Organization for retail buying Traditional retailers: Department and specialty store Chain organization Independent retailers

Organization in department and specialty stores Department store Census dept.- “a retailer carrying a general line of apparel, home furnishings and house wares, employing more than 50 people.” “Stores” magazine – includes multi- department soft goods stores with a fashion orientation and full markup policy Specialty stores retail stores that cater to the needs of a narrowly defined group of consumers, with a single or limited number of merchandise categories.

Departmentalization What separates department and specialty stores Departmentalization organizing different activities and functions into departments with individuals assigned to each department to oversee various activities and functions. Enables store management to locate and eliminate weaknesses in various departments as well as to make improvements.

Methods used for Departmentalization Functional departmentalization Product line departmentalization Geographic Departmentalization Combination departmentalization

Functional departmentalization Activities of a similar nature a grouped together in the same department

Paul Mazur’s four function organization Manager Assistant manager Publicity And Public Relations Store management Merchandise management Finance And Control

Adjustments to Mazur’s four function plan Human resources Branch stores

Functions performed in department and specialty stores Human resources Advertising and public relations Finance and control Operations Merchandising Branch stores

Human resources Policies and procedures Recruitment Hiring Training Termination Compensation Unions and government regulations Buyer’s interaction On- the job training Learning opportunities Develop working relationships with all members of the department

Advertising and public relations Advertising - “persuasive tools” that attract customer to buy. Various advertising media Different types of display Promotional techniques Buyer interaction- specials, new merchandise Public relations – store’s image in the community

Accounting and Control “Checks and balances” Tasks include Accounting Credit management Financial analysis Merchandise control systems Budgeting Control department Manages store computer systems Buyer’s interaction Adhere to budgets Use reports to make informed buying decisions

Store operations Functions Store maintenance Security Delivery Receiving Marking Conditions of stockrooms and warehouse General housekeeping

Merchandising department Responsibilities Buying activity Selection Planning of merchandise Inventory control Sales planning Stock-keeping records

Branch stores Responsible for sales in that store

Product line departmentalization Organizing a business enterprise according to the various classifications and kinds of merchandise that it sells.

Product line departmentalization Store manager Men’s outerwear manager Ladies’ outerwear manager Lingerie manager Appliance manager

Geographical departmentalization Organize based on geographic areas or territories

Geographic departmentalization Vice president Store manager Location A Store manager Location B Store manager Location C Store manager Location D

Combination Vice president Advertising and public relations Merchandise manager Human resource manager Manager Store A Men’s outerwear manager Ladies’ Outerwear manager Manager Store B Store operations Accounting and control

“Applications” Retail Store Organization - Structure for a Retailing Business Retail Store Organization - Structure for a Retailing Business

Organization of a small retailer Owner/manager Merchandising Store Operations

Organization of a small firm Owner/manager Buying Advertising and display Sales credit and collections Finances Operations Control hiring and firing Merchandising personnel Buying and selling Advertising and display Comparison shopping Inventory control Store operations store maintenance Delivery Stock control Clerical Budget adjustment Complaints.

Organization of a chain store Centralization Centralized buying Central merchandise plan Warehouse and requisition plan Price agreement plan

Central Merchandise plan central buying authority assumes complete responsibility for buying the assortment of goods, pricing, warehousing, and distribution to individual stores Manufacturer’s lots Warehousing Buyer can check goods If a firm does not have a warehouse, goods may be shipped directly to the individual stores.

Central merchandise plan (continued) Advantages Steady flow of merchandise Advanced planning by each unit eliminated More accurate forecasting Specialists in each merchandise category Goods are inspected by buyers Better stock control and attention on selling Disadvantages Adjustments to local conditions. Cooperation An enthusiastic sales force

Automatic open-to-buy A predetermined portion of funds is allotted to the central buyers after the month’s purchases have been planned, with the balance allotted to the store manager

Warehouse and requisition plan Buyers purchases the initial stock assortment and has the merchandise shipped to individual stores. Store managers can then check inventoried merchandise and reorder in the necessary quantities.

Warehouse requisition plan Advantages Store responsibility in merchandise selection. The store manager assured of receiving the requested items. Reorders or fill-ins are usually filled quickly. Economic advantage obtained by buying in large quantities Disadvantages Control over the composition of the merchandise selection Poor warehouse control may cause imbalance in store inventory

Price agreement plan Central buyer working with vendors and manufacturers agree on the retail price, color, size, style and assortment of staple types of merchandise as well as the terms of shipping. Merchandise is illustrated/described in a catalog, on a video or CD, or on a website.

Price agreement plan Advantages It develops a feeling of responsibility on the part of the store manager It reduces the expense of a warehouse It reduces the necessity of keeping detailed records of each unit Disadvantages More tardy deliveries Higher transportation costs

Considerations in organization Centralize vs. decentralize Separation of buying and selling

Viewpoints “At [Wal-Mart’s] size today, there’s all sorts of pressure to regiment and standardize and operate as a centrally driven chain, where everything is decided on high and passed down to the stores. In a system like that, there’s absolutely no room for creativity, no place for the Maverick merchant that I was in the early days at Ben Franklin, no call for the entrepreneur or the promoter.” (Walton 1992: 218) [A] manager of 20 Nordstrom stores in southern California describes the Nordstrom style: “Many times I’ve seen Mr. Jim [Nordstrom, co-chairman] get up and say: ‘This is your own business. Do your own thing. Don’t listen to us in Seattle. Listen to your customer. We give you permission to take care of your customer’.” (Lubove 1995: 45) [Bernie] Marcus [co-founder of Home Depot] gives regional and store managers a great deal of autonomy so they can make buying decisions. (Discount Store News 1995: 29) Bed Bath & Beyond has remained true to three founding principles: minimal advertising (except for new store introductions), very little warehouse space and store autonomy. Each store is decentralized and managers are given a great deal of freedom in all facets of merchandising. (Wilson 1993: 23)