Channel stuffing

Channel stuffing is a business practice in which a company, or a sales force within a company, inflates its sales figures by forcing more products through a distribution channel than the channel is capable of selling. Also known as trade loading, this can be the result of a company attempting to inflate its sales figures. Alternatively, it can be a consequence of a poorly managed sales force attempting to meet short term objectives and quotas in a way that is detrimental to a company in the long term. Channel stuffing is a business practice in which a company, or a sales force within a company, inflates its sales figures by forcing more products through a distribution channel than the channel is capable of selling. Also known as trade loading, this can be the result of a company attempting to inflate its sales figures. Alternatively, it can be a consequence of a poorly managed sales force attempting to meet short term objectives and quotas in a way that is detrimental to a company in the long term. Channel stuffing has a number of long-term consequences for a company. Firstly, distributors will often return any unsold goods to the company, incurring a carrying cost and also developing a backlog of product inventory. Wildly fluctuating demand, combined with this excess inventory, leads to costly overtimes and factory shutdowns. Even mild channel stuffing can spiral out of control as sales works to make up for prior overselling. Discounts used to drive trade loading can greatly affect profits, and even help establish gray market channels as salesmen no longer adequately qualify their prospects.