Retail Merchandising and Buying
Amelia17002
MakingthePurchase2CWritingthePurchaseOrder2CNegotiationswithVendors2CAnalyzingVendorPerformance.pptMaking the Purchase, Writing the Purchase Order, Analyzing Vendor Performance, Negotiations with Vendors
- Preparing for Market/Analyzing Vendor Performance
- Steps involved in making the purchase
- Components in writing the purchase order
- Following up on the purchase order
- What to negotiate for
- How to negotiate
- Issues in the global environment and overseas sourcing
Prepared by M. Greene
Prepared by M. Greene
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Preparing for Market
- Buyers will go to market several times per year depending on their business category
- Easy to meet with existing vendors and new vendors
- Buyers must have their vendor analysis reports of previous season’s sales and profitability reports to discuss with vendors-were the sales, gross margin, turnover, markup plans achieved Buyers need future buying plans; open-to-buy for current needs and upcoming seasonal purchases which is approved by the DMM in advance
- Review trends for the season
- Schedule Appointments
Prepared by M. Greene
Prepared by M. Greene
Purpose of Buying Trips
- To buy product for the new season
- Orders are placed at least 6-9 months in advance of in store dates
- To see which vendor has the new trends for the season
- To discuss promotional buys for a Holiday event
- Evaluation of new resources
- Discuss current business; sales, gross margin, turnover
Prepared by M. Greene
Prepared by M. Greene
Markets
- Central Markets:
- New York-Women’s, Men’s, Accessories, Intimate Apparel
- Los Angeles-Juniors, Contemporary
- Miami-Swim
- Las Vegas-Shoes
- High Point, NC-Furniture
- Regional Markets
- Dallas
- Atlanta
- Chicago
- Las Vegas-Magic, other trade shows
- New York-Toy Fair, Coterie
Prepared by M. Greene
Prepared by M. Greene
Frequency of Market Trips
- Dependent on the Buyer’s buying responsibilities
- Women’s Sportswear market
- September-Spring-February/March/April in store
- November-Summer-May/June/July in store
- March-Fall-August/September/October in store
- June-Holiday-November/December/January in store
- Men’s Market
- February-Fall
- July-Spring
Prepared by M. Greene
Prepared by M. Greene
Frequency of Market Trips
- Shoes
- February-Fall
- August-Spring
- Accessories and Intimate Apparel
- March-Fall/Holiday
- August-Spring
- November-Mother’s Day and Summer
Prepared by M. Greene
Prepared by M. Greene
Planning for Market
- Private Label merchandise may need to be placed 9-12 months in advance although lead times have become quicker
- Buyers may work with Manufacturers to put their label in product or visit factories overseas
- Off Price and Discount Retailers may or may not attend market weeks. Buy opportunistically and may work with vendors after market or at the mid to end of season
Prepared by M. Greene
Prepared by M. Greene
Writing the Purchase Order
- Once the Buyer has attended their specific market and evaluated all the alternatives and decided what to buy, the order is written
- Purchase order is a valid contract. It is a legal and binding document
- Buyers can negotiate canceling a purchase order if a vendor is late in shipping or is not shipping as ordered
- Purchase orders must be complete to allow for better shipping and labeling by the vendors
- Store breakdown necessary to allow for easier allocation to stores by retailer distribution and planning team
Prepared by M. Greene
Prepared by M. Greene
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Writing the Purchase Order
- Components to be included on the purchase order:
- Vendor name and number
- Department name and number
- Date of order
- Purchase order number
- Shipping dates-start and cancel
- Freight terms
- Order discount terms and dating if applicable
- Style number/description/color/sizes/size breakdown
- Store size breakdown
- Total number of units ordered
- Cost price-can be negotiated lower cost and/or regular cost price
- Retail is optional, buyers may opt not to include this on the purchase order
- Advertised styles optional but helpful to flag for vendors and store distribution team
Prepared by M. Greene
Prepared by M. Greene
After Purchase Order is Written
- Associate Buyer, Assistant Buyer or Clerical may need to enter the order into the proper system
- Most orders are transmitted electronically to the vendors (EDI capability)
- Buyers and their teams need to follow up:
- With the vendors to make sure the order had been received into the vendor’s system
- Will all styles, sizes and colors be manufactured. If not, are there any comparable substitutions?
- Will the purchase order ship on time? This will be done starting at least 4-6 weeks before the start ship date on the respective purchase orders.
- If the order will not ship on time, what actions can be taken especially if merchandise is featured in an ad
Prepared by M. Greene
Prepared by M. Greene
Negotiation
- Give and Take between a Buyer and a Vendor
- There is always room to negotiate
- Comes with experience
- Positive relationships strengthen negotiations
Prepared by M. Greene
Prepared by M. Greene
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What should a Buyer negotiate for?
- Cost prices
- Quantity discounts
- Promotional/off-price offerings
- Exclusives
- Order term discounts
- Transportation
- Advertising co-op dollars
- Markdown/gross margin dollars
- Fixture dollars
- Signage dollars
- Return capability
- Late shipping discounts
- Canceling a purchase order
Prepared by M. Greene
Prepared by M. Greene
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Legalities in Negotiation
- Robinson-Patman Act, Sherman Anti-Trust Act
- Acts limit price discrimination
- Protects smaller retailers
- Retailers cannot dictate price to the vendors and who they can or cannot sell to
- Laws permit price reductions when:
- Meet competitor’s pricing
- Closeout merchandise
- Quantity discounts
Prepared by M. Greene
Prepared by M. Greene
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Pricing Negotiations
- Initial cost pricing
- Buyers want to be at lowest possible cost price to maximize markup
- Quantity discounts
- The greater quantity you buy, the less the price should be
- Do not just buy a larger quantity to secure a discount. Buy what you can sell. Overbuying leads to markdowns
Prepared by M. Greene
Prepared by M. Greene
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Pricing Negotiations
- Promotional/Off-Price offerings
- Buyers will run seasonal or weekly sale events
- Negotiate with vendors which collection or item to feature
- Negotiate the reduced cost price for that merchandise to be featured on sale in order to maximize gross margin and compensate for markdowns taken
- Can be done prior to season or in season
- Off price retailers will negotiate pricing for merchandise:
- End of season closeouts
- Broken size and color assortments
Prepared by M. Greene
Prepared by M. Greene
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Negotiating Exclusives
- Buyers are able to negotiate exclusive merchandise offerings
- Exclusives can be:
- Additional or different colors of in line styles
- Style variations in sleeve length, neckline or fabrication
- Additional styles that compliment existing assortment in a vendor’s line
- Exclusives usually require a large order quantity in order to secure production and lowest cost price
- Exclusives will differentiate your vendor’s presentation from a competitor’s
- Buyers cannot tell a vendor that they cannot sell this merchandise to any other retailer
Prepared by M. Greene
Prepared by M. Greene
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Markdowns/Gross Margin Assistance
- Buyers negotiate for additional assistance to meet their gross margin goals
- Occurs when sales did not meet expectations and markdowns were higher than anticipated
- Negotiated with vendors at beginning, during and end of seasons
- Ongoing process
Prepared by M. Greene
Prepared by M. Greene
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Consignment Buying
- Buyers will negotiate return to vendors (RTV) for merchandise that did not sell
- Negotiated up front especially for a new vendor or trend
- If vendor strongly believes in an item and Buyer is not sure it is right for the customer
Prepared by M. Greene
Prepared by M. Greene
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Developing Negotiation Skills
- Need to understand people
- Consider both your needs for your store/department and the vendor’s
- Good negotiators have the following skillset:
- Listening skills
- Organizational skills
- Confidence
- Creativity
- Keep an open mind
- Be flexible
Prepared by M. Greene
Prepared by M. Greene
Objectives of Negotiations
- What is the minimum the buyer can accept?
- What is the maximum the buyer can ask for?
- What is the maximum compromise the buyer can make?
- What is the least the buyer can offer?
- What is the relationship you have with the vendor? This will vary based on if it is a major vendor, small vendor or new vendor.
Prepared by M. Greene
Prepared by M. Greene
Negotiation Strategy
- Remember it is a partnership between a buyer and a vendor
- Develop the traits that show you as the collaborator
- Formalize an agreement
- Avoid intimidating tactics and ultimatums
Prepared by M. Greene
Prepared by M. Greene
Issues with Overseas Sourcing
- Delivery and shipping time and costs-need to plan in advance and allow one month shipping time for merchandise from the Far East
- Reorders-manufacturers need to have stock on hand due to delivery times
- Quality variations-different countries and factories have different specialties. Need to make sure quality, sizing and color is consistent between factories.
- Added Expense and Travel time-longer trips out of the office; many countries may need to be visited
Prepared by M. Greene
Prepared by M. Greene
Issues with Overseas Sourcing
- Size discrepancies-Need to provide size specifications as each countries specs may differ
- Dollar fluctuation-U.S. dollar changes in value daily. Buyers need to be cognizant of dollar value when deadlines for placing orders need to be met. Any decrease in the dollar value, may increase the cost of merchandise.
- Time-may need to communicate with overseas factories in the middle of the night.
- Political unrest-may affect shipments
- Human rights issues-low pay, unsafe conditions, child labor
Prepared by M. Greene
Prepared by M. Greene
Social and Cultural Issues
- Must have a knowledge of the language of the country; can use an interpreter but may hinder negotiations
- Find out what is socially and culturally acceptable in each country
- Do not engage in political discussions
- What is the proper etiquette
- What is the proper dress code
- Know the language and how words will be translated
- Do not offer gifts
- Be punctual
- Introduction guidelines
- “Know before you go”
Prepared by M. Greene
Prepared by M. Greene
