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Retailing 2 Assignment

Retailing 2 Assignment

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Retail Management

PURCHASE NEGOTIATION AND SUPPLY CHANNEL RELATIONSHIP

Presented by: GROUP 2

1

Learning Objectives
• What is Merchandise Buying • Process of Merchandise Buying • Factors Affecting Merchandise Buying

2

KEY TERMS
Merchandise Management is the analysis,

planning, acquisition, handling, and control of the merchandise investments of a retail operation
Merchandise Line is a group of products that

are closely related because they
are intended for the same end use (all televisions)  are sold to the same customer group (kids clothing)  or fall within a given price range (budget men’s wear)

3

Contd. • Breadth (or assortment) is the number of merchandise brands that are found in a merchandise line. • Variety refers to the number of different merchandise lines that the retail stocks in the store. • Depth is the average number of stock-keeping units within each brand of the merchandise line. 4 .

Merchandise Buying Process The process through which a retailer decides what merchandise to buy and in what quantity Steps in Merchandise management Creating an assortment plan for a category  Forecasting Sales  Outlining the flow of merchandising  Buying a merchandise  5 .

QUESTIONS EXPLAINING THE PROCESS What branding options are available to the retailers? How do retailers buy national brands? How do retailers prepare for and conduct negotiations with their vendors? 6 .

Contd. What legal and ethical issues are involved in buying merchandise? What issues do retailers consider when buying and sourcing private-label merchandise internationally? Why are retailers building strategic relationships with their vendors? 7 .

Branding options Whether to buy a  National-label brand  Private-label brand  Licensed brand 8 .

g. produced and marketed by a vendor and sold to many different retailers  Umbrella branding (e. P&G)  9 . Amul) Not associating name with a product (e.Contd.g. are products designed. Kellog’s. National-label brand: Also known as manufacturer brands.

STOP. .g. often located in countries with developing economies. to produce the product Also national-brand manufacturers can develop a private-label brand for a specific retailers e.g. FORCA Jeans etc.Contd. are products developed and managed by retailers Retailers typically develop the specifications for their private labels and then contract with manufacturers. Levi’s Signature jeans was developed specifically for sale at Wall-Mart in US 10 E. Private-label brands: Also called store- brands.

Any retailer selling a sweatshirt with a university’s logo printed on it has to obtain the license from that university by paying some licensing fee 11 . produce and sell the branded merchandise Licensees may be : A retailer  A third party E.g. Licensed Brands: These are the brands for which the owner of a well known brand enters into a contract with a licensee to develop .Contd.

“+”: Advantage. “?”: depends on circumstances 12 .Manufacturer Vs Private brands Impact on store Store Loyalty Store Image Traffic Flow Selling & Promotional expense Restrictions Differential Advantage Margins Manufacturer brands ? + + + ? Private-label brands + + + + + ? “-”: Disadvantage .

The places where a retailer can meet a vendor include Wholesale market centers: A Concentration of vendors within a specific geographic location that may be under one roof or even on the Internet Trade shows: These are the shows where vendors display there product range and offerings to the buyers(retailers) Vendor’s office 13 .MEETING WITH VENDORS To reach to a buying decision a retailer must meet a vendor.

Wholesale market Vs Trade shows The meetings during market weeks offer an opportunity for in-depth discussion where as trade shows have the advantage for buyers to see the merchandise offered by different vendors 14 .

The mantra for negotiation is “Knowledge Is Power” The more a buyer knows about his situation and that of the vendor. more powerfully can he negotiate In this process the buyer may provide the vendor with some new ideas or current trends e. 15 .NEGOTIATING WITH VENDORS Negotiating is the process of finding mutually satisfying solutions when the retail buyer and vendor have conflicting objectives. fashion trend in some other region etc.g.

MAJOR ISSUES IN NEGOTIATION Price and Gross Margin Additional Markup Opportunities Terms of Purchase Delivery and Exclusivity Advertising Allowances Transportations 16 .

if the costs of manufacturing. selling and delivery are different .LEGAL & ETHICAL ISSUES Terms & conditions of purchase •Protect individual Resale price maintenance retailers from chain Commercial Bribery Chargeback Slotting allowances Exclusives Counterfeit Merchandise Gray Markets Tying Contract 17 retailers •Vendors can offer different terms to retailers for the same merchandise.

LEGAL & ETHICAL ISSUES Terms & conditions of purchase •It is a requirement Resale price maintenance imposed by any vendor Commercial Bribery Chargeback Slotting allowances Exclusives Counterfeit Merchandise Gray Markets Tying Contract 18 that retailer can not sell a particular item for less than a specific price •Example of BOSE Speakers .

LEGAL & ETHICAL ISSUES Terms & conditions of purchase Resale price maintenance Commercial Bribery Chargeback Slotting allowances Exclusives Counterfeit Merchandise Gray Markets Tying Contract 19 •No vendor or his agents are allowed to offer “something of value ” to the buyer to influence the purchase decision .

LEGAL & ETHICAL ISSUES Terms & conditions of purchase Resale price maintenance Commercial Bribery Chargeback Slotting allowances Exclusives Counterfeit Merchandise Gray Markets Tying Contract 20 •Retailer deducts an amount of money from what he owes to a vendor .

LEGAL & ETHICAL ISSUES Terms & conditions of purchase Resale price maintenance Commercial Bribery Chargeback Slotting allowances Exclusives Counterfeit Merchandise Gray Markets Tying Contract 21 •It is an amount that a vendor pays to a retailer for securing a space in the retail outlet to display its products .

LEGAL & ETHICAL ISSUES Terms & conditions of purchase Resale price maintenance Commercial Bribery Chargeback Slotting allowances Exclusives Counterfeit Merchandise Gray Markets Tying Contract 22 •Retailers ask the vendors for an exclusive arrangement so that no other retailer can sell the item or brand .

LEGAL & ETHICAL ISSUES Terms & conditions of purchase Resale price maintenance Commercial Bribery Chargeback Slotting allowances Exclusives Counterfeit Merchandise Gray Markets Tying Contract 23 •A retailer should not sell the goods of a particular brand or with a trademark without obtaining the permission of the brand owner .

that is selling a country specific registered trademark product made by a foreign manufacturer at lesser prices .LEGAL & ETHICAL ISSUES Terms & conditions of purchase Resale price maintenance Commercial Bribery Chargeback Slotting allowances Exclusives Counterfeit Merchandise Gray Markets Tying Contract 24 •A retailer should not get involved into gray marketing.

LEGAL & ETHICAL ISSUES Terms & conditions of purchase Resale price maintenance Commercial Bribery Chargeback Slotting allowances Exclusives Counterfeit Merchandise Gray Markets Tying Contract 25 •In such a contract vendors restrict the retailer from buying the needed merchandise until he purchases the merchandise that vendor asks him to buy even if it is not needed by the retailer .

BUYING A PRIVATE-LABEL BRAND Buying and Selling private-label brands is a strategic decision as it involves a significant investment Retailers offering PL have specialized departments which have people for:  Identifying trends  Designing & specifying products  Selecting manufacturers  Maintaining staff to monitor the conditions under which products are developed  Testing the quality of manufactured products 26 .

Reverse Auctions One buyer (vendors) (retailer) and many potential sellers Retailer provide the specification of what they want to a group of potential vendors. who then bid for fulfilling the requirement Buyer may not buy from the lowest bidder but from the one who assures good quality and on-time delivery with a reasonable price 27 .

Global Sourcing Diminishing barriers(tariffs. duties etc.) to International trade have opened the door to outsourcing of manufacturing of products to countries with developing economies Low labor cost acts as a major factor However the factors that give rise to the cost include  Foreign  Tariffs  Longer currency fluctuations lead time  Increased transportation cost 28 .

STRATEGIC RELATIONSHIPS It occurs when a retailer and a vendor are committed to maintaining the relationship over the long term and investing in opportunities that are mutually beneficial to the parties It creates a Win-Win situation as:  Size of profit increases  Sales volume increases  Both parties focus on uncovering and exploiting joint oppurtunities 29 .

Fundamentals of successful Strategic relationship Mutual Trust Open Communication Common Goals Credible Commitments A belief that the partner is •Honest •Benevolent 30 .

Fundamentals of successful Strategic relationship Mutual Trust Open Communication Common Goals Credible Commitments •To share information •To develop salesforecast together •To sort out the problems in relationship 31 .

Fundamentals of successful Strategic relationship Mutual Trust Open Communication Common Goals Credible Commitments To have common goals like •Enhancing profit •Increasing the sales volume •Business expansion 32 .

Fundamentals of successful Strategic relationship Mutual Trust Open Communication Common Goals Credible Commitments •These are tangible investments in relationship •It may include spending money to improve supplier’s product or services provided to the customer 33 .

FACTORS AFFECTING MERCHANDISE BUYING In selecting merchandising sources the following criteria should be considered: Selling history Consumers’ perception of the manufacturer’s reputation Reliability of delivery Trade terms Quality of Merchandise 34 .

After sale service Transportation time Inventory carrying cost Fashionability 35 .Contd.

resulting in a limited selection. (All too often. Failing to identify the season’s hot items early enough in the season.Common Buying Errors • Buying merchandise that is either priced too high or too low • • • • • for the store’s target market. too many shirts and no trousers) or buying merchandise that is too trendy. Buying from too many vendors.) 36 . Having too much or too little basic stock on hand. Failing to let the vendor assist the buyer by adding new items and/or new colors to the mix. the original order is merely repeated. Buying the wrong type of merchandise (i..e.

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