retail practice of purchasing more materials than immediately needed in order to take advantage of special discounts or a trade allowance, or to increase profits.
purchasing retail inventory in quantities exceeding current demand, usually when manufacturers, or other suppliers, offer temporary discounts. When the promotion period expires, the retailer can then sell the remaining inventory to consumers at regular prices, earning a bigger margin of profit. In some cases, an authorized dealer who receives a substantial discount might resell the merchandise to other retailers. Diverted units may end up at "dollar stores" or other less-than-selective retailers to which manufacturers do not sell directly. Those retailers can sell to the public at a discount the authorized dealer is not allowed to offer. Retailers who use aggressive forward buying and diverting practices may make as much profit through these buying practices as they make through nonpromotional sales to consumers. Manufacturers offer discounts to retailers assuming the retailer will pass the savings on to consumers. The discounts also can quickly move a large amount of inventory when the manufacturer needs to reduce stock. As more retailers employ the forward buying strategy, manufacturers such as Procter & Gamble are switching to every day low pricing (EDLP) strategies instead.
