Part 3 · FMCG trade practice · Chapter 3.12
Schemes and margins
Draft: the wording may change.
The idea
A stockist's margin is small and fixed. A scheme is the company's money passing through the stockist to the retailer. The stockist pays it out first and gets it back later through a claim. Until the claim is settled, the scheme is a loan from you to the company — and if the claim is rejected, it comes straight out of your margin.
The margin on one case
Take one case of cream biscuit, 60 packs of ₹10 MRP:
| Price | Per pack | Per case |
|---|---|---|
| MRP (what the shopper pays) | ₹10.00 | ₹600 |
| Price to retailer (PTR) | ₹8.70 | ₹522 |
| Price to stockist (PTS) | ₹8.20 | ₹492 |
The retailer keeps ₹78 a case. We keep ₹30 a case — about 6% on what we sell it for. Out of that ₹30 we pay the salesman, the van, the godown rent and the interest on our money. There is no room in it for gifts.
Kinds of schemes
| Scheme | Who gets it | Example | Proof the company wants |
|---|---|---|---|
| Free goods | Retailer | Buy 2 cases, get 6 packs free | Retailer bill showing the free packs |
| Trade discount | Retailer | ₹15 off per case | Retailer bill showing the discount |
| Display | Retailer | ₹300 a month to keep a rack at the front | Photos, signed display agreement |
| Quantity scheme on primary | Stockist | Extra 1% if the month's purchases cross a target | The company's own invoices |
| Consumer offer | Shopper | 20% extra in the pack, or a free spoon | Nothing — it is inside the pack |
Only the stockist's own quantity scheme is truly the stockist's. Everything else belongs to someone further down the chain and must reach them.
The scheme circular
Schemes arrive as a circular from the company. Read it like a contract, because the claim will be checked against it word for word.
Trade scheme circular No. TN/BIS/2611-03 Valid: bills dated 1 to 30 November 2026 Product: Cream biscuit 75g, ₹10 MRP only Offer to retailer: 6 packs free for every 2 cases in one bill Not valid for: wholesale outlets and modern trade Reimbursement: free packs at price to stockist, on a claim with retailer bill copies, filed within 30 days of the scheme end date
Four things to pull out: the dates (bill date, not order date), the product and pack, who is excluded, and the claim deadline.
What the scheme does to our margin
Six packs per two cases is 3 packs per case. At ₹8.20 each, that is ₹24.60 a case we give away from our own stock.
- Claim settled: we get ₹24.60 back. Our margin stays ₹30 a case.
- Claim rejected: our margin falls to ₹30 − ₹24.60 = ₹5.40 a case.
On 400 cases in November, that is the difference between ₹12,000 and ₹2,160. One sloppy scheme month wipes out most of a month's earnings on that product.
Ask your CA how free goods and scheme discounts should be shown on the retailer's bill for GST. The answer depends on how the scheme is given, so settle it once and bill the same way every time.
Common mistake
Eating the scheme, or the opposite, giving it loosely. Some stockists hold back the free packs and sell them, hoping the retailer won't ask. The retailer hears about the scheme from the company's salesman and stops trusting you. Others give the scheme on a 1 December bill, to a wholesaler, or on the 150g pack because "it's the same biscuit". Each of those packs will be cut from the claim, and you pay for them.
Where you'll use this
In Part 4, schemes are set up once with their dates, products and exclusions, and the billing screen applies them only where they are valid (chapter 4.4). The same records build the claim in chapter 3.13 without retyping.
Check yourself
- PTR is ₹522 and PTS is ₹492 a case. What is the stockist's margin per case?
- A bill dated 1 December carries the November scheme. What happens to those free packs at claim time?
- Which kind of scheme in the table needs photos as proof?
Answers
- ₹30 a case.
- They are outside the circular's dates, so the company rejects them and the stockist bears the cost.
- The display scheme.