Buybacks are promises made by manufacturers or brokers to buy back part or all of their product if it is not profitable for the customer. They are often used in merchandise sales and can vary in terms of percentage and payment. Buybacks are also common in the apparel and jewelry industries and can apply to the stock market.
A buyback is a type of promise that many manufacturers and brokers add to sales deals. By offering a buyback to a customer, a manufacturer or broker promises to buy back part or all of its product, not proving to be profitable for the customer. Buybacks are often applied to merchandise sales.
If a flower pot seller sells a chain of home stores a supply of terracotta pots, that seller might sweeten the deal with a buyback. Through buyback, the chain of home stores will be able to return the terracotta pots to the supplier if they don’t sell well. Repurchase offers can vary greatly. The supplier may agree to buy back a certain percentage of the products. Alternatively, the supplier may agree to recall all products. However, the supplier may only pay the customer a percentage of what was originally paid for the goods.
Buybacks are more common in some industries than others. For example, in some strata of the apparel and jewelry industries, buybacks are often added to sales agreements. For example, let’s say a large department store places an order for 10,000 units of a blue plastic bracelet with one of the store’s suppliers. That supplier may offer the department store a buy-back agreement. The specifics of the buyback agreement will depend on cost margins, the buyer-supplier relationship, and each party’s sales policies. Often fashion industry suppliers maintain relationships with discount chains happy to buy back merchandise.
A buyback is also a term that applies to the stock market. Whether it’s a stock market buyback or a trade, the concept is effectively the same. A share repurchase is an event during which a company buys back the shares or bonds it has sold. By doing so, the number of shares decreases, increasing the power of each individual share left in the market. Companies decide to buy back their shares for a large number of reasons. However, a company’s shareholders must vote to authorize a buyback. A stock market buyback is also known as a company buyback.
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