Lecture Retailing management (6/e): Chapter 14 - Levy Weitz

Chapter 14
Buying Merchandise

McGraw­Hill/Irwin
Retailing Management, 6/e

Copyright © 2007 by The McGraw­Hill Companies, Inc. All rights reserved.


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Merchandise Management
Planning
Merchandise
Assortments

Retail
Communication
Mix

Buying
Merchandise
Buying
Systems

Pricing

2


Merchandise Branding Strategies

– Designed, produced, and
marketed by a vendor
and sold by many
retailers

• Private-Label (Store)
Brands
– Developed by retailer
and only sold in retailer’s
outlets

The McGraw-Hill Companies, Inc./Jill Braaten, photographer

• Manufacturer (National)
Brands

143


Spectrum of
National vs. Private Label

144

 National
 Brands

% Store
Brands

The Gap

Macy’s

Wal­Mart

Limited

Target

Home Depot

Marks & 
Spencer
IKEA


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Value of Retail Brands

5


Relative Advantages of
Manufacturer versus Private Brands

Impact on Store

Type of Vendor

Manufacturer
Brands

Private-Label
Brands

Store loyalty

?

+

Store image

+

+

Traffic flow

+

+

Selling and promotional
expenses

+

-

Restrictions

-

+

Differential advantages

-

+

Margins

?

?

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Private Labels
Advantages
• Unique merchandise
not available at
competitive outlets
• Difficult for customers
to compare price with
competitors

• Higher margins

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Disadvantages
• Need to develop
expertise in developing
and promoting brand
• Unable to sell excess
merchandise
• Typically less desirable
for customers


Manufacturer (National) Labels
• Advantages
• More desired by
customers
• Resell excessive
merchandise
• Don’t need skills and
people to develop and
promote merchandise

Disadvantages
• Lower margins
• Vulnerable to
competitive
pressures
• Limit retailer’s

flexibility

148


149

Buying from Vendors of National Brands
• Helps retailers build their image
• Helps build traffic flow
• Reduces selling and promotional expenses

The McGraw-Hill Companies, Inc./Lars Niki, photographer


Most Recognized Apparel
10
and Accessory Manufacturer Brands

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Most Recognized Apparel
and Accessory Private Label Brands

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Examples of
Private-Label Brands

1412


Examples of
Private-Label Brands

1413


Examples of
Private-Label Brands

1414


Examples of
Private-Label Brands

1415


Going to Market for National Brands

16

• Wholesale Market Centers
– National Markets (new York), Regional Markets
(Atlanta, Miami)
• Trade Shows

– Frankfurt Book Fair, Las Vegas Consumer
Electronics, Atlanta Sporting Goods
• Internet Exchanges
– Worldwide Retail Exchange
• Meeting Vendors at Your Company
• Diverters, Closeout Specialists, Liquidators, Other
Retailers (Gray Markets, Diversion)

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What do Buyers do at Market?

17

• Meet with vendors
• Discuss performance of vendor’s merchandise
during the previous season
• Review the vendor’s offering for the coming
season
• May place orders for the coming season
• Sometimes they do not buy at market, but
review merchandise, return to their offices to
discuss with the buying team before negotiating
with vendors


Negotiating with Vendors

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Two-way
communication
designed to reach
an agreement
when two parties
have both shared
and conflicting
interests.
Royalty-Free/CORBIS


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Planning Negotiations
• Consider prior history
• Assess current situation
– General market conditions
– Vendor’s position
– Power of vendor
• Set goals
• Be aware of vendor’s goal’s
• Number of people involved
• Select an advantageous place
• Be aware of deadlines

19

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Issues to Negotiation

20

Price and gross margin
Additional markup opportunities
Purchase terms
Delivery times and exclusivity
Advertising allowances
Transportation
Steve Cole/Getty Images


Types of Negotiations
Win

Win 
Buyer
Lose

Vendor
Lose

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Win - Lose Negotiation

• Can be good in the short run and
bad in the long-run
• Short-term solution-- person you are
negotiating with can’t lose all the
time
• Might degenerate into LOSE LOSE

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Lose - Lose Negotiation
• Wastes time and energy
• No relationships established
• Objectives not met

23


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Win - Win Negotiation
Collaboration
Cooperation
Long-term relationship

Doesn’t mean “giving-in”
Enhances vendor trust
Royalty-Free/CORBIS

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Guidelines for Negotiations
• Separate people from problem
• Insist on objective criteria to evaluate
performance
• Invent options for mutual gain
• Let the other party do the talking
• Know how far to go

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