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Retail buying & merchandising purchasing

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Retail buying & merchandising purchasing

  1. 1. Merchandise Purchasing SMS Varanasi
  2. 2. Objectives of the session  Branding Strategies  Global Sourcing Decisions  The Merchandise Purchasing and Handling Process  Ethical and Legal Issues in Purchasing Merchandise Merchandise Purchasing 2
  3. 3. Merchandise Purchasing  All the activities that are required for establishing a successful relationship with various vendors  Once the merchandise has been purchased, it should be brought safely into the store and placed on the shelves for sale.  Merchandise handling  Getting the merchandise physically into the store and taking care of it till it is sold  As the same vendor may supply the merchandise to a retailer over a period of time, a relationship is bound to develop between the vendor and the retailer  More number of transactions between retailers and various vendors across the globe, more number of legal and ethical issues Merchandise Purchasing 3
  4. 4. Branding Strategies  An optimum mix of manufacturers' brands and private brands to be offered at the store  Manufacturers' brands    These brands are produced and controlled by the manufacturer Licensed brands Private brands  In-store brands, are products that are produced and marketed by retailers Merchandise Purchasing 4
  5. 5. Private Label Brands  Factors - enable major manufacturers' brands to dominate the market and keep other new entrants at bay    The major manufacturers have developed high entry barriers through their strong distribution channels Older brand names have better brand recall than the newer ones. It is difficult for new entrants to build such strong brands because of the fragmented media and cost involved The removal of high import duties made Indian consumers aware of the quality of imported goods. As a result, they expect higher value from Indian retailers Merchandise Purchasing 5
  6. 6. Private Label Brands  The popularity of private labels is significantly low for the following reasons Retailers are not able to advertise as aggressively as manufacturers.  Retailers are not able to achieve economies of scale in designing and manufacturing (unlike manufacturers)  Retailers lack technical sophistication  Consumers regard private label brands as inferior to manufacturers‘ brands  Merchandise Purchasing 6
  7. 7. Reasons for Launching Private Labels  The consumer does not see any tangible value in some of the manufacturers' brands offered by the store  The retailer does not earn good margins through the sale of national brands  Of all the purchase orders placed, the vendors fulfill only 60 to 65 percent of the orders Merchandise Purchasing 7
  8. 8. Global Sourcing Decisions  Bags, shoes, caps, cordless telephones and similar goods that are sold in the US are sourced mostly from China or South East Asian Countries like Philippines, Taiwan, Bangladesh.  A retailer should be careful while taking global sourcing decisions as the customers judge the quality of an imported product on the basis of the country of origin.   Japan is known for producing electronic goods, certain countries are well known for manufacturing certain products Brazil is known for coffee, and France is known for wines  Factors  Country-of-origin effect  Foreign exchange fluctuations  Tariffs  Free trading zones  Inventory carrying costs  Transportation costs Merchandise Purchasing 8
  9. 9. Tariffs/Duty  A list of taxes charged by the government on imports  General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO)  The General Agreement on Tariffs and Trade (GATT) was first signed in 1947. GATT was an international forum that encouraged free trade between member countries by regulating and lowering tariffs on traded goods. It also served as a mechanism for resolving trade disputes. In January 1995, GATT evolved into the World Trade Organization. The WTO monitors and arbitrates GATT agreements and supports all negotiations Merchandise Purchasing 9
  10. 10. Managerial Issues in Global Sourcing Decisions  Quality control  Strategic alliances Merchandise Purchasing 10
  11. 11. Merchandise Purchasing Process 1. Identify the local sources of supply 2. Contact and evaluate the different sources of supply 3. Negotiate and purchase from the best sources of supply Merchandise Purchasing 11
  12. 12. Identifying the local sources of supply  Raw resource producers  Manufacturers  Intermediaries  Resident purchasing offices Merchandise Purchasing 12
  13. 13. Types of Wholesale Intermediaries Category Type Merchant General Merchandise (full function) Intermediaries Single line (full function) Specialty line (full function) Cash and Carry (limited function) Drop shipper (limited function) Truck Distributor (limited function) Rack Jobber (limited function) Merchandise Purchasing 13
  14. 14. Types of Wholesale Intermediaries Agent Intermediaries Broker (limited function) Sales agent (limited function) Manufacturer's agent (limited function) Contractual Intermediaries Cooperative Group Voluntary Chain Merchandise Purchasing 14
  15. 15. Contacting the sources of supply  Supplier-initiated contacts  Retailer initiated contacts Merchandise Purchasing 15
  16. 16. Evaluating the sources of supply  Evaluation of Source of Supply  Evaluation criteria  Merchandise  Distribution  Price  Promotion  Service         Warranty and repairs Exchange facilities Finance and credit services Training of sales personnel Accounting services Planning and controlling inventory Designing store facilities Providing display units, fixtures and signs Merchandise Purchasing 16
  17. 17. Criteria used vendors for evaluating Criteria Description Reliability Vendor's ability to satisfy all written promises. Price Vs Quality Vendor's ability to provide best merchandise at the least possible price. Time for processing orders Speed in delivering the merchandise. Exclusive selling rights Vendor's ability to provide exclusive selling rights to the retailer. Services provided Vendor's ability to provide services like shipping and storing, if required. Information Vendor's ability to provide any significant data pertaining to goods and services. Guarantee Vendor's support for its goods. Credit Vendor's ability to provide credit purchases to the retailer. Ethics Vendor's ability to stick to all its verbal promises. Long term relationship Availability of the vendor over an extended period of time. Reorder filling capacity Vendor's ability to fill reorders on time. Markups Vendor's ability to provide sufficient markup or price margins. Innovativeness Innovativeness of the vendor's product line. Advertising support Advertising support provided by the vendor. Investment costs The size of the vendor's total investment cost. Risk Involved The amountMerchandise Purchasing with the vendor. of risk involved in dealing the 17
  18. 18. Methods of Evaluation  Weighted rating method  Decision matrix approach Selecting the criteria  Weighing the criteria  Selecting the vendor  Rating the vendor  Weighted rating  Merchandise Purchasing 18
  19. 19. Negotiating with sources of supply  Price negotiations  Final Price = List Price - negotiated discounts and allowances  A trade discount  A simple method for changing prices to meet changing market conditions.  Mentioning the price on the invoice and then quoting a series of discounts  A quantity discount  Cash discounts  Some important terms  NET  Free on Board  Free Alongside Ship  Cost, Insurance and Freight  Cash on Delivery Merchandise Purchasing 19
  20. 20. Purchasing from Sources of Supply  Purchasing Strategies Concentrated strategy  Dispersed strategy   Purchasing Methods Regular  Consignment  Memorandum  Approval and  Specification purchasing  Merchandise Purchasing 20
  21. 21. Merchandise Handling  The physical handling of the merchandise by the retailer          Receiving and stocking merchandise Pricing and marking inventory Setting up displays Determining on-floor quantities and assortments Completing customer transactions Providing delivery and pickup of goods (for customers) Processing goods that are damaged Processing returns and exchanges Monitoring pilferage and merchandise control Merchandise Purchasing 21
  22. 22. Re-ordering Merchandise  Merchandise controlling Process for evaluating revenues, profits, turnover, shortage of inventory, seasonal fluctuations and costs for each product in the merchandise category being offered by the retailer  An effective reordering plan - critical factors  Order and delivery time  Inventory turnover  Financial implications, and  Inventory versus ordering costs  Regular re-evaluation  Merchandise Purchasing 22
  23. 23. Ethical and Legal Merchandise Purchasing Issues in  Retailer's perspective Slotting allowances and  Commercial bribery   Vendor's perspective Exclusive territories  Exclusive dealing agreements  Tying contracts  Refusal to deal, and  Dual distribution  Merchandise Purchasing 23
  24. 24. Summary of the Chapter  Branding Strategies  Global Sourcing Decisions  The Merchandise Purchasing and Handling Process  Ethical and Merchandise Legal Issues Merchandise Purchasing in Purchasing 24

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