Retail Marketing
Magic Solutions
RetailLecture10BuyingandMerchandising2019.pptxLecture Retail Buying and Merchandising
NBS-7030B
Retail Marketing & Management
Ratula Chakraborty
Professor of Business Management
Director MSc Programmes
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Lecture Outline
Buying and Merchandising Process
Buying and Merchandising Roles
Case Study: Buying and Merchandising at Next
Buying Organisation
Product Range Management
Supplier Selection
Purpose: to explain the retail buying and merchandising process, show how retail buying is organised and structured, examine how product ranges are managed, and consider the criteria to select suppliers
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What is Merchandising?
Activities involved in acquiring particular goods and/or services and making them available at the places, times, and prices and in the quantity that enable a retailer to reach its goals. (Berman and Evans, 2010)
The right product
The right time
The right quantity
The right place
The right price
Retail
Buying
Objectives
1. Buying and Merchandising Process
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Buying and Merchandising Process
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Merchandising Philosophy
Sets the guiding principles for all the merchandise decisions
Should reflect:
Target market desires
Retailer’s institutional type
Market-place positioning
Defined value chain
Supplier capabilities
Costs
Competitors
Product trends
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Buying and Merchandising Process
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Buying and Merchandising Function
Plan, select and source products
At an appropriate cost
Ensure right specification and quality
Decide quantities of merchandise to buy
Ensure right stock, in right stores at right time
At right selling price
With right space allocation in stores
Attractively presented and promoted
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Buying and Merchandising Process
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Buying: Key Activities
Merchandise selection
New product development
Forecasting
Appraising/ selecting suppliers
Negotiating with suppliers
Monitoring the supply chain
Quality control
Pricing
Promotions
Budgeting
Planning
Scheduling
Managing information systems
Reporting
Managing personnel
Administration
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Buying and Merchandising Process
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The Retail
Buying Function
Represented
as a Process
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Buying and Merchandising Process
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Why is the buying function so important?
Influences of Buying on Retail Success
Translate Marketing
Strategy into
Assortment
Presentation and
Promotion of
merchandise
Determine type and
specification of products
(quality)
Cost of products
Purchased (margin
and Competitiveness)
Selling prices
(margin)
Quantity of product
and allocation by branch
(stock availability/ mix)
Competitiveness of offer and profitability
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2. Buying and Merchandising Roles
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What are the different roles and responsibilities involved in buying and merchandising?
How do these roles relate to other retail jobs and functions?
How do buying and merchandising teams function?
Case Study: next
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Buying and Merchandising Roles
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A Conceptualisation of Merchandising Functions in Retailing
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Buying and Merchandising Jobs
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Fashion Buying, Merchandising and Related Functions
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Buying and Merchandising Roles
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Example: Marks & Spencer buying teams
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Buying and Merchandising Roles
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Buyer Liaison with Internal Departments
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Buying and Merchandising Roles
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Fashion Buyer: Required Hard and Soft Skills
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Buying and Merchandising Roles
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Merchandiser: Required Hard and Soft Skills
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Case Study: Next
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Merchandising and Buying at Next PLC
See: Group Merchandiser Director, Next PLC (1:25min)
http://careers.next.co.uk/trainees/videos.aspx#
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Case Study: Next
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Buyer’s Role at Next
Source a range that meets the needs of the customer
Maximise sales and achieve profit targets
Work closely with designers, merchandisers and technologists to develop quality products at excellent prices
Identify potential new suppliers and manage existing suppliers to ensure continuity of supply
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Case Study: Next
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Example: Buyers’ Responsibilities at Next
Product and range development
Researching competitors’ ranges and identifying product trends
Ensuring a balanced range in terms of customer profile fashion direction
Working to appropriate lead times
Determining selling price and margin
Range presentation to product directors and managers
Price negotiation with suppliers
Supplier sourcing and management
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Case Study: Next
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Example: Fabric Technologist’s Role at Next
Implement fabric management procedures from design concept to completion
Work with merchandisers
Liaise with product teams to ensure fabric and garment suppliers meet and maintain the relevant performance standards throughout the entire buying cycle
Identify fashion trends, fabric developments and technical innovations
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Case Study: Next
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Merchandisers’ Responsibilities at Next
Maximise the company’s turnover and profitability
Analyse and evaluate previous seasons’ sales information and product trends
Work with the buyers and designers to create a plan with recommendations for range content by fabric and product type
Propose departmental budgets
Develop excellent working relationships with suppliers
Life as a Merchandiser - https :// www.youtube.com/watch?v=V29BsOStZuE
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Questions for Discussion #1
Why has the role of the buyer become increasingly important to retailers in recent years?
Should fashion buyers follow the crowd and buy the same style of goods as other retailers or go against the flow and be different? What are the respective business risks involved?
Role of Buyer - ASOS
https :// www.youtube.com/watch?v=p52WlWy8NvE
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3. Buying Organisation
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How should the buying function be organised?
What are the different dimensions in choosing how best to operate the buying function for the retailer’s needs?
Should buying be done centrally (at head office) or locally (at store level)?
To what extent should buyers have autonomy in making buying decisions?
Is it better to have specialist or generalist buyers?
How can external support complement the internal buying team?
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Buying Organisation
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Dimensions in the Organisation of Retail Buying
Centralised
Decentralised
Autonomous buyers
Teams/ Committees
Specialist Buying
General Buying
Internally managed
External support
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Buying Organisation
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Centralised Buying Decentralised Buying
Head Office
Buyers
Head Office
Store A
Store B
Store C
Store A
Buyers
Store B
Buyers
Store C
Buyers
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Buying Organisation
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Advantages of Centralised Buying
More effective use of buying power
More specialist analysis
Accurate forecasting
Quality control procedures
Consistent product assortment
Economies of scale
Improves buying and stock control decisions
Store personnel focus on selling
Stricter controls
Proximity to top management
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Buying Organisation
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Disadvantages of Centralised Buying
Less sensitive to local needs
Less communication between stores and buyers
Less selling enthusiasm in stores
Inflexible and time delays
Excessive uniformity
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Buying Organisation
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Decentralised Buying
Advantages
Adaptable to local market conditions
Quicker order processing
Improved morale in stores?
Disadvantages
Disjointed planning
Inconsistent image across chain
Limited management controls
Limited staff support for branches
Loss of volume discounts
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Buying Organisation
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Autonomous Buyers vs. Buying Teams
Benefits of Committee / Team Buying
Range of experience
More scientific / objective decisions
Less pressure on buyer / supplier relationship
Problems
Less deliberation over proposals?
Influence of group members?
Stifle creativity?
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Buying Organisation
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Specialised Product Buying vs. Broader Buying
Specialisation improves:
Knowledge and responsibilities
Specialisation affects:
Costs and additional personnel
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Buying Organisation
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External Buying Support
Different possibilities:
Co-operative Buying (for scale advantage)
Resident Buying Offices (for international sourcing)
Agents (for international sourcing)
Likely to be needed by small retailers with limited resources
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Buying Organisation
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Resident Buying Offices
Located in major producing / wholesale countries
Vary in size / services / ownership
Independent / Co-operative / Private
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Buying Organisation
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Advantages of Affiliation to Buying Offices
Improves merchandising effectiveness
Exchange of information
Increased buying power
Reduced risk
Buying own-label and specified goods
Ease administration
Market research and local knowledge
Faster replenishment
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Questions for Discussion #2
Why are buying decisions rarely made by one person in large multiple (chain-store) retailers?
How can small retailers overcome their size disadvantage to compete effectively with large retailers in buying goods?
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4. Product Range Management
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Key decisions:
Assortment strategy: wide/deep or narrow/shallow?
Types of merchandise to stock
Predicting fashion trends
Deleting products
Planning cycle for stocking
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Product Range Management
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Assortment Strategy
Width of assortment refers to the number of distinct goods/service categories (product lines) a retailer carries
Depth of assortment refers to the variety in any one goods/service category (product line) a retailer carries
An assortment can range from wide and deep (department store) to narrow and shallow (box store)
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Product Range Management
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Types of Merchandise
Staple merchandise
Assortment merchandise
Fashion merchandise
Seasonal merchandise
Fad merchandise
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Product Range Management
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Staple Merchandise
Regular products carried by a retailer
Grocery store examples: milk, bread, canned soup
Basic stock lists specify inventory level, colour, brand, style, category, size, package, etc.
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Product Range Management
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Assortment Merchandise
Apparel, furniture, automotive, and other categories for which the retailer must carry a variety of products in order to give customers a proper selection
Decisions on assortment
Product lines, styles, designs, and colours are projected
Model stock plan
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Product Range Management
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Fashion, Seasonal and Fad Merchandise
Fashion Merchandise: Products that may have cyclical sales due to changing tastes and life-styles
Seasonal Merchandise: Products that sell well over non-consecutive time periods
Fad Merchandise: Products with a very short life cycle where demand exists only for a very brief period of time
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Product Range Management
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Buying Decisions over the Product Life Cycle
Introduction phase – trial product, limited stocking in selected stores
Growth phase – increase stocking and increase product variation
Maturity phase – core product with all-store distribution
Decline phase – reduce stocking to core lines; phase out
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Product Range Management
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Predicting Fashion Adoption
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Product Range Management
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Life Cycle of a Fashion Trend
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Product Range Management
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Structured Guidance for Deleting Products
Select items for possible elimination on the basis of declining sales, prices, profits, and appearance of substitutes
Gather and analyse detailed financial and general data about these items
Consider non-deletion strategies such as cutting costs, revising promotion efforts, adjusting prices, and cooperating with other retailers
After making a deletion decision, do not overlook timing, parts and servicing, inventory, and holdover demand
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Product Range Management
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Merchandising Planning Cycle
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Selecting Merchandise Source
Choices available:
Company-owned
Outside, regularly used supplier
Outside, new supplier
5. Supplier Selection
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Supplier Selection
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Key criteria in selecting suppliers
Selling history (how well goods have sold in the past)
Mark-up (the relationship between purchase price and selling price)
Delivery (reliable and timely supply of goods to store)
Key factors in negotiation
price, quality, volume, delivery time, timing of payment, marketing support, special terms (e.g. sales-performance discounts, design exclusivity)
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Supplier Selection
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A Checklist in Choosing Suppliers
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Supplier Selection
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Where to Source: Local or Global?
Strong trend over recent years for international sourcing
International sourcing trend driven by lower manufacturing costs (particularly in Asia)
Local advantage: higher unit costs but faster lead times, reduced overheads (from less travel and management time), quick response delivery avoids lost sales
Example: Zara – reliance on production in home country of Spain for “fast fashion” competitive advantage
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Supplier Selection
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The Hidden Costs of International Sourcing
The Iceberg Theory of Cost Comparison
Why buying locally may work out cheaper
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Questions for Discussion #2
How do fashions come and go (and sometimes come back again)? How can retailers take advantage of changing fashions?
In your view, which are the most fashionable clothing stores operating in the UK? Do you pay a high price for being fashionable? Do you ever regret the fashions you buy?
For UK retailers, why might there be a cost advantage in adopting a “buy British” sourcing policy? What other advantages might such a sourcing policy offer?
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References
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Varley, R. and Rafiq, M. (2014), Principles of Retail Management, 2nd edition, Palgrave MacMillan.
Berman, B. and Evans, J.R. (2010), Retail Management: A Strategic Approach, 11th edition, Prentice-Hall.
Hines, T and Bruce, M. (2007), Fashion Marketing: Contemporary Issues, 2nd edition, Butterworth-Heinemann. (Chapter 3) (http://www.prschool.ge/img/every_day/Fashion%20Marketing.pdf)
Thank You!
...see you next time for
Lecture 14 – Supply Chain Management 1
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