Copyright © 2006 by John Wiley & Sons, Inc. All rights reserved Ch. 10: Negotiating the Buy Price negotiation Types of discounts The services included (or not) in a final price Shipping & insurance options Advertising & markdown allowances
Copyright © 2006 by John Wiley & Sons, Inc. All rights reserved The Spirit of Retail Negotiation Good negotiators begin with: Support & approval of their senior management A thorough understanding of what they want to achieve in this particular negotiation The intention of keeping their price limits ‘hidden’ A time limit, to keep negotiations from dragging on needlessly Willingness to ‘split the difference’ when two sides are close to agreement Ability to negotiate one issue at a time
Copyright © 2006 by John Wiley & Sons, Inc. All rights reserved Retail Negotiations: Be Prepared..! Estimate the item’s final retail price in your store Evaluate a quoted price by knowing what goes into it (labor, materials, profit, etc.) Make price comparisons Consider the remaining length of season for fashion or seasonal items Look for and request value-added services (packaging, tagging, warranties, etc.)
Copyright © 2006 by John Wiley & Sons, Inc. All rights reserved Federal Trade Commission Concerns Illegal “horizontal” agreements (between competitors) Agreeing on prices or price-related terms in ways different from how the companies actually conduct business Restrictions on advertising that exclude important information from consumers Limiting or restricting output to drive prices up Boycotting other businesses or persons Restricting sales territories such that the parties are agreeing not to compete directly against each other
Copyright © 2006 by John Wiley & Sons, Inc. All rights reserved Federal Trade Commission Concerns Illegal “vertical” agreements (between buyers & sellers) Agreeing on minimum or maximum resale prices for products Product tie-ins: Requiring a retail buyer to purchase one product or line in order to get another (if the buyer doesn’t want the product or could buy it elsewhere for less) Any significant restriction of competition that has no overriding business justification
Copyright © 2006 by John Wiley & Sons, Inc. All rights reserved Trade Terms to Know Cash-and-carry – A discount for accepting merchandise earlier than needed, or paying upon order instead of upon delivery Anticipation – Payment over a short time period after receipt of order Dating terms – Payment terms that include discounts for anticipation: 3/10 net 45 (A 3% discount if paid within 10 days of invoice date; otherwise due in full in 45 days)
Copyright © 2006 by John Wiley & Sons, Inc. All rights reserved Trade Terms to Know (continued) EOM or proximo dating – Payment terms that include a discount for paying in full within the same month the order was placed: 3/10 net 30 EOM (A 3% discount if paid within 10 days from end of month – EOM – in which order was written; otherwise due in 30 days.) ROG dating – Payment terms that include a discount for paying in full within a certain number of days of receipt of the goods (ROG) 2/10 net 30 ROG (A 2% discount if paid within 10 days from date goods are received; otherwise due in 30 days.)