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Channel stuffing

Channel stuffing Definition

Channel stuffing is the business practice where 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 to the world at large. 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 the company in the long term.

Occasionally, distribution channels such as large retailers have been known to identify the practice of channel stuffing in their suppliers, and use the phenomenon to their advantage. This is done by holding back on orders until the end of the suppliers' quota period. The suppliers sales force then panics, and sells a large amount of the product under more favorable terms than they would under ordinary circumstances. At the beginning of the next period, no new orders are placed and barring any action, the cycle then repeats.


Additional meaning of Channel stuffing:

Corporations have been known to engage in channel stuffing and hide such activities from their investors. In the United States, the Securities and Exchange Commission has in some cases litigated against such corporations.





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