5 Ways Wholesale Distribution Can Earn More Rebate Revenue

Most wholesale distribution businesses fail to claim all rebate revenue due, leaving millions of dollars on the table each year. If your wholesale distribution business is like the 57% of U.S. distributors that consistently leave rebate revenue unclaimed, you’ll be ‘giving thanks’ for this seasonal advice for years to come. We’ve compiled five ways your wholesale distribution business can increase wholesale revenue and margin—all by improving how you manage your supplier rebate agreements.

#1 Be Smarter About Rebate Thresholds

Strategic management of rebate thresholds can generate millions in additional wholesale revenue, yet few wholesale distribution businesses pay rebate thresholds the attention they deserve.

Imagine you have two suppliers of a similar product. Supplier A offers a 2% rebate on purchase volume of $1-5M and 4% on volume of $5M+. Supplier B only offers 1% on volume of $1-5M but 5% on volume of $5M+. At the start of the year, your forecasted spend on that product is $5.2M. You plan to buy everything from Supplier B since the rebate revenue is higher on spend over $5M. However, halfway through the year, after spending $2M with Supplier B, you revise your forecast down to $4.5M. You now won’t hit the $5M threshold with Supplier B, as you’ll only be spending $4.5M.

The smart thing to do is switch immediately to Supplier A, as they offer a higher rebate for purchases of up to $5M. But if your business doesn’t monitor purchases against agreed rebate thresholds, you might continue to spend with Supplier B, losing $35,000 in the process.

This simple example highlights how significant the differences can be. Multiply this by hundreds of suppliers, and it’s easy to see how wholesale revenue can be lost if rebate agreements aren’t properly managed.

#2 Keep Close Track of Trading Agreements

Despite rebates being a highly valuable source of rebate revenue, many wholesale distribution businesses don’t closely track the deals they’ve struck. Agreements are often paper documents, signed and forgotten. When that happens, rebates go unclaimed because nobody realizes the company is eligible to collect them.

Sometimes, agreements are entered into finance systems, but critical variables (like rebate thresholds) are missed because the ERP system can’t handle the fine details. Without a dedicated rebate accountant to manually track purchase and sales volumes against complex agreements, a huge amount of rebate revenue can go unclaimed.

Agreements can also work against each other if not properly managed. For example, a wholesale distribution business might negotiate a special pricing agreement (SPA) for a one-off customer project, which then disqualifies the purchased products from being eligible for rebates. If the rebate was potentially worth more than the SPA, the wholesale revenue is negatively impacted.

#3 Pay Attention to SKUs and Product Groupings

Inaccurate product grouping is another significant contributor to unclaimed rebate revenue for wholesale distribution businesses. A supplier might offer a volume rebate on "sink fixtures," but if the wholesale distribution business accidentally leaves some relevant SKUs outside of this grouping, they won’t be included in rebate claims.

The same applies to miscoded or catch-all SKUs. Sales teams often code products as “Other” or “Special” to save time, meaning those sales volumes are left out of rebate calculations. Mapping SKUs more closely to rebate agreements ensures that every eligible dollar is accounted for in rebate revenue calculations.

#4 Align Your Purchasing, Sales, and Finance Teams

Communication breakdowns and siloed operations cause many wholesale distribution businesses to miss out on rebate revenue. Purchasing may strike a deal with a supplier, but if the agreement’s terms aren’t effectively communicated to finance, they may be wrongly entered into the ERP system or rebate-tracking spreadsheet.

Often, rebate terms aren’t communicated to sales teams, so they aren’t incentivized to use the correct SKUs or meet rebate thresholds. Sales may even pursue their own SPAs for customer projects, unintentionally undermining existing rebate agreements. Getting everyone on the same page regarding rebate strategy will maximize the amount of rebate revenue your wholesale distribution business can reclaim.

#5 Don’t Rely on Supplier Data

Keeping track of hundreds of rebate agreements across a large supplier base is challenging, especially if you rely on spreadsheets. Many wholesale distribution businesses use purchase data from suppliers to estimate what they can claim. However, suppliers often face the same tracking issues we’ve highlighted, meaning their data isn’t always accurate.

Suppliers aren’t always motivated to return the maximum rebate revenue to wholesale distribution businesses. That’s why it’s essential for wholesale distribution businesses to keep close track of their agreements and ensure no rebate revenue is left unclaimed.

Getting Started with Supplier Rebate Programs

Supplier rebate programs are designed to drive higher sales and loyalty to the manufacturer’s brand. When getting started with supplier rebates, it’s essential to understand how the rebate structure works, as rebate revenue may be calculated based on factors like purchase volume, sales growth, or specific product lines.

Negotiating favorable terms with the manufacturer, such as rebate thresholds, percentages, and payment schedules, is crucial. Wholesale distribution businesses should also implement systems to accurately track purchases and sales, with automated rebate management software providing transparency and reporting.

Focusing on stocking and promoting products that offer the highest rebate revenue potential is key to maximizing wholesale revenue. Regularly reviewing progress and adjusting purchasing or sales strategies ensures that returns are optimized while strengthening supplier relationships.

Maximize Revenue with Supplier Rebate Management Software

Tightening up rebate management can deliver many quick wins. By implementing the five strategies covered in this blog, your wholesale distribution business will start seeing immediate improvements in rebate revenue and margin.

The long-term benefits include stronger supplier relationships, the ability to offer attractive pricing, and more value-added services to customers. If you’re ready to maximize the value of your trading agreements and optimize your wholesale revenue through supplier rebate management, contact us today!