1. The slotting fee associated with one product in a chain of stores in one metropolitan area varied from $2,313 to $21,768. If a food company wanted to roll a new product out nationwide, it would.
2. Slotting fees are relatively high especially for new and smaller manufacturers—making it difficult to stay in business and keep up with other retail giants. According to the Journal of Business Ethics, some retailers require a flat fee of $5,000 per product introduction, while some have fees.

A slotting fee, also known as a slotting allowance, is a payment (usually once-off) that you would offer to a retailer to ensure your products appear on the shelf in their stores. That's why you'll also hear it.

Abstract

The practice of manufacturers' payments of fees to retailers for the display and sale of their products has become a common practice. In the grocery retail business, the fees paid by manufacturers are called slotting fees, or a payment made for a slot on the shelf. The same practice is used now in the retail book industry. Large book chains command high fees from publishers for the prominent display of books. Entrepreneur's products are often precluded from stores and markets because slotting fees are prohibitive. The fees are non-uniform and often paid in cash, creating an atmosphere that has already spawned illegal activity on the part of retail executives. This article examines the ethics of slotting fees.

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A Slotting Fee Is A Payment That Adds

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A slotting fee, slotting allowance,^[1]pay-to-stay, or fixed trade spending^[2] is a fee charged to produce companies or manufacturers by supermarket distributors (retailers) in order to have their product placed on their shelves.^[3] The fee varies greatly depending on the product, manufacturer, and market conditions. For a new product, the initial slotting fee may be approximately $25,000 per item in a regional cluster of stores, but may be as high as $250,000 in high-demand markets.^[4]

In addition to slotting fees, retailers may also charge promotional, advertising and stocking fees. According to an FTC study, the practice is 'widespread' in the supermarket industry.^[5] Many grocers earn more profit from agreeing to carry a manufacturer's product than they do from actually selling the product to retail consumers. Fees may serve to efficiently allocate scarce retail shelf space, help balance the risk of new product failure between manufacturers and retailers, help manufacturers signal private information about potential success of new products, and serve to widen retail distribution for manufacturers by mitigating retail competition.^[6] For vendors, slotting fees may be a move by the grocery industry to profit at their suppliers' expense.^[7]

A Slotting Fee Is A Payment That A Third Party

Some companies argue that slotting fees are unethical as they create a barrier to entry for smaller businesses that do not have the cash flow to compete with large companies. The use of slotting fees can, in some instances, lead to abuse by retailers such as in the case where a bakery firm was asked for a six figure fee to carry its items for a specific period with no guarantee its products would be carried in future periods.^[8]

The same practice is common in major bookstore chains in the US as well, as far back as the mid-nineties.^[9]

References[edit]

A Slotting Fee Is A Payment That Affect

1. ^'The Use of Slotting Allowances in the Retail Grocery Industry Federal Trade Commission'(PDF). Ftc.gov. 2003-11-14. Retrieved 2015-08-18.
2. ^'H.J. Heinz Company and Milnot Holding Corp Federal Trade Commission'(PDF). Ftc.gov. Retrieved 2015-08-18.
3. ^Sparks, Brian. 'Slotting fee battle continues.' American Fruit Grower. January, 2001. Retrieved on August 1, 2006.
4. ^Copple, Brandon. 'Shelf-Determination.' Forbes. April 15, 2002. Retrieved on August 1, 2006.
5. ^'FTC Releases Grocery Industry Slotting Allowance Report'. Federal Trade Commission. 2003-11-14. Retrieved 2020-01-17.
6. ^Innes, Robert; Hamilton, Stephen F. (2013). 'Slotting Allowances under Supermarket Oligopoly'. American Journal of Agricultural Economics. 95 (5): 1216–1222. doi:10.1093/ajae/aat023. ISSN0002-9092. JSTOR24476902.
7. ^Aalberts, Robert J.; Jennings, Marianne M. (1999). 'The Ethics of Slotting: Is This Bribery, Facilitation Marketing or Just Plain Competition?'. Journal of Business Ethics. 20 (3): 207–215. doi:10.1023/A:1006081311334. ISSN0167-4544. JSTOR25074132.
8. ^[1]Archived April 2, 2010, at the Wayback Machine
9. ^In Bookstore Chains, Display Space Is for SaleNew York Times. January, 1996. Retrieved on August 22, 2012.