Planning to Buy

Objectives: Describe the merchandise planning function Outline internal and external sources of planning information Explain factors to be considered in preparing financial and merchandise assortment buying plans Describe ongoing inventory management planning Explain the variables in selecting merchandise sources

The Merchandising Cycle Planning Forecasting Buying Obtain merchandise through vendors Selling Direct and Indirect selling

The Planning Function Retail Buyers Select and purchase goods for their companies Responsible for one or more classifications or departments Develop the merchandise plan

Gathering Information Internal information Past sales records (most important) Salespeople and managers Want slips Consumer behavior and opinions Store fashion bureau External information Vendors and other buyers Trade information Do your homework before you buy.

Preparing the Buying Plan Six-month plan Utilizes last year’s sales to project new season Plan shows each month’s merchandise needs to meet consumer demand Merchandise plan Types and quantities Price points Set amount of money

Buying Terminology Stock turnover (TO) Open-to-buy (OTB) Number of times inventory is sold and replaced in a given period; how fast inventory goes in and out of the store Open-to-buy (OTB) The dollar amount of merchandise the buyer may order during the month

Assortment Planning Balanced Stock Buyers goal: Achieve a balanced stock assortment Maintain basic stock Sell regardless of conditions Maintain model stock Risky fashion items that rise and fall with consumer demand Stock-keeping unit (SKU) Smallest unit for which records are kept Balanced Stock

Additional Planning Considerations Maintain stock to meet consumer demand (depth and breadth) If inventory low, build with current styles and colors Supplement with complementary products Specification buying Consignment buying Clearance or off-price

Inventory Management Computerized inventory-management systems Electronic point-of-sale (EPOS) equipment Vendor-managed inventory (VMI) Quick response

Selecting Merchandise Sources Manufacturers Goods are latest styles Prices are lower Can be made to order Merchandise support available Higher quantities Wholesalers Resellers or distributors Greater breadth and depth options from several manufacturers Smaller quantities may be ordered

Other Sources Web and catalogs Importers No sales pressure Only photos, no fabrics Importers Favored by mass merchandisers U.S. agents take orders May be shipped direct to store

“Shopping” for a Vendor General Criteria Payment and credit terms Minimum purchase requirements Reorders- usually not available on higher-priced goods Return policies Retail pricing rules Distribution and confinement practices

Other Considerations Services Training of salespeople Promotional assistance Fashion shows Markdown insurance Vendor pre-ticketing Floor-ready merchandise (FRM)

Look at Past Performance Working practices Word of mouth reputation Fairness Accuracy of orders Deliveries Quality Turnaround time (from order to delivery)

Know What You Are Getting Know terms Discounts allowed Payment period Transportation arrangements Date of delivery Point of transfer of title to the merchandise Allocation of transportation costs Don’t be pressured into anything!

Choosing Number of Suppliers Single Supplier Larger orders can mean quantity discounts “Favored customer” status Greater cooperation in developing exclusive products Several Suppliers Less dependence on one supplier if there is a problem Access to market information Better service (competition) Wider selection

Offshore Sourcing Disadvantages Advantages Buying trips longer and costlier Longer lead times No reorders Communication problems Sizing, fit, and quality Legal complications Financial risks Delays in shipping Takes jobs from U.S. Advantages Lower cost, higher markups Unique products Consumers cannot shop and compare Add status or prestige More variety of goods Jobs to developing countries

Do You Know . . . Retailers have design control over private labels. If a company participates in private labeling, there is no markdown money or warranties from the manufacturer if there are problems.