Retl 366 USC final exam Retail buying
Retl 366 USC final exam Retail buying RETL 366 002
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This 18 page Study Guide was uploaded by Sarah Albert on Friday January 29, 2016. The Study Guide belongs to RETL 366 002 at University of South Carolina taught by Addie Martindale in Summer 2015. Since its upload, it has received 153 views. For similar materials see Retail Buying in Retail at University of South Carolina.
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Exam 1 Chapter 1 What is retail buying and what does it entail? selecting and purchasing products to satisfy the wants and needs of consumers Know the difference between retail strategy, positioning, marketing concept, and market segmentation Retail strategy overall framework or plan of action that guides a retailer. The owner or management team outlines the philosophy, objectives, target customer, tactics, and control activities positioning identifying a group of consumers and developing retail activities to meet their needs marketing concept the belief that all business activities should be geared toward satisfying the wants and needs of consumers market segmentation demographic data, geographic data, behavioristic data, psychographic data Know the different types of data and examples of each. demographic data information about customers such as age sex family size income education occupation race geographic data information about where consumers live such as zip codes, neighborhoods, cities, counties, states, regions behavioristic data information about consumers buying activities such as the time that most customers make purchases and the average amount of their purchases psychographic data information about customers personality characteristics such as lifestyles interests opinions Know the different types of target marketing and examples of each. undifferentiated target marget an attempt by retailers to please all consumers. Retailers broadly define their potential customers. Conventional supermarkets and drugstores concentrated target market focusing on one segment of the market, Retailers have selected a well defined consumer group. A women's shoe store and an upscale deli multi segment target market focusing on more than one consumer segment of the market. Retails offer distinct merchandise aimed at several different groups of consumers. Big and tall menswear stores. Hardware stores appealing to both do it yourself consumers and contractors Understand what direct marketing is and the consumer benefits. a direct connection with carefully targeted individual customers to both obtain immediate response and cultivate lasting customer relationships. Direct marketers often communicate on a one to one, interactive basis Be able to distinguish between the different types of retailers and know examples of each direct marketing catalog marketing more than three quarters of all catalogue companies now present merchandise and take orders over the internet electronic retailing tv shopping channels, kiosks, internet superstore retailing supercenters, warehouse clubs, and specialized superstores Who do TV shopping channels primarily target? working women and the elderly Internet retailing and the concerns of online consumers. navigating the internet can be confusing and time consuming for the customers. Customers worry about the loss of privacy and identity theft. What is the best course of action for buyers, when faced with an economic slowdown? Appealing to pent up consumer demand could yield surprising results through increased sales. Buyer must continue to control their inventories and buy the right merchandise they must continually monitor the pulse of the economy. What economic challenges are retailers and buyers facing today? unemployment and declining home sales Which retailing format was the first to develop superstores? Supermarkets were the first retailers to develop a superstore concept List three reasons that could explain the recent slowdown in the growth of catalogue sales. Recent slowdowns in the growth of catalogue sales could be due to postal rate increases, increases in the cost of paper, and the economic downturn that started in 2008. List and describe the characteristics that must be present for a superstore to be successful. For a superstore to be successful, the following conditions must be present: (1) total market sales must be at least $1 billion a year, (2) market share must still be dominated by small retailers, and (3) proliferation of product SKUs has occurred so rapidly that traditional retailers cannot offer a complete selection Where have hypermarkets already been proven successful? Hypermarkets have been successful in Europe. Describe the buyer’s role in the development of destination stores. Buyers, through their merchandise selections, will play a key role in making their stores a destination store for consumers What is meant by “informationally empowered” customers? Customers have instant access to information through the Internet. Therefore, it becomes quite easy to compare stores, their product offerings, and prices Chapter 2 Descriptions of the buyer’s job. purchasing merch, analyzing market data and reading the latest trade journals Why are college students attracted to jobs as buyers? traveling to exciting places Difference between basic merchandise and fashion merchandise. basic merchandise products that a business wants to always have in stock. tend to have a stable consumer demand, so inventory and sales vary little from year to year fashion merchandise relies on forecasting consumer demand and market trends, since a fashion that sold well last year may not sell at all this year Know the three factors that affect the scope of the buyer’s job. factors affecting the scope of the buyers job merchandise carried, organizational structure, size of the retail store For large retail organizations, who is the buyer’s immediate boss? merchandise manager What has automatic reordering systems allowed buyers to do? give the buyer more time to concentrate on other buying activities(selecting merchandise and developing other merchandise programs), can focus more on customers wants and needs Have an understanding of the different personality traits needed by buyers enthusiasm, drive, vision, goal setting ability, ability to do work under pressure, creativity Know what computer literacy skills are needed by retailers/buyers. computer operation, computer output Know what markup is and how to calculate individual and cumulative MU%. markup percent retail cost / retail What is the best way to quantitatively show performance measurements? individual markup percentages Summarize how buying may be different in large and small retail stores. At many large stores, the buyers are centralized in headquarters and have little or no direct contact with the stores and their customers. In small, independent stores, the owner performs all the buying duties in addition to all the other activities required for operating a retail business Summarize the planning duties of a merchandise manager. Merchandise managers formulate policies and set standards related to the merchandise areas for which they are responsible. Another key planning task for merchandise managers is budget development. Merchandise managers must also develop standards against which a buyer’s performance is measured. List quantitative performance standards that can be used to evaluate a buyer’s performance. Performance standards for most buyers usually include factors such as net sales, maintained markup percentages, markdown percentages, gross margin percentages, and stock turn List the different audiences with whom the buyer must communicate. Buyers must be able to work with superiors (merchandise managers), subordinates (assistant buyers), vendors, department managers, and salespeople Chapter 3 Have an understanding of chain stores and where their buyers are typically located Chain store two or more stores under a single ownership. Buyers responsibilities include planning sales goals, seeking out sources of merchandise, and purchasing merchandise to be sold in all the chains stores. Buyers have very little responsibility for sales personnel and practically no personal contact with them. Buyers must keep in contact with stores and sales associates through bulletins and other communications. There buyers are usually placed at the stores headquarters (centralized buying) What are the primary advantages of central buying? When all buying activities are performed from the stores central head quarters. Advantages include: a steady flow of merchandise is provided, sales forecasts are more reliable, a specialist is making the buying decisions, and purchasing power is consolidated at headquarters Have an understanding of the different types of central buying plans. central merchandising plan a central office representing a group of stores has complete responsibility for the selection and purchase of merchandise for all the stores. Retailers include JCpenney, sears, old navy, gap Warehouse requisition plan regional distribution centers are established to serve a number of stores in the area. Each store is allowed to requisition the assortment that he or she wishes for the individual store. Typically used by stores carrying basic merchandise: food, drug, and discount chains Price agreement plan Buyers decide what merchandise the stores will be carrying at what price. They than make an agreements with various vendors, and a list of approved merchandise is sent to each store What does the original Mazur Plan include? basic fourfunction plan of store organization: control (safeguarding firm's assets) promotion (spearhead advertising, public relations, special events, and fashion coordination) operations (stockroom, maintenance, delivery, receiving, customer service) merchandising (identify and purchase goods) Know the three types of departmentalization typically found in retail. Functional activities of a similar nature are grouped together into a major area of responsibility. Groups are headed by an individual who reports to the owner or Ceo of the firm. Product line occurs at some retail stores that have a varied product offering. Group merchandise by category such as jewelry, furniture, appliances. An individual is responsible for all business operations affecting a particular product line, including buying and selling Geographic breaks the organization down by region of the country. Can be found at many retail chains that have expanded nationally Who is responsible for the buying activities for small, independent stores? the owner Why is buying for a small, independent store easier than buying for larger retail stores? selecting merch that customers want and need, where the owner has direct daytoday contact with their customers Know what net profit/loss is, how to calculate it, and the terms involved in the formula. net profit/ loss amount of money that is left over after subtracting operating expenses from gross margin net sales total sales minus returns Know what gross margin is and how to calculate it. sales cost of goods sold Have an understanding of the “fastfashion strategy” and know examples of retailers who are known for their fastfashion strategy. zara, forever 21 three types of ways to improve performance increase sales, decrease costs of goods, decrease operating expenses Identify the key disadvantages of centralized buying. Purchases made by central buyers may not adequately reflect local conditions of a specific store. Additionally, central buying may make it difficult to maintain an enthusiastic and knowledgeable sales staff, since sales associates usually have little or no input into what is purchased for the store. Also, merchandise may arrive at the store level with little or no product information provided, such as selling features and benefits. Chapter 4 Know the drawbacks to using primary data and secondary data. primary may be timeconsuming and expensive secondary too general or incomplete, dated/obsolete Know the difference between primary and secondary data and examples of each. primary info collected for the specific purpose at hand secondary data that already exist Be familiar with the different sources of information for making buying decisions. internal store records(past sales and inventory records most important)(want slip system a form is completed each time a customer requests a product not in stock) , management, sales associates external customers, vendors, magazines and trade pubs, trade assocs, comparison shoppers, forecasters, reporting services, the internet, buying offices Know the reasons why buyers get input from sales associates. sales associates can tell you why an item is not selling, they can ask a customer about satisfaction with past purchases, or they can get requests for items not carried by stores Know how buyers determine how many sources they will use before making purchasing decisions. the type of merch they are selling and the time they have available will determine how many and which sources to use What is the largest and most important trade association? National Retail Federation Know examples of reporting services used by buyers. retailingtoday.com chainstoreage.com retailsolutions.com retailmerchandiser.com Which U.S. city has the largest number of buying offices for apparel? NYC Have an understanding of the different types of buying offices. independent and store owned offices independent buying offices privately owned and operated salaried(fixed fee) office paid directly by the retail stores the firm represents. ranges from .5 to 1 percent of sales paid monthly merchandise broker office provides similar advice and services to retailers, but paid by the manufacturers represented by the firm. 24 percent of the stores purchases paid Private buying offices (store owned) owned by the store they represent, maintained in market centers by some large retailers. Large department stores and specialty stores generally use this type of service List some simple approaches to marketing research that buyers can use to answer questions and make decisions. Marketing research can be conducted in a number of simple ways, including (1) comparing sales figures from one year to another, (2) observing the colors that consumers are wearing, and (3) keeping a file of newspaper and magazine articles (from print publications or online publications) about product trends. What is probably a buyer’s most important source of information when making purchasing decisions? Past sales and stock records are probably the buyer’s most important source of information. What is the limitation of using only sales records to make purchasing decisions? The key limitation of relying on store records to predict consumer demand is that they reveal only what store customers have or have not purchased in the past. Sales records do not reflect what the customer would have purchased had that item been in stock. Identify the two individuals who will likely need to approve a buyer’s purchasing plans in large retail stores. In large retail stores, the merchandise manager and the finance officer (controller) probably will need to approve a buyer’s purchasing plans. Identify the purpose(s) of teen boards. Teen boards serve in an advisory capacity to the store. Teen board members may also serve as fashion show models and provide assistance with special promotions. Some members even wear new merchandise from the store to their school. When might retailers choose a merchandise broker over a fixedfee buying office to represent them? Merchandise brokers have strong appeal to retailers with limited funds. Chapter 5 What is the most difficult thing for buyers to forecast? tastes and attitudes of consumers demographic trends Know the difference between the different types of trends. Demographic trends marital status and birth rates, households, age groups and spending patterns. consumer behavior trends lifestyle trends psychographic trends are related to consumers lifestyles, attitudes, and opinions demographic trend and consumer trends Single person households are showing the greatest increase in numbers, and that trend is projected to continue. The birth rate has remained stable in the US since 1994, and population growth will continue to slow. There is a growing percentage of working women. The percentage of male homemakers continues to increase, but women will continue to make the majority of purchasing decisions. baby boomers vary markedly in their attitudes and values, and thus cannot be looked at as a single market segment. Baby boomers tend to spend lavishly on their children. Products appealing to older customers will probably need to focus on comfort, security, convenience, sociability, and old fashioned values As more responsibility is placed on younger children, they are learning savy shopping skills, along with gaining confidence in their role as shoppers lifestyle trends busy busy busy juggling multiple tasks is common among married americans. Shopping has become an activity that many hate. Many retailers are stocking and promoting items directing at calming and relaxing customers. computer junkies as the mass market evaporates into smaller and smaller niches and more people spend time and make purchases online traditional advertising have become less effective we’re living large retirement is creeping up on baby boomers, who feel they need to reward themselves for the daily stresses they face. Americans are bigger too(obese) What are the results of more women in the U.S. workplace? stores to offer more career clothing and convenience foods What is happening in the U.S. to the number of male homemakers? increasing Who is responsible for making most of the retail purchases in the U.S.? women Who is the fastest growing ethnic group in the U.S.? hispanics Know why consumers buy based on their buying motives. rational concerned with basic needs such as food, clothing, shelter (physiological needs) emotional customer's feelings rather than rational thought (social and esteem needs) patronage why customers choose one store over another Be familiar with Maslow’s Hierarchy (in particular, what is satisfied first and last) physiological first, selfactualization last Know the difference between data warehousing, data mining, and database marketing data warehousing electronically storing customer info in order to develop better retail strategies data mining searching though warehoused data to find trends and patterns that might otherwise have gone unnoticed; uses info already maintained in the firm's data warehouse database marketinginvolves collecting mountains of info about customers, analyzing it to predict how likely customers are to buy a product, and using that knowledge to develop a marketing message designed to best match customers' wants/needs Have an understanding of the purposes of data mining (e.g., why it is used by management, buyers, and other retail decision makers). clusters customers into segments; it allows retailers to understand what customers buy and when they buy it price analysis, markup/markdown opportunity identification, brand analysis, performance analysis, affinity analysis How do customers select one store over another when making a purchase? Customers select one store over another based on convenience, value received, assortment of merchandise offered, services offered, and types of sales associates. List types of data maintained by retailers in data warehouses. Data maintained could include data on each customer’s sales transaction— date of transaction, products purchased, payment type (e.g. credit vs. cash), amount of purchase, and demographic characteristics of the customers. Describe how retailers use data mining. Data mining involves extracting significance from warehoused data. Data mining can be used to identify real and perceived threats to the company. Chapter 6 What is the largest category of nondurables? food products Know why retailers welcome the addition of fashion items into their inventory encourages customers to buy new products; fashion items give your store a competitive advantage; stimulates sales and enhances store image What is fashion? currently accepted or popular styles What is the key element that causes changes in fashion? the customer people's ideas and behaviors change Know how you recognize the end is near for a fad. when goods are offered in all types of stores at constantly lower prices Know the difference between a fad and a trend. fad: products that enter the market quickly, purchased with zeal, and then decline quickly; help keep stores vital and attract customers; inflexible trend: gradual sales growth that turns into stable business; must be able to recognize this and determine that it is a trend rather than a fad in order to capitalize Have an understanding of the “Product Life Cycle” and the different stages. illustrates the expected behavior of a product over its lifetime; velocity stages: 1) introduction by low sales and high losses/high risk 2) growth accelerating sales and highest profit levels of any stage 3) maturity sales increase at slower rate and finally begin to level 4) decline target market shrinks, price cuts, high risk/low reward Have an understanding of the different types of consumer groups (e.g., innovators, early adopters, late adopters, and laggards). 1) innovators more likely to purchase a new style 2) early adopters purchase products in its earlyrise stage 3) late adopters accept product past its peak 4) laggards adopt product during decline stage Know and be able to identify the different fashion adoption theories downward flow theory fashion innovators are those people at the top of the social pyramid such as royalty, world leader, wealthy (haute couture) The adoption starts at the top and flows down to others in the society horizontal flow theory fashion adoption moves horizontally within groups; innovators within groups who are willing to try new product upward flow theory fashion innovators are the young Know the difference between the different types of products and have an understanding of each. Brand Names national brands products sold almost everywhere private brands store brands generic brands no significant identity to product Licensed Products designed and sold through identification with a celebrity or corporate name, etc. Mass Customization efficiently providing customers with unique products that give them "exactly what they want" Why should buyers constantly monitor their merchandise mix? The merchandise mix must be frequently monitored because an appropriate mix today might not contain the right products tomorrow. Explain how products that buyers purchase influence personnel decisions for a store. Skilled, knowledgeable personnel are necessary when stores offer some products, such as designer gowns, cameras, or computers List five examples of convenience products. batteries, candy, toothpaste, fast food, and gasoline. When do customers tend to stretch the life of durable products? During difficult economic times, consumers tend to stretch the life of durable products. Describe how new fashions may create a “ripple effect” with the sale of other products.The“ripple effect” means that customers make new product purchases based on other purchases they have made. For example, when the length of a skirt changes, women will probably purchase new slips, shoes, and hosiery. Describe differences in pricing strategy between the introduction and decline stages of the product life cycle. Items are typically priced at their highest during the introduction stage. Pricecutting usually happens during the decline stage. Chapter 7 What is the most important forecast? the sales forecast prediction of future sales for a specified period under a proposed mktg plan The questions buyers answer by using forecasts. how much of each product will need to be purchased? should new products be added to the merch assortment being offered? how much inven is needed to support the planned sales? what price should be charged for each product? When making sales forecasts, what is the first/most important information that you should obtain? past sales records Know the timeline for shortterm and longterm forecasts shortterm include a period of up to one year longterm extend for more than one year Know what external forces/factors should be considered when making forecasts economic conditions, demographic trends, competitive conditions Know the difference between primary and secondary data sources and examples of each. primary data originate with the specific research being undertaken; you collect the data needed to solve the problem secondary data data that are gathered for some other purpose but are applicable to solving your problem; may be outofdate What should buyers take into consideration when preparing forecasts? past sales, economic conditions, changes in sales potential, changes in mktg strategies of firm/competition What does the accuracy of a sales forecast depend on? actual sales Know what stocktosales ratio is and how to calculate it. maintaining inventory at a specific ratio to sales: value of stock / actual sales Know how to calculate % increase/decrease. difference in sales from last year to this year / last year Know what impacts stock turnover. the type of merch carried by a store and store policies; less frequently purchased items vs. more frequently purchased items Describe factors that will affect the accuracy of a sales forecast. Internal forces, such as expansion of sales space or reduction in the number of salespeople; and external forces, such as competition and economic conditions, will affect the accuracy of a sales forecast List and describe three benefits of forecasting sales. Sales forecasts (1) stimulate planning of other decisions such as planned inventory levels and prices, (2)promote coordination between merchandising and other areas of the store, and (3) support control activities by becoming the basis for measuring the success or failure of a buyer’s efforts Describe the information provided in the Survey of Buying Power. The Survey of Buying Power contains information on markets by state, county, and MSA. Describe the impact of a forecast that underestimates sales. Underestimating sales will result in an inadequate amount of inventory, causing the store not be able to satisfy customer demand. Customers could therefore be lost to the competition. Describe the impact of a forecast that overestimates sales. Overestimating sales will cause expense percentages to increase and profits to fall below expectation What would be one source for industrywide stocktosales ratios? Sources include the Merchandising and Operating Results of Department and Specialty Stores and Industry Norms and Key Business Ratios. What are the advantages of forecasting an increase in stock turnover rates? Increased stock turnovers reduce the number and amount of markdowns required to move old merchandise. Merchandise that is being replaced frequently always looks fresh and generally has greater appeal to the customer. Chapter 8 What is the period of time covered on a merchandise plan? six months What should increase after the development of a merchandise plan? turnover merch customers want should be more readily available for them to purchase What is the first and most important part forecasted in a buying plan? forecasting sales What is considered a reduction? markdowns, employee discounts, shrinkage (shoplifting/employee theft) Know what OTB (opentobuy) is, how to calculate it, and the benefits of OTB for buyers opentobuy: the amount the buyer has left to spend for a period, and it is reduced each time a purchase is made OTB = Planned purchases Merch on order benefits:limit overbuying/under buying, prevent loss of sales due to inadequate stock, maintain purchases w/in budget, reduce markdowns, increase sales, improve stock turnover What are the results of overbuying? increases markdowns, decreases maintained markups, decreases stock turnover, decreases profit What is the major benefit of topdown planning? Top management tends to have a better perspective of all economic and competitive conditions facing the business than would other employees. for what two periods are sixmonth plans typically developed? The two periods usually are February through July and August through January. How is planned EOM inventory on a sixmonth merchandise plan determined? Planned EOM Inventory is the same as Planned BOM Inventory for the following month When would opentobuy equal planned purchases at cost? Planned purchases would equal opentobuy if no purchase orders have been issued for merchandise to be ordered for the period Chapter 9 Know the factors that retailers use in planning merchandise assortments. maintaining a balanced assortment of merch, understanding your various customers and their changing interests/buying habits, floor/shelf space available Know the difference between assortment plans (e.g., the breadth and depth). Additionally, understand “narrow and deep”, “broad and shallow”, “balanced”, and “cannibalization” breadththe number of product lines carried or the number of brands carried w/in a product classification broad breadth offering multiple brands of dress shirt; appeals to broader market, but not deep assortment narrow breadth offering only one brand of dress shirt; fewer brands, but larger number of sizes, styles, colors depththe number of choices offered to the customer w/in each brand or product narrow and deep few brands, deep assortment; customer demand firms up and assortment tends to become deeper broad and shallow lots of brands, little assortment; can experiment with several brands w/o making financial commitment balancedoccurs when the breadth and depth meet the demands of your customer cannibalization occurs when potential sales of existing products are lost to new items Know what customers are most interested in when making purchases at the end of the season customers tend to be more price conscious at this time, so they are looking for lowerpriced merch what is an assortment plan a plan of assortment of merch that is balance to customer needs while being bound by the financial constraints of the merch buying plan How does assortment planning differ for convenience and specialty goods? For convenience goods, buying a large assortment of merchandise is usually not required because most customers will make a purchase regardless of which brand is available. Before purchasing specialty goods, buyers will want to identify the brand loyalty of customers and determine which brands are demanded by the majority of their customers as well as which brands are substitutable for others in the customer’s mind. Why would a fashion store probably offer a broad and shallow assortment at the beginning of a selling season? Broad assortment plans are usually offered early in the season when new styles are being tested for customer acceptance. A broad and shallow assortment plan gives buyers the opportunity to experiment with several brands without making a large financial commitment. As customer demand becomes more clearly defined during the selling season, the assortment is likely to become narrow and deep Chapter 10 Know how to calculate % shortage/overage. = shortage (or overage) / net sales What causes excessive inventory (e.g., know examples)? buying didn't purchase merch customers wanted selling salespeople didn't provide an adequate selling effort pricing merch not priced correctly in relationship to product's quality Know what retailers can learn from stock counts (e.g., benefits of a good inventory control system). proper relationship bw sales and inven can be maintained more effectively provide you with info needed to take markdowns by identifying slowselling merch allows the buyer to identify best sellers identifies merch shortages/shrinkage What technology is being experimented with to replace UPC bar codes? RFID (radio frequency identification) Know how merchandise should be grouped for taking a physical inventory. specific categories or classifications What typically causes shortages (e.g., inaccuracies)? What is the most common method for valuing inventory? inaccuracies beginning inventory counts improperly coded merch failure to record markdowns incorrect recording of sales, purchases, returns, transfers dishonesty of customers or employees Know what GMROI is and how to calculate it. measures the profitability of a retailer's sales; how much cash a business is using and how well it's using its investment in inventory (GM% * Turnover) / (1 MU%) What is Quick Response? a strategy whereby retailers can forecast today what they will sell tomorrow and have the merch in the store on time and in the right quantities, colors, sizes, styles; monitoring sales down to the item level What does Quick Response ultimately increase? increase sales, customer service What does Quick Response require? alliance bw the retailer and supplier, use of model stocks, barcoding/scanning, and EDI Know the benefits of scanning. faster customer checkout ability to track merch down to the SKU level elimination of the need to remark merch increased employee productivity How are perpetual inventory systems maintained manually? Inventory records are updated as transactions occur on a daily or weekly basis by designated employees. Employees manually mark an inventory card when merchandise arrives at the store and strikes the mark when it is sold. Only stores with limited sales, such as bridal salons, can effectively maintain a perpetual control system manually When do most retailers conduct physical inventories? Retailers take physical inventories a minimum of one time a year, usually after clearance sales. January is the most popular time for most retailers. Chapter 11 Know the different types of vendors and have an understanding of each. manufacturers (costs are lower, intermediaries limited) wholesalers (is an organization that purchases merch from a manufacturer in large quantities and resells to retailers) manufacturer's reps/brokers (acts as an agent for a manufacturer, do not take possession of merch) rack jobbers (service client stores themselves, mostly in food industry; assigned to rack/shelf space, more expensive bc it's a service) Know the difference between the types of vendor distribution policies. exclusive distribution (practice of some vendors whereby they sell the product to only one retailer in a trading area) selective distribution (vendors sell the product to one or more selected retailers in the same trading area) Know what a vendor diary is, why they are used/important, and be familiar with what usually gets recorded brief summaries of your dealings with each vendor with whom you do business; highlights vendor contribution, sales volume, and profit; vendor evaluation (quantitative analysis) Have an understanding of what could weaken retailervendor partnerships. not paying bills promptly, not accepting goods they order, etc. What is the most effective way that small vendors can compete with larger vendors? offset tech advantages of size by being more flexible and customizing their approach to stores What benefits do vendorowned stores offer? the ability to display the entire line the ability to create an environ for the line according to the designer's concept the ability to obtain feedback from customers on the entire line, not just pieces of the line Chapter 12 Where is the oldest furniture market for the U.S. located? High Point, North Carolina Where is the major apparel market for the U.S. located? New York A central market is a city where a large number of key suppliers are located. Know the reasons for making market visits. ∙ To obtain merchandise for the upcoming season. ∙ To gain knowledge about trends and new merchandise. ∙ To evaluate new resources and merchandising offerings from vendors. ∙ To seek out special values for an upcoming promotion – special deals that could be featured in new promotional events or sales. ∙ To replenish stock in order to fill in sections of stock that have been selling well. ∙ To attend previews of new vendor lines. Fashion designers and manufacturers of such products as automobiles, electronics, and computers typically have special shows for buyers to preview changes in styles and models. Know how long market visits are usually plan for: ∙ Most buyers usually visit foreign or central markets only once or twice a year and make other trips to regional markets to supplement their assortments. If they are not located a great distance from a market, buyers may make more frequent buying trips. When and how often you make market visits will also depend on a number of other factors, as follows. ∙ Season of the year twice a year ∙ Spring/summer or fall/winter Know the five steps in planning market trips and have an understanding of each ∙ Step 1: Bring your merchandise buying plan and any vendor analysis form ∙ Step 2: Make certain that you have obtained all approvals that you need for your buying plan ∙ Step 3: Schedule visits w/vendors If you have one, notify your buying office of your upcoming visit Examine market reports, trade journals and other publications to identify new vendor ∙ Step 4: Arrange your hotel and travel reservations ∙ Step 5: Establish a work schedule for your staff members while you are away Visiting the market ∙ Use your time wisely during market week; it is likely to be a hectic period What is negotiation? ∙ More than an event; it is a process that involves gathering and using information to your advantage Know what the buyer should do to determine the vendor’s position during a negotiation ∙ Seek information from your buying office ∙ Develop negotiation skills Characteristics of good negotiations include: Creativity, Active listening skills, Excellent organizational skills, Selfconfidence Have an understanding of the body language involved in negotiations: By listening more and talking less in negotiations, you will increase your chances of gaining more information about the vendor’s position. For example, vendors leaning back in their chairs and folding their arms may mean they object to something you have said. Remain still during negotiations, sit with your shoulders squared, and look the vendor in the eye. Have an understanding of the different types of negotiation tactics. ∙ Take it or Leave it ∙ Limited Authority ∙ Buy you can do a little better ∙ But I can’t make up my mind ∙ Facts and data ∙ What if? ∙ Let’s split the difference ∙ Time Pressure Know what NAFTA is and the countries involved. ∙ NAFTA – North American Free Trade Agreement ∙ Countries involved: Mexico, US, Canada Who is the top global retailer? Walmart Know the product categories that the U.S. primarily purchases from foreign sources automobiles, computers, TVs, furniture, and clothing Know the drawbacks to purchasing from foreign sources ∙ Early purchase commitment required ∙ Delivery problems ∙ Size discrepancies ∙ Added expense and time involved ∙ Funds tied up What do free trade agreements do for the U.S.? ∙ Eliminate all tariffs between the countries (Mexico and Canada) What new countries have entered the world’s marketplace for apparel? ∙ Bangladesh, the Philippines, Sri Lanka, and Turkey Know the area that is the leading exporter of apparel and textile products to the U.S. ∙ The Far EastSoutheast Asia region Know which countries have the highest and lowest average factory wages ∙ Factories in China, Taiwan, Korea, and Hong Kong high wages ∙ Low wages: Bangladesh, Sri Lanka, Philippines and Turkey Have an understanding of the “Buy American” campaign and the product category that originated it ∙ Some businesses have undertaken “Buy American” strategies as a reaction to the domestic job losses caused by the increasing use of imported products and materials ∙ Increasingly, there is no such thing as an “American” product ∙ U.S. brands are often foreign owned, and foreign brands can be manufactured in the United States Have an understanding of the RobinsonPatman Act and when price reductions can be granted ∙ The RobinsonPatman Act of 1936, which outlawed price discrimination in interstate commerce. All price reductions must be offered on a “proportionally equal” basis to all buyers. The manufacturer must be able to justify any price reductions given a buyer that result from differences in the seller’s manufacturing costs, selling costs, or delivery costs. Have an understanding of the different types of discounts and how to calculate them ∙ Quantity discounts: save money in handling and processing orders in large quantities, can benefit from lower production costs – they can order raw materials in larger quantities and plan their operating schedules more efficiently. Example, a vendor offering a 2 percent discount for orders of more than 123 dozen. ∙ Seasonal discount: may be offered on such products as skis, air conditioners, or lawn mowers. Example of seasonal discount would be a vendor offering a 2 percent discount to buyers who place orders for next year’s lawn mowers in October ∙ Trade discounts: based on the manufacturer’s list price. For example, an item with a list price of $1,000 may be offered with discounts of 40 percent and 10 percent – which is not a 50 percent discount. ∙ Cash discounts: early payment of invoices. Typically, cash discount terms are expressed in a form such as “2/10 net 30,” which means that a 2 percent discount will be granted if the buyer pays the invoice within 10 days of the invoice date. If the invoice is not paid within that period, the total amount is due in 30 days. Know what anticipation is and when it is usually taken ∙ Anticipation is an extra discount that some manufacturers give buyers for paying an invoice in advance of the cash discount date. Usually taken only if your store has ready cash available Be able to differentiate between the different types of transportation terms. FOB origin (buyer pays shipping) FOB destination (manu pays shipping) FOB destination, charges reversed (buyer pays shipping, seller assumes responsibility of goods) FOB destination, freight paid (seller pays shipping, buyer takes title of the goods as soon as they are shipped) FOB shipping point (manu pays until merch reaches a distrib. point, then buyer pays until it reaches store) Know the difference between “on consignment” and “on memorandum” ∙ On consignment – vendor ships you goods for free don’t have to pay in advance as you sell you pay for the items ∙ On memorandum – you the buyer pay for those goods if it doesn’t sell you can send back What are the reasons many retailers have turned to private brands Private brands allowed them to avoid direct competition. Developed in order to offer unique merchandise to their customers. What is the proper percentage for pricing private brands, when it comes to national brands? ∙ 20 percent Know what fixed and variable expenses are and examples of each ∙ Fixed expenses – no control over told what it would be external Ex. Mortgage, insurance payments ∙ Variable expenses – internal some control over Ex. Commissions, delivery expenses, supplies and advertising Know what markup is and how to calculate MU% (markup %). ∙ Markup is added to the cost of goods to determine retail price. ∙ Markup percentage = Markup in dollars/Retail price Know how to calculate retail price and the cost of an item. ∙ Retail price = Cost + Markup ∙ Cost = Retail price – Markup ∙ Markup = Retail price – Cost Know how to calculate IMU% (initial markup %) and what it is initial markup percentage = Expenses + Profit + Reductions – cash discounts/ Sales + Reductions Know what keystoning is and how to calculate it. Keystoning: doubling the cost to determine the retail price Know what markdown is and how to calculate MD% ( markdown%) Every item of merchandise probably will not sell at its original retail price; thus, markdowns are a critical element of merchandising decisions. ∙ Markdown percent = Dollar markdown/Total sales Know how to calculate offretail percentages and why buyers use them ∙ Offretail percentage = Markdown/Original retail price ∙ Used for advertising purchases
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