DC Lecture Seven : Merchandise Buying and Handling

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DC Lecture Seven : Merchandise Buying and Handling

  1. 1. MKTG 1058:DISTRIBUTION CHANNELS 7-1
  2. 2. Distribution Channels MKTG 1058 LECTURE SEVEN Merchandise Buying & Handling (Dunne Chapter Nine) 7-22
  3. 3. Learning Objectives for Chapter 9 (Dunne):• Explain the differences between the four methods of dollar merchandise planning used to determine the proper stock levels needed to begin a merchandise selling period.• Explain how retailers use dollar merchandise control and describe how open-to-buy is used in the retail buying process. 7-3
  4. 4. Learning Objectives for Chapter 9 (Dunne):• Describe how a retailer determines the makeup of its inventory.• Describe how a retailer selects proper merchandise sources.• Describe what is involved in the vendor-buyer negotiation process and what terms of the contract can be negotiated.• Discuss the various methods of handling the merchandise once it is received in the store in order to control shrinkage, including vendor collision and theft. 7-4
  5. 5. Retailing TruismIf a retailer doesn’t have the merchandise, there is nothing to promote and sell. 7-5
  6. 6. Chapters 8 and 9 (compared): The previous lecture was on merchandise budget This chapter covers the buying process and how to ensure there is a right mix Some exam questions may use the terms “merchandise makeup” – sometimes known as mix Don’t confuse the word makeup with “mark-up” Read the questions carefully! 7-6
  7. 7. Dollar Merchandise Planning•Merchandise Management is the analysis, planning, acquisition, handling, and control of the merchandise investments of a retail operation.•Process by which a retailer offers the right quantity of the right merchandise in the right place at the right time and meets the company’s financial goals. (Levy) 7-7
  8. 8. Dollar Merchandise Planning• Gross Margin Return on Inventory (GMROI) is gross margin divided by average inventory at cost; alternatively it is the gross margin percent multiplied by (net sales divided by average inventory investment). GMROI can be comupted as follows:• (Gross margin/Net sales) X (Net sales/Average inventory at cost) = (Gross margin/Average inventory at cost) A very important ratio to note- read the text carefully on this and the implications of a changing GMROI (note ‘I’ is NOT investment but inventory) 7-8
  9. 9. GMROI Inventory Productivity MeasuresGMROI = Gross Margin Percent x sales to stock ratio = gross margin x net sales net sales avg inventory at cost = gross margin avg inventory at cost 7-9
  10. 10. ROI and GMROI Asset Productivity MeasuresStrategic Corporate Level• Return on Assets = Net Profit Total AssetsMerchandise Management Level• GROI = Gross Margin Average Inventory 7-10
  11. 11. Illustration of GMROI 7-11
  12. 12. GMROI for Selected Department in Discount Stores 7-12
  13. 13. Calculating Inventory Turnover– Inventory turnover = Net Sales Average inventory at retail– Inventory turnover = Cost of goods sold Average inventory at cost– Average inventory = Month1 + Month2 + Month 3 +… Number of months 7-13
  14. 14. Inventory TurnoverMonth Retail Value of Inventory• EOM January $22,000• EOM February 33,000• EOM March 38,000• Total Inventory $93,000• Average inventory = $93,000 ÷ 3 = $31,000 7-14
  15. 15. Inventory Turnover and Stock-to-Sale RatioInventory turnover = Net Sales Average inventory at retailInventory turnover = Cost of goods sold Average inventory at costSock-to-Sales Ratio = Net Sales Average cost of inventory 7-15
  16. 16. Advantages of Rapid Turnover• Increased sales volume• Less risk of obsolescence and markdowns• Improved salesperson morale• More resources to take advantage of new buying opportunities 7-16
  17. 17. Approaches for Improving Inventory Turnover• Reduce number of categories• Reduce number of SKUs within a category• Reduce number of items in a SKU BUT if a customer can’t find their size or color or brand, patronage and sales decrease! another approach… 7-17
  18. 18. …another approach To improve inventory turnover• Buy merchandise more often• Buy in smaller quantities which should reduce average inventory without reducing sales BUT by buying smaller quantities• Buyers can’t take advantage of quantity discounts so• Gross margin decreases• Operating expenses increase• Buyers need to spend more time placing orders and monitoring deliveries 7-18
  19. 19. Dollar Merchandise Planning Basic Percentage Stock Variation Method Method Weeks’ Stock-to- Supply Sale Method Method 7-19
  20. 20. Dollar Merchandise Planning• Basic Stock Method (BSM) is a technique for planning dollar inventory investments and allows for a base stock level plus a variable amount of inventory that will increase or decrease at the beginning of each sales period in the same dollar amount as the period’s expected sales. 7-20
  21. 21. Dollar Merchandise Planning The BSM can be calculated as follows:• Average monthly sales for the season = Total planned sales for the season/Number of months in the season• Average stock for the season = Total planned sales for the season/Estimated inventory turnover rate for the season• Basic stock = Average stock for the season – Average monthly sales for the season• Beginning-of-Month (BOM) = Basic stock + Planned monthly sales 7-21
  22. 22. Dollar Merchandise Planning Percentage variation method (PVM): Is a technique for planning dollar inventory investments that assumes that the percentage fluctuations in monthly stock from average stock should be half as great as the percentage fluctuations in monthly sales from average sales. 7-22
  23. 23. Dollar Merchandise Planning The (PVM) can be calculated as follows: BOM stock = Average stock for season X ½[1 + (Planned sales for the month/Average monthly sales)] 7-23
  24. 24. Dollar Merchandise Planning Weeks’ supply method (WSM): Is a technique for planning dollar inventory investments that states that the inventory level should be set equal to a predetermined number of weeks’ supply, which is directly related to the desired rate of stock turnover. 7-24
  25. 25. Dollar Merchandise Planning The WSM can be calculated as follows:• Number of weeks to be stocked = Number of weeks in the period/Stock turnover rate for the period• Average weekly sales = Estimated total sales for the period/Number of weeks in the period• BOM stock = Average weekly sales X Number of weeks to be stocked 7-25
  26. 26. Dollar Merchandise Planning Stock-to-sales method (SSM): Is a technique for planning dollar inventory investments where the amount of inventory planned for the beginning of the month is a ratio (obtained from trade associations or the retailer’s historical records) of stock-to-sales. 7-26
  27. 27. Dollar Merchandise PlanningThe SSM can be computed as follows: Average BOM stock-to-sales ratio for the season = Number of months in the season/Desired inventory turnover rate 7-27
  28. 28. Exercises from the Text (Merchandise Buying)28
  29. 29. Solutions to end of chapter questions Chapter Nine:Merchandise Buying and Handling 7- 29
  30. 30. 2. The Corner Hardware Store is attempting to develop a merchandise budget for thenext 12 months. To assist in this process, the following data have been developed. Thetarget inventory turnover is 4.8 and forecast sales are: Month Forecast Sales 1 $27,000 2 26,000 3 20,000 4 34,000 5 41,000 Total sales= $ 6 40,000 7 28,000 8 27,000 9 38,000 10 39,000 11 26,000 12 28,000Develop a monthly merchandise budget using the basic stock method (BSM) and thepercentage variation method (PVM). 7- 30
  31. 31. SOLUTION: Using the basic stock method we should plan the following inventorylevels: Month Planned Inventory 1 $27,000 + [(374,000/4.8)-(374,000/12)] $27,000 + 46,750 = $73,750 2 $26,000 + 46,750 = $72,750 3 $20,000 + 46,750 = $66,750 4 $34,000 + 46,750 = $80,750 5 $41,000 + 46,750 = $128,750 6 $40,000 + 46,750 = $88,750 7 $28,000 + 46,750 = $74,750 8 $27,000 + 46,750 = $73,750 9 $38,000 + 46,750 = $84,750 10 $39,000 + 46,750 = $85,750 11 $26,000 + 46,750 = $72,750 12 $28,000 + 46,750 = $74,750 7- 31
  32. 32. Using the percentage variation method we should plan the following inventory levels: Month Inventory Planned 1 1/2 (374,000/4.8)(1+27,000/(374,000/12)) .5(77,916.67)(1+.87) = $72,708 2 .5(77,916.67)(1+.83) = $71,458 3 .5(77,916.67)(1+.64) = $63,958 4 .5(77,916.67)(1+1.09) = $81,458 5 .5(77,916.67)(1+1.32) = $90,208 6 .5(77,916.67)(1+1.28) = $88,958 7 .5(77,916.67)(1+.90) = $73,958 8 .5(77,916.67)(1+.87) = $72,708 9 .5(77,916.67)(1+1.22) = $86,458 10 .5(77,916.67)(1+1.25) = $87,708 11 .5(77,916.67)(1+.83) = $71,458 12 .5(77,916.67)(1+.90) = $73,958 7- 32
  33. 33. Planning Your Own Retail Business:Alexia White is in the process of developing the merchandise budget for the gift shop sheis opening next year. She has decided to use the basic stock method of merchandisebudgeting. Planned sales for the first half of next year are $200,000, and this is divided asfollows: February = 9 percent, March = 10 percent, April = 15 percent, May = 21 percent,June = 22 percent, and July = 23 percent. Planned total retail reductions are 9 percent forFebruary and March, 4 percent for April and May, and 12 percent for June and July. Theplanned initial markup percentage is 48 percent. Alexia desires the rate of inventoryturnover for the season to be two times. Also, she wants to begin the second half of theyear with $90,000 in inventory at retail prices. Develop a six-month merchandise budget for Alexia. 7- 33
  34. 34. Suggested Answer: After determining planned sales for each month, the BOM inventorylevel for each month using the basic stock method is computed as follows:Average monthly sales = Total planned sales/Numberfor the season of months = $200,000/6 = $33,333Average stock for the = Total planned sales/Inventoryseason turnover = $200,000/2 = $100,000Basic stock = Average stock - Average monthly sale = $100,000 - $33,333 = $66,667 7- 34 34
  35. 35. BOM @ retail (Feb.) = Basic stock + Planned monthly sales = $66,667 + $18,000 = $84,667BOM @ retail (Mar.) = $66,667 + $20,000 = $86,667 This set ofBOM @ retail (Apr.) = $66,667 + $30,000 = $96,667 figures will beBOM @ retail (May) = $66,667 + $42,000 = $108,667 inserted intoBOM @ retail (Jun.) = $66,667 + $44,000 = $110,667 Row #1 of theBOM @ retail (Jul.) = $66,667 + $46,000 = $112,667 Merchandise Budget 7- 35
  36. 36. SIX-MONTH PROBLEM Six-Month Date: December 14 Merchandise Season: Summer Budget Spring/Summer Feb March April May June July Seasonal Total 1.Planned 84,667 86,667 96,667 108,667 110,667 112,667 ______ BOM Stock 2.Planned 18,000 20,000 30,000 42,000 44,000 46,000 200,000 Sales 3.Planned 1,620 1,800 1,200 1,680 5,280 5,520 17,100 Retail Reductions 4.Planned 86,667 96,667 108,667 110,667 112,667 90,000 ______ EOM Stock 18,000= 200000 x 9% 1620 = 18000 x 9%(cont’d) 7- 36
  37. 37. 5.Planned 21,620 31,800 43,200 45,680 51,280 28,853 222,433Purchases @ Retail6.Planned 11,242 16,536 22,264 23,754 26,666 15,004 115,666Purchases @ Cost 7.Planned 10,378 15,264 20,736 21,926 24,614 13,849 106767InitialMarkup8.Planned 8,758 13,464 19,536 20,246 19,334 8,329 89,667GrossMargin Refer back to Lecture Six to find out how to get these figures 7- 37
  38. 38. (Planned Sales for the Month ) + (PlannedRetail Reductions for the Month) + (Planned EOM Stock for the Month) - (Planned BOM Stock for the Month) = (Planned Purchases at Retail for the Month) (Planned Purchases at Retail for the Month ) - X (100% Planned Initial Markup Percentage) = (Planned Purchases at Cost for the Month)(Planned Purchases at Retail for the Month ) X(Planned Initial Markup Percentage) =(Planned Initial Markup for the Month) OR(Planned Purchases at Retail for the Month) -(Planned Purchases at Cost for the Month) =(Planned Initial Markup for the Month)(Planned Initial Markup for the Month) -(Planned retail Reductions for the Month) =(Planned Gross Margin for the Month) 7- 38
  39. 39. Dollar Merchandise Control Open-to-buy (OTB) refers to the dollar amount that a buyer can currently spend on merchandise without exceeding the planned dollar stock. Computations for OTB are as follows:• Planned sales for month + Planned reductions for month + End-of-Month (EOM) planned retail stock – Beginning-of-Month (BOM) stock = Planned purchases at retail• Planned purchases at retail – Commitments at retail for current delivery = Open-to-Buy (OTB) 7-39
  40. 40. Dollar Merchandise Control:Common Buying Errors• Buying merchandise that is either priced too high or too low for the store’s target market.• Buying the wrong type of merchandise (i.e., too many tops and no skirts) 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 season’s 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, the original order is merely repeated, resulting in a limited selection.) 7-40
  41. 41. Merchandise PlanningMerchandise planning is a dynamic process subject to many changes. Consider the implications that could arise in planning your stock levels as a result of: sales for the previous month being lower or higher than planned reductions being either higher or lower than planned shipments of merchandise being delayed in transit. Understanding the consequences of each of these situations points out the interrelationship of merchandising activities with the merchandise budget. 7-41
  42. 42. Dimensions of and Constraints on OptimalMerchandising Mix Exhibit 9.1 7-42
  43. 43. Inventory Planning•Optimal Merchandise Mix•Constraining Factors•Managing the Inventory•Conflicts in Unit Stock Planning 7-43
  44. 44. Optimal Merchandise Mix• 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 (junior miss clothing); or fall within a given price range (budget women’s wear).• Category Management refers to the management of merchandise categories, or lines, rather than individual products, as strategic business unit. 7-44
  45. 45. Optimal Merchandise Mix- 3 Dimensions• Variety refers to the number of different merchandise lines that the retail stocks in the store.• Breadth (or assortment) is the number of merchandise brands that are found in a merchandise line. • Battle of the Brands occurs when retailers have their own products competing with the manufacturer’s products for shelf space and control over display location.• Depth is the average number of stock-keeping units within each brand of the merchandise line. 7-45
  46. 46. Battle of the Brands Private branding in retailing is creating a situation in which many “third-tier” brands are beginning to be squeezed out of the market, thus leaving only the leading national brand and the retailer’s private label brand. Here Albertson’s (the name of the supermarket) has strategically located its private brand to the right of the national brand (Kelloggs) 7-46
  47. 47. Constraining FactorsDollar Merchandise ConstraintsSpace ConstraintsMerchandise Turnover ConstrainsMarket Constraints 7-47
  48. 48. Constraining Factors Dollar merchandise constraint: There seldom will be enough dollars to emphasize all three dimensions of variety, breadth, and depth. Space constraint: If depth or breadth is wanted, space is needed. If variety is to be stressed, enough empty space is needed to separate the distinct merchandise lines. Merchandise turnover constraint: As the depth of the merchandise increases, more and more variations of the product must be stocked to serve smaller segments. Market constraints: The above three dimensions have a profound effect on how the market perceives the store, and consequently on the customers the store will attract. 7-48
  49. 49. Question to PonderHow can retailers overcome these constraints to provide greater value, especially in comparison to their competition, for the consumer? 7-49
  50. 50. Next stage- Inventory Planning After deciding the relative emphasis to be placed on the three dimensions of the merchandise mix, the retailer needs to decide when to order and reorder the desired merchandise line items. 1. Ideally, a retailer would receive the reordered merchandise just as it is needed. 2. When selling a seasonal item, the retailer would want to be completely sold out of the item at the planned out-of-stock date. 3. The retailer tries to achieve the optimization of its inventory dollars by closely monitoring its inventory using UPC or barcode data. 7-50
  51. 51. The concept of tradeoff in inventory planning Lost Sale Due to StockoutCost of Carrying Inventory 7-51
  52. 52. Managing the Inventory Model Stock Plan is a unit stock plan that shows the precise items and quantities that should be on hand for each merchandise line.•Identify attributes•Identify levels•Allocate Dollars or Units 7-52
  53. 53. Inventory Management for a Retailer Selling aBasic Stock Item Exhibit 9.2 7-53
  54. 54. Staple Merchandise PlanningStaple merchandise planning systems provideinformation needed to assist buyers by performingthree functions:•Monitoring and measuring current sales for itemsat the SKU level•Forecasting future SKU demand with allowancesmade for seasonal variations and changes intrend•Developing ordering decision rules for optimumrestocking 7-54
  55. 55. Cycle and Backup Stock 150 - Order 96 CycleUnits Available Stock 100 - Buffer Stock 50 - 0- 1 2 3 4 Weeks 7-55
  56. 56. Inventory Management for a Retailer Selling aSeasonal Item Exhibit 9.3 7-56
  57. 57. Factors Determining Backup Stock• Level of backup depends on product availability retailer wishes to provide• The greater the fluctuation in demand, the more backup stock is needed• The amount of backup stock needed is also affected by the lead time from the vendor• Fluctuations in lead time affect the amount of backup stock• Vendor’s product availability affects retailers’ backup stock requirements 7-57
  58. 58. Variations in the Category Life Cycle 7-58
  59. 59. Conflicts in Stock Planning• Maintain a strong in-stock position on genuinely new items while trying to avoid the 90 percent of new products that fail in the introductory stage.• Maintain an adequate stock of the basic popular items while having sufficient inventory dollars to capitalize on unforeseen opportunities.• Maintain high merchandise turnover while maintaining high margin goals.• Maintain adequate selection for customers while not confusing them.• Maintain space productivity and utilization while not congesting the store. 7-59
  60. 60. Selection of Merchandising Sources In selecting merchandising sources the following criteria should be considered: Selling history Consumers’ perception of the manufacturer’s reputation Reliability of delivery Trade terms Projected markup Quality of Merchandise 7-60
  61. 61. Selection of Merchandising SourcesCriteria (cont’d) After sale service Transportation time Distribution center processing time Inventory carrying cost Country of Origin Fashionability Net-landed cost 7-61
  62. 62. Retailers using private label brands… Retailers that use private label brands have found that private branding increases as the perceived consequences of making a buying mistake decrease, increases when the different brands in the category are perceived to vary more in their quality, and decreases if the category benefits are deemed to require actual trial/experience instead of being assessable through search of package label information 7-62
  63. 63. Selection of Merchandising Sources• Vendor Profitability Analysis Statement is a tool used to evaluate vendors and shows all purchases made the prior year, the discount granted, the transportation charges paid, the original markup, markdowns, and finally the season-ending gross margin on that vendor’s merchandise. 7-63
  64. 64. Two-Seasons Vendor Profitability Analysis Exhibit 9.4 7-64
  65. 65. Selection of Merchandising Sources Confidential vendor analysis: Is identical to the vendor profitability analysis but also provides a three-year financial summary as well as the names, titles, and negotiating points of all the vendor’s sales staff. 7-65
  66. 66. Confidential Vendor Analysis Exhibit 9.5 - Sample 7-66
  67. 67. Selection of Merchandising Sources Based on the information gathered from the two reports, retailers can then categorize vendors as falling into the following categories: • Class A Vendors are those from whom the retailer purchases large and profitable amounts of merchandise. • Class B Vendors are those that generate satisfactory sales and profits for the retailer. • Class C Vendors are those that carry outstanding merchandise lines but do not currently sell to the retailer. • Class D Vendors are those from whom the retailer purchases small quantities of goods on an irregular basis. • Class E Vendors are those with whom the retailer has had an unfavorable experience. 7-67
  68. 68. Multi-attribute Method for Evaluating VendorsThe multiattribute methodfor evaluating vendors usesa weighted average scorefor each vendor. The scoreis based on the importanceof various issues and thevendor’s performance onthose issues. 7-68
  69. 69. Multiattribute Method for Evaluating Vendors Performance Evaluation of Individual Brands Across Issues Importance Evaluation Brand A Brand B Brand C Brand D Issues of Issues (I) (Pa) (Pb) (Pc) (Pd) (1) (2) (3) (4) (5) (6) Vendor reputation 9 5 9 4 8 Service 8 6 6 4 6 Meets delivery dates 6 5 7 4 4 Merchandise quality 5 5 4 6 5 Markup opportunity 5 5 4 4 5 Country of origin 6 5 3 3 8 Product fashionability 7 6 6 3 8 Selling history 3 5 5 5 5 Promotional assistance 4 5 3 4 7 n I *P Overall evaluation = 290 298 212 341 j ij i 1 7-69
  70. 70. Evaluating a Vendor:A Weighted Average Approach ni1 I j * P ij = Sum of the expression = Importance weight assigned Ij to the ith dimension = Performance evaluation for Pi jth brand alternative on the jth issue 1 = Not important 10 = Very important 7-70
  71. 71. Evaluating VendorsA buyer can evaluate vendors by using the following five steps:• Develop a list of issues to consider in the evaluation (column 1)• Importance weights for each issue in column 1 are determinedby the buyer/planner in conjunction with the GMM (column 2)• Make judgments about each individual brand’s performance oneach issue (the remaining columns)• Develop an overall score by multiplying the importance foreach issue the performance for each brand or its vendor 7-71
  72. 72. Selection of Merchandising Sources:Key Questions• Where does this product fit into the strategic position that I have staked out for my department?• Will I have an exclusive with this product or will I be in competition with nearby retailers?• What is the estimated demand for this product in my target market?• What is my anticipated gross margin for this product? 7-72
  73. 73. Selection of Merchandising Sources:Key Questions• Will I be able to obtain reliable, speedy stock replacement?• Can this product stand on its own, or is it merely a “me-too” item?• What is my expected turnover rate with this product?• Does this product complement the rest of my inventory? 7-73
  74. 74. Vendor Negotiations• Negotiation 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. 7-74
  75. 75. Vendor Negotiations- Price Factor•Trade Discount•Quantity Discount•Promotional Discount•Seasonal Discount•Cash Discount•Delivery Terms 7-75
  76. 76. Trade Discount• 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 $1,000Less 40% - 400 600Less 20% - 120 480Less 10% - 48Purchase price $432 7-76
  77. 77. Quantity Discount• Quantity Discount is a price reduction offered as an inducement 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. 7-77
  78. 78. Quantity Discount• For an example of how a quantity discount works, consider the following schedule: Order Quantity Discount from List Price 1 to 999 0% 1,000 to 9,999 5% 10,000 to 24,999 8% 25,000 to 49,999 10% 7-78
  79. 79. Promotional Discount•Promotional Discount is a discount provided for the retailer performing an advertising or promotional service for the manufacturer. 7-79
  80. 80. Seasonal Discount•Seasonal Discount is a discount provided to retailers if they purchase and take delivery of merchandise in the off season. 7-80
  81. 81. Cash Discount Cash Discount is a discount offered to the retailer for the prompt payment of bills.• End-of-Month (EOM) Dating allows the retailer to take a cash discount and the full payment period to begin on the first day of the following month instead of on the invoice date.• Middle-of-Month (MOM) Dating allows the retailer to take a cash discount and the full payment period to begin on the middle of the month. 7-81
  82. 82. Cash Discount• Receipt of Goods (ROG) Dating allows the retailer to take a cash discount and the full payment period to begin when the goods are received by the retailer.• Extra Dating (Ex) allows the retailer extra or interest-free days before the period of payment begins.• Anticipation allows the retailer to pay the invoice in advance of the end of the cash discount period and earn an extra discount. 7-82
  83. 83. Delivery Terms• Free on Board (FOB) Factory is a method of charging for transportation where the buyer assumes title to the goods at the factory and pays al transportation costs from the vendor’s factory.• Free on Board (FOB) Shipping Point is a method of charging for transportation in which the vendor pays for transportation to a local shipping point where the buyer assumes title and then pays all further transportation costs.• Free on Board (FOB) Destination is a method of charging for transportation in which the vendor pays for all transportation costs and the buyer takes title on delivery. 7-83
  84. 84. 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 retailer’s 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 retailer’s store.  Hijacking theft of merchandise while in transit. 7-84
  85. 85. 5 of the 50 Tricks for Bartenders Exhibit 9.6 - Sample 7-85
  86. 86. Past Year Examination QuestionsNote: in October 2008, the entire set of compulsoryquestions tested in Section B was on the topic ofMerchandise Buying- Chapter 9. However in order toanswer these questions, you also needed to fullyunderstand the techniques of Merchandise Budgetfound in Chapter 8. This demonstrates why it isimportant to have wide coverage of reading andpractice as exam questions can cover two or morechapters on a combined question. 7-86
  87. 87. October 2008- Section B (12 marks forthis question) 7-87
  88. 88. October 2008- Section B (12 marks forthis question) 7-88
  89. 89. October 2008- Section B (12 marks forthis question) 7-89
  90. 90. October 2008- Section B (12 marks forthis question) Note: this question covers the topic from Chapter Eight 7-90

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