Retailing 2 Assignment

8/3/2019 Retailing 2 Assignment

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PURCHASE NEGOTIATION AND SUPPLY

CHANNEL RELATIONSHIP

Retail Management

Presented by: GROUP 2


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Learning ObjectivesWhat is Merchandise Buying

Process of Merchandise Buying

Factors Affecting Merchandise Buying

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KEY TERMSMerchandise Management is the analysis,

planning, acquisition, handling, and control ofthe merchandise investments of a retailoperation

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 mens wear)

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Contd.Variety refers to the number of different

merchandise lines that the retail stocks in thestore.

Breadth (or assortment) is the number ofmerchandise brands that are found in a

merchandise line.

Depth is the average number of stock-keepingunits within each brand of the merchandiseline. 4


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Merchandise Buying

ProcessThe 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

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QUESTIONS EXPLAINING THE

PROCESS

What branding options are available to the

retailers?

How do retailers buy national brands?

How do retailers prepare for and conductnegotiations with their vendors?

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Contd.What legal and ethical issues are involved in

buying merchandise?

What issues do retailers consider whenbuying and sourcing private-label

merchandise internationally?

Why are retailers building strategicrelationships with their vendors?

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Contd.

National-label brand: Also known as manufacturerbrands, are products designed, produced andmarketed by a vendor and sold to many different

retailers

Umbrella branding (e.g. Kellogs, Amul)

Not associating name with a product (e.g. P&G)

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Contd.Private-label brands: Also called store-

brands, are products developed and managedby retailers

Retailers typically develop the specificationsfor their private labels and then contract withmanufacturers, often located in countries withdeveloping economies, to produce the product

Also national-brand manufacturers candevelop a private-label brand for a specificretailers e.g. Levis Signature jeans wasdeveloped specifically for sale at Wall-Mart inUSE. . STOP, FORCA eans etc. 10


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Contd.Licensed Brands: These are the brands for

which the owner of a well known brand entersinto a contract with a licensee to develop ,produce and sell the branded merchandise

Licensees may be :A retailer

A third party

E.g. Any retailer selling a sweatshirt with auniversitys logo printed on it has to obtainthe license from that university by paying

some licensing fee 11


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Manufacturer Vs Private

brands

-: Disadvantage ; +: Advantage; ?: depends on circumstances

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Impact on store Manufacturer brands Private-label brands

Store Loyalty ? +

Store Image + +

Traffic Flow + +Selling & Promotionalexpense

+ -

Restrictions - +

Differential Advantage - +

Margins ? ?


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MEETING WITH VENDORSTo reach to a buying decision a retailer must

meet a vendor. The places where a retailercan meet a vendor include

Wholesale market centers: A Concentration ofvendors within a specific geographic locationthat may be under one roof or even on theInternet

Trade shows: These are the shows wherevendors display there product range andofferings to the buyers(retailers)

Vendors office

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Wholesale market Vs Trade

showsThe meetings during market weeks offer an

opportunity for in-depth discussion where as tradeshows have the advantage for buyers to see the

merchandise offered by different vendors

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NEGOTIATING WITH

VENDORSNegotiating is the process of finding mutually

satisfying solutions when the retail buyer andvendor have conflicting objectives.

The mantra for negotiation is

Knowledge Is PowerThe more a buyer knows about his situation

and that of the vendor, more powerfully canhe negotiate

In this process the buyer may provide thevendor with some new ideas or current trendse.g. fashion trend in some other region etc.

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MAJOR ISSUES IN

NEGOTIATIONPrice and Gross Margin

Additional Markup Opportunities

Terms of PurchaseDelivery and Exclusivity

Advertising Allowances

Transportations

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LEGAL & ETHICAL ISSUESTerms & conditions of purchase

Resale price maintenance

Commercial BriberyChargeback

Slotting allowances

Exclusives

Counterfeit Merchandise

Gray Markets

Tying Contract

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Protect individualretailers from chainretailers

Vendors can offerdifferent terms to retailersfor the same merchandise,if the costs ofmanufacturing, selling anddelivery are different


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Slotting allowances

Exclusives


Gray Markets

Tying Contract

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It is a requirementimposed by any vendorthat retailer can not sell

a particular item for lessthan a specific price

Example of BOSESpeakers


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Slotting allowances

Exclusives


Gray Markets

Tying Contract

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No vendor or hisagents are allowed tooffer something ofvalue to the buyer toinfluence the purchasedecision


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Slotting allowances

Exclusives


Gray Markets

Tying Contract

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Retailer deducts anamount of money fromwhat he owes to avendor


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Slotting allowances

Exclusives


Gray Markets

Tying Contract

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It is an amount that avendor pays to a retailerfor securing a space inthe retail outlet to display

its products


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Slotting allowances

Exclusives


Gray Markets

Tying Contract

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Retailers ask thevendors for an exclusivearrangement so that noother retailer can sell the

item or brand


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Slotting allowances

Exclusives


Gray Markets

Tying Contract

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A retailer should not sellthe goods of a particularbrand or with atrademark without

obtaining the permissionof the brand owner


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Slotting allowances

Exclusives


Gray Markets

Tying Contract

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A retailer should not getinvolved into graymarketing, that is sellinga country specific

registered trademarkproduct made by aforeign manufacturer atlesser prices


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Slotting allowances

Exclusives


Gray Markets

Tying Contract

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In such a contractvendors restrict theretailer from buying theneeded merchandise

until he purchases themerchandise that vendorasks him to buy even if itis not needed by theretailer


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BUYING A PRIVATE-LABEL

BRANDBuying and Selling private-label brands is a

strategic decision as it involves a significantinvestment

Retailers offering PL have specializeddepartments which have people for:

Identifying trends

Designing & specifying products

Selecting manufacturers

Maintaining staff to monitor the conditions underwhich products are developed

Testing the quality of manufactured products

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Reverse AuctionsOne buyer (retailer) and many potential sellers

(vendors)

Retailer provide the specification of what theywant to a group of potential vendors, whothen bid for fulfilling the requirement

Buyer may not buy from the lowest bidder butfrom the one who assures good quality andon-time delivery with a reasonable price

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Global SourcingDiminishing barriers(tariffs, duties etc.) to

International trade have opened the door tooutsourcing 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

includeForeign currency fluctuations

Tariffs

Longer lead time

Increased transportation cost

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STRATEGIC

RELATIONSHIPSIt occurs when a retailer and a vendor are

committed to maintaining the relationshipover the long term and investing in

opportunities that are mutually beneficial tothe parties

It creates a Win-Win situation as:Size of profit increases

Sales volume increases

Both parties focus on uncovering and exploitingjoint oppurtunities

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Fundamentals of successful Strategic relationship

Mutual Trust

Open Communication

Common GoalsCredible Commitments

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A belief that thepartner is

Honest

Benevolent


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Mutual Trust

Open Communication


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To shareinformation

To develop sales-forecast together

To sort out theproblems inrelationship


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Mutual Trust

Open Communication


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To have commongoals like

Enhancingprofit

Increasing thesales volume

Businessexpansion


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Mutual Trust

Open Communication


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These are tangibleinvestments inrelationship

It may includespending money toimprove suppliersproduct or servicesprovided to thecustomer

FACTORS AFFECTING


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FACTORS AFFECTINGMERCHANDISE BUYING

In selecting merchandising sources thefollowing criteria should be considered:

Selling historyConsumers perception of the manufacturers

reputationReliability of delivery

Trade termsQuality of Merchandise

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Contd.After sale service

Transportation time

Inventory carrying cost

Fashionability

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Common Buying Errors Buying merchandise that is either priced too high or too lowfor the stores target market.

Buying the wrong type of merchandise (i.e., too many shirtsand no trousers) or buying merchandise that is too trendy.

Having too much or too little basic stock on hand. Buying from too many vendors. Failing to identify the seasons hot items early enough in the

season.

Failing to let the vendor assist the buyer by adding new

items and/or new colors to the mix. (All too often, theoriginal order is merely repeated, resulting in a limitedselection.)

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POULIN

RIYASJOYRAJ AND

ARAVIND

Retailing 2 Assignment

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