Buying merchandise

Chapter 13

Acquiring management
In the management process most important process is to acquire the
merchandise. The process is differs for well known brands national brands and
private label brands. So the first strategic decision is to make what types of
brands to buy.
Some facts:
The buying process of private level merchandise is more complex than national
label.
Buyer generally meets with vendors at whole sale market.
Negotiate about price, design, delivery time, payment terms and financial
terms.
The retailers who has their own design also works with vendors to prepare the
products.
Buyer has the tendency to create long term strategic partnership with vendors.

Brand alternatives
Retailers and their buyer face a strategic decision about
the mix of national and private brands sold exclusively by
the retailer. So different factors are discussed about1. National brands
2. Private label brands.

Brand alternatives (contd)

National brands: known as manufacturer brands,
designed, produced and marketed the product to
retailers.
Vendors are responsible for developing quality products
consistently.
Sometimes they create UMBRELLA or FAMILY brand with
sub brands.
EXEMPLE: Marico (family brand) produces Parachute
coconut oil, Saffola cooking oil, Hair and care shampoo,
Nihar hair oil (all sub brands)

Brand alternatives (contd)

Private label brands: also called store brands, house
brands or own brands.
It offered products developed by the retailers.
retailers develop design and speciation, contract with
manufacturers.
sometimes national brands work with retailers to make
special version sold exclusively by particular retailers.
In past national brands had more resource to do
aggressive marketing than private brands.
but at present private brands are investing in private
merchandise to create their own their identity.

Categories of Private label brands

There are four types of private label brands. They are1. premium brands.
2. copycat brands.
3. exclusive brands.
4. generic brands.
Premium brands: offer consumer a private label
comparable to manufacturers quality with little price
savings. SUCH AS- Tescos finest the mens collection.
a subcategory of private label brand is environmentally
sensitive or organic.

Private brand categories (contd)

Copycat brands: imitate the manufacturers brand in
appearance and packaging but in low quality with lower
price. Generally provided in drug and grocery industry.
SUCH AS CVS or Walgreens are look like manufacturers.
Exclusive brands: developed by a national brand often
added with a retailer and sold by that particular retailer.
Exclusive brand has different model numbers for different
retailers to sold.
SUCH AS- Canon digital camera sold at both Best Buy and
Walmart of similar features has different model number.

Private brand categories (contd)

Generic brands: targets a price sensitive segments by
offering non-frills products at a discount price. Typically
used for commodities like milk, egg at grocery stores and
underwear at discount stores. When the generic products
sales declines, labelled with the name of commodity. So it
has no distinguishing brand name.

National brands or private brands ?

Exclusive brands
Retailer

Manufacturer/Desi
gner

Product Category

Product Name

Kohls

Estee Lauder

Cosmetics

American Beauty

Walmart

Mary Kate and

Ashley

Apparel and
accessories

Mark kale

Walmart, Best Buy

Hewlett-Packard

Computers

Martha Stewart

Macys

Martha Stewart

Soft Homes

Rachel

McDonalds

Jones Apparel Group

Coffee

Newmans Own
organic

JCPenneys

Ralph Lauren

Home goods, Apparel American Organic

and accessories

JCPenneys

Nicele Miller

Apparel and
accessories

Nicole

National brands or private brands ?

(contd)
Impact on Store

National
Brands

Private label
Brands

Store loyalty

Store image

Traffic flow

Selling and promotional expenses

Restrictions

Differential advantages

Margins

- Disadvantage for retailers

Buying National based Merchandise

Goods and services can be bought from national based
brand in many ways. Most successful and promptly used
market areMeeting national based vendors.
Wholesale Market centres
Trade shows

National Brand Buying process

Generally retailers meet at market weeks or in trade
shows with vendors, take appointment and discuss about
the transactional factors.
Sometimes they do not negotiate rather place orders and
reviews from different source about factors and take
managerial decisions.

Developing and sourcing Private

Merchandise
This process is some extent difficult and complex for the
retailers to perform, but gives the quality authenticity and
possess negotiation power. Steps involved In are developing private label merchandise
Sourcing merchandise
Cost analysis
managerial decision about global sourcing decision.
Resident buying office
Reverse auction.

Negotiation with vendors AND

issues

The most important thing for negotiation is KNOWLEDGE

IS POWER.

Negotiation issues:
1. Prices and gross margins
2. Additional mark-up
3. Terms of purchase
4. Exclusivity
5. Advertising allowance

Tips for effective negotiation

choose a good place to negotiate
Be aware of real deadlines
Separate the people from problems
Insist on objective information
Invent option for mutual gain
Let them do talking
Know how far to go
Dont burn bridges
Dont assume

Building and maintaining strategic

relation

Strategic relationship: emerges when a retailers and

vendors committed to build long term relationship,
investing opportunities profitable for both parties.
Maintaining relationship:
Mutual trust
Common goals
Open communication
Credible commitments
awareness

Legal and ethical issues to Buying

merchandise
Terms and condition of purchase: the law passed on
terms and condition that vendors can not offer different
to different retailers for same quality and features
products.
Commercial Bribery: is illegal in merchandising to
influence the buying decision of retailers by offering
something valuable.
Chargeback: deducting owe money by retailers to

Legal and ethical issues to Buying

merchandise(contd)
Buybacks: is system that gives favours to vendors by
buying back and sniffing space allowance rather than
competitors or buying back of products which slow
moving in store. Its unethical.
Counterfeit merchandise: includes goods made
without the permission of the owner of a trademark or a
copyright. Copyright is a intellectual property. Counterfeit
merchandise is an illegal

Legal and ethical issues to Buying

merchandise(contd)
Gray-Market Merchandise: Gray-Market goods, also known as
parallel imports, involve the flow of merchandise channels, usually
across the international borders.
Diverted merchandise: It is similar to gray-market merchandise
except there need not be distribution across international borders.
Black Market Merchandise: It occurs when consumer goods are
scarce, such as water or gasoline after a natural disaster; heavily
taxed such as cigarettes or alcohol; or illegal, such as drugs or arms.

THANK YOU ALL