Spend Management
Trade spend pays off — if you can manage it well. Here are the common hurdles:
ROI Measurement
Many promotions look good on paper but don’t drive profit. POS analytics give hard numbers to show real performance.
Promotion Clutter and Cannibalization
Too many promos confuse shoppers and sometimes shift sales away from other products. Careful scheduling avoids cannibalization.
Compliance Issues
Promotions come with terms. If rules aren’t followed, it strains manufacturer-retailer relationships. POS systems track agreements and reduce disputes.
How POS Systems Support Trade Spend Management
A modern POS isn’t just a checkout tool—it’s your trade spend command center. With KORONA POS, retailers can:
- Track promotions in real-time to measure sales lifts.
- Automate ROI reporting to share with suppliers.
- Spot trends to prevent cannibalization and over-discounting.
- Use data to negotiate better manufacturer partnerships.
Maximize Your Trade Spend with KORONA’s Smarter Retail Solution
Trade spend is one of the most powerful tools in retail. When managed well, it drives awareness, boosts sales, and strengthens partnerships.
With KORONA POS, retailers can maximize every dollar of trade spend through data-driven insights and automated reporting.
Get started with KORONA POS today!
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FAQs
What does trade spend mean in retail?
It’s the money manufacturers invest in discounts, promotions, and retailer support to boost sales.
How does trade spend benefit retailers?
It funds promotions, reduces costs, improves margins, and strengthens supplier relationships.
How can retailers manage trade spend effectively?
With tools like KORONA POS, which track promotions, monitor ROI, and provide negotiation-ready data.
