Chapter 14

Buying Merchandise

McGraw-Hill/Irwin PPT 14-1 Retailing Management, 5/e Levy/Weitz:

Copyright 2004 by The McGraw-Hill Companies, Inc. All rights reserved.

Merchandise Branding Strategies

Manufacturer (National) Brands Designed, produced, and marketed by a vendor and sold by many retailers

Private-Label (Store) Brands Developed by retailer and only sold in retailers outlets

Licensed Brand Developed by licensee and right sold to either manufacturer or retailer

PPT 14-2

Private Label Options

Bargain Branding
no-frills product at a discount price.

Copycat Branding
imitates the manufacturer brand in appearance and trade dress

Premium Branding
private label at a comparable manufacturer-brand quality.

Parallel Branding
private labels that closely imitate the trade dress and product attributes of leading manufacturer brands.

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Issues in International Sourcing of Private Label Merchandise

Country of Origin Effects Costs Foreign Currency Fluctuations Tariffs Supply Chain Efficiency and Inventory Carrying Costs Transportation costs Quality Control
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Managing International Sources

Quality Control More difficult to maintain quality standards Human Right Issues Need to Build Strategic Partnerships

PPT 14-5

Connecting with Vendors Going to Market

Internet Exchanges Wholesale Market Centers Trade Shows Resident Buying Offices Meeting Vendors at Your Company

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Functions Provided by Internet Exchanges Product Directories Use of Reverse Auctions Collaboration in Planning CPRF Software General Information about Trends
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Types of Exchanges
Consortium Exchanges
Transora Worldwide Retail Exchange GobalNetXchange

Private Exchanges Independent Exchanges

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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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SUMMARY Planning is critical Knowledge is power A person will only do what is right for him/her

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Stages in Building Strategic Relationships

Awareness Exploration Expansion Commitment

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Legal and Ethical Issues

Contractual Disputes Chargebacks Commercial Bribery Slotting Allowances Buybacks Counterfeit Merchandise Refusal to Deal Tying Contracts
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Gray Markets and Diverted Merchandise Exclusive Territories Exclusive Dealing

Terms of Purchase
Discounts
Trade (Functional) Discounts Chain Discounts Quantity Discounts Seasonal discounts Cash discounts ROG and EOM dating Anticipation discounts

Shipping Terms and Conditions

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Example of a Cash Discount

1/30, n/60

Nov 1 Date of Invoice

Dec 1 30 days 1% discount

Jan 1 60 days Full amount Due

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Example of ROG Dating

ROG Dating

Nov 1 Date of invoice

Nov 15 Merchandise arrives

Dec 15 30 days ROG 1% discount

Jan 15 60 days ROG Full amount due

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Example of EOM Dating

EOM Dating

Nov 1 Date of invoice

Dec 1 30-day discount period begins

Jan 1 Feb 1 30 days EOM 60 days EOM 1% discount Full amount due

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Example of EOM Dating, Grace Period

EOM Dating, Grace Period

Oct 25 Date of invoice

Nov 1

Dec 1 Jan 1 Feb 1 30-day 30 days EOM 60 days EOM discount 1% discount Full amount period due begins

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Example of Extra Dating

Extra Dating

Nov 1 Date of invoice

Dec 1 Jan 1 30-day 60-day discount Extra period discount begins period begins

Feb 1

Mar 1 Apr 1 60 days Full Extra amount 1% discount due

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