Merchandise Buying and Handling

introduction
* Branding is one of the important strategic merchandising decisions of retailers * The types of brands a retailer chooses to carry are essential cues that customers use to evaluate a store * Brands influence customer loyalty to a store and its image

Merchandise Management
Retail Communication Mix Planning Merchandise Assortments

Buying Merchandise
Buying Systems Pricing

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Merchandise Branding Strategies

* Manufacturer (National) Brands
* Designed, produced, and marketed by a vendor and sold by many retailers
* Developed by retailer and only sold in retailers outlets. Ex: SM Bonus * Developed by licensee and right sold to either manufacturer or retailer. Ex: Walt * Disney, Nickelodeon, Mattel

* Private-Label (Store) Brands

* Licensed Brand

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The McGraw-Hill Companies, Inc./Jill Braaten, photographer

Private Labels
Advantages * Unique merchandise not available at competitive outlets * Difficult for customers to compare price with competitors * Higher margins Disadvantages
Need to develop expertise in developing and promoting brand Unable to sell excess merchandise

Typically less desirable for

customers
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Manufacturer (National) Labels

* * * * Advantages More desired by customers Resell excessive merchandise Dont need skills and people to develop and promote merchandise Disadvantages Lower margins Vulnerable to competitive pressures Limit retailers flexibility

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Most Recognized Apparel and Accessory Private Label Brands

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Ethical and legal issues in purchasing merchandise

Slotting allowances fees paid by vendor for space in a retail store. It becomes unethical if retailers will charge very high fees Buy Backs retailers allow vendors to create space for its goods by buying back competitors inventory Charge backs deducting money from the amount owed to a vendor due to mistakes in labels, billings Commercial Bribery a vendor offers something of value to influence purchasing decisions

Ethical and legal issues in purchasing merchandise

* Counterfeit merchandise goods made and sold without permission of the owner of a trade mark, copyright, patent * Gray market and Diverted merchandise or smuggled * Exclusive territories considered illegal when competition is restricted

Ethical and legal issues in purchasing merchandise

* Exclusive dealing agreements a manufacturer restricts a retailer into carrying only its products and nothing from competing vendors * Tying Contracts when a vendor and a retailer enter into agreement that requires the retailer to take a product it doesnt necessarily desire

Ethical and legal issues in purchasing merchandise

* Refusals to deal a manufacturer refuses to sell a retailer for the sole purpose of benefiting a competing retailer * Dual Distribution a manufacturer competes directly with its retailers

Managing the Inventory

LO 3

Successful retailers, such as Lane Bryant, realize that a third of all women now wear a size larger than 14. As a result they disregarded past sales records and now offer large selections of plus sizes featuring the latest looks, including the same designermade fitted dresses and coats worn by fashion models.

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Managing the Inventory

LO 3

Predicting future sales for toys is always difficult. During the 1996 Christmas season many retailers were caught by surprise when Rosie ODonnell featured Tickle Me Elmo on her television show just before Thanksgiving.

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Selection of Merchandising Sources

In selecting merchandising sources the following criteria should be considered: * After sale service * Transportation time * Distribution center processing time * Inventory carrying cost * Country of Origin * Fashionability
LO 4

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Vendor Negotiations
Negotiation
LO 5

is the process of finding mutually satisfying solutions when the retail buyer and vendor have conflicting objectives. The retailer must negotiate price, delivery dates, discounts, shipping terms, and return privileges.

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Vendor Negotiations

Trade Discount Quantity Discount Promotional Discount Seasonal Discount Cash Discount Delivery Terms
LO 5

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Trade Discount
LO 5 Trade Discount is also referred to as a functional discount and is

a form of compensation that the buyer may receive for performing certain wholesaling or retailing services for the manufacturer. Often expresses in a chain, or series, such as list less 40-20-10. The computations would look like this:
List price Less 40% Less 20% Less 10% Purchase price $1,000 - 400 - 120 48 $432 600 480

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Quantity Discount
Quantity Discount is a price reduction offered as an inducement
LO 5

to purchase large quantities of merchandise. Non-Cumulative Quantity Discount is a discount based on a single purchase. Cumulative Quantity Discount is a discount based on the total amount purchased over a period of time.
Free Merchandise is a discount whereby merchandise is offered in lieu of price concessions.

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Promotional Discount
Promotional Discount is a discount provided for the retailer
performing an advertising or promotional service for the manufacturer.
LO 5

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Seasonal Discount
Seasonal Discount is a discount provided to retailers if they
LO 5

purchase and take delivery of merchandise in the off season.

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Cash Discount
Cash Discount is a discount offered to the retailer for the
prompt payment of bills.
LO 5

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In-Store Merchandise Handling

Shrinkage is the loss of merchandise due to theft, loss, damage, or
bookkeeping errors. Vendor collusion occurs when an employee of one of the retailers vendors steals merchandise as it is delivered to the retailer. Employee theft occurs when employees of the retailer steal merchandise where they work. Customer theft is also know as shoplifting and occurs when customers or individuals disguised as customers steal merchandise from the retailers store.
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LO 6

In-Store Merchandise Handling

* Hijacking theft of merchandise while in transit.
LO 6

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