1. Retail: Purchasing & Supply Chain
Management
Organisation of retail buying

2. Learning objectives
• Identify the advantages and disadvantages of
centralised and decentralised buying
• Apply these to relevant retailers
• Understand different buying roles, supporting
roles and the role of buying committees

3. Centralised retail buying organisations
Buying personnel usually account for the
greatest number of people in any centralised
retail operational area.
The responsibilities of a centralised buyer are
similar in all operations with a centralised
system but considerably different to those
buyers in a decentralised environment.

4. Responsibilities of a centralised buyer
• Separation of buying and selling
• Dependence on reports (e.g. to satisfy
regional variations)
• Long lines of supply (overseas suppliers
delivering to centralised warehouses)
• Merchandise testing / quality control

5. Advantages of centralised retail buying
organisations (a)
• Increased buying power allows buyers to
negotiate better terms with suppliers
• Specialist buyers can devote more time to
product/market analysis
• Sales data can be aggregated to improve
forecasting
• Economies of scale are achieved, resulting in
lower sourcing and selection costs per product;
buyers’ salaries are comparatively high within a
retail business

6. Advantages of centralised retail buying
organisations (b)
• Greater control over the quality level of the product offer
(technologists, quality controllers with buyers at
warehouses and source)
• Consistent product assortment -reinforces the retail brand
identity and supports national promotions (cost-effective
and consistent retailer branded product development
• Consistent quality of buying and stock control decisions
across outlets
• Store personnel are freed from buying responsibilities,
allowing them to concentrate on creating a high quality
shopping experience for customers in the retail outlet.

7. Disadvantages of centralised retail buying
organisations
• Buyer’s effectiveness is based on sales volume so
they are keen to train and enthuse selling staff and
this may be more difficult
• There can be a lack of sensitivity to local needs
• Communication can be a problem with the result
that when sales performance is poor buyers blame
sellers and sellers blame buyers
• Computers cannot analyse lost sales or customer
attitude.

8. Decentralised retail buying organisations
Where demand is relatively stable retailers can
allow stores to have an element of control over
their buying
This is usually within centrally set parameters
So what are the advantages?

9. Decentralised retail buying organisations
• Retailers can respond to local variations in
demand
• A consistent corporate product offer is still
maintained
• Sometimes it is the product itself that requires a
decentralised approach (eg local food,
newspapers, heritage gifts)
• Improves customer service
• Improves productivity
This is an issue for some retailers (eg mail order)

10. Buying organisation roles
• Buying director
• Merchandise manager
• Buying controller
• Buyer
• Merchandiser
• Category manager
• Assistant buyer
• Buying (administration) assistant
• Allocator / stock distributor

11. Additional buying decision-makers
• Technologists and quality controllers
• Product development team
• Corporate design
• Logistics

12. Buying committees
In some larger companies (e.g. Marks & Spencer)
buying committees are used to make the decisions.
McGoldrick summarises the benefits of these as:
• A wider range of experience is applied to the
decision making process.
• Decisions are made in a more scientific
atmosphere.
• The level of pressure in the buyer-salesperson
relationship is lowered.
• The opportunity for buyers to take ‘bribes’ is
reduced.

13. Buying alliances
• A strategy to gain competitive advantage
• Exploits buying expertise (a rare and highly
valued commodity)
• E.g. Sainsburys with ELC & Adams
Another type of buying alliance is the internet
exchange – we will consider this later in the
module

14. Store categories by ownership
• Independent
• Contractual chain
– voluntary groups (e.g. Spar, AIS)
– retailer buying groups (e.g. Intersports, Nisa, Intermarche)
– Franchising – support given on product, place, price,
promotion and training.
• Corporate chain
• Government chain
• Consumer co-operative