2. Buying Merchandise
Pricing Merchandise 2

3. Chapter Objectives Explain the role of the buyer.
Determine what to buy.
Determine quantities to buy.
Discuss the importance of when to buy.
Explain factors affecting pricing decisions.
Define markup and markdown. 3

4. Buying, Selling, and Pricing
Decisions
Market Strategy Decisions
Merchandise Planning
Decisions
Retailing Decisions 4

5. The Buyer’s Job
The buyer determines the amount of money available to make purchases for a given amount of time. 1
The buyer determines the merchandise the store’s customers want and will purchase. 2
The buyer determines the best vendor or supplier for each item to be bought for the store. 3
The buyer negotiates the best terms and discounts possible for those items bought from each vendor. 4
The buyer determines the best time for the merchandise purchases to arrive at the store. 5 5

6. The Buyer’s Job
Open-to-buy is figured for a specific time period, such as a buying season or for a month in that season.
open-to-buy amount of money available to purchase merchandise after other purchases have been subtracted
Planned Purchases – (Merchandise Received + Merchandise Ordered) = Open-to-Buy 6

7. The Buyer’s Job
The buyer uses the following tools to help with purchasing decisions:
want slip a form used to inform a buyer of a specific request from a customer for merchandise that the store or department does not have in stock or does not carry
Target-market information
Sales records
Customer preferences
Customer requests
want slip
Shopping the competition 7

8. The Buyer’s Job
vendor a company from which a buyer purchases merchandise
The buyer needs to determine the best vendor for each item.
dating terms terms that deal with the date when the bill for merchandise has to be paid
The buyer needs to negotiate the dating terms and shipping terms.
shipping terms terms that deal with how the merchandise will get from manufacturer to the store, who pays for shipping, and when ownership changes hands 8

9. The Buyer’s Job Most shipping terms are FOB.
FOB a free on board, or the ownership of merchandise in transit determines if freight charges are free 9

10. Types of Buying
Centralized buying allows a buyer to take advantage of quantity discounts.
centralized buying a type of buying in which all buying for a chain is completed from one location
Decentralized buying is another approach to buying.
quantity discounts discounts offered for large purchases
decentralized buying buying decisions made at the local store level 10

11. What are the five characteristics of the buyer’s job?1.
What are the five characteristics of the buyer’s job?
Why is it important to take advantage of dating discounts?
What factors do buyers consider when negotiating shipping terms? 2.
Quick Check Answers
A buyer determines the money available for purchases; determines what merchandise customers will want, determines best vendors, negotiates best terms, and determines best delivery time.
They reduce the cost of the merchandise the buyer purchases.
Answers include the shipping costs and who must pay the insurance while the merchandise is being shipped. 3. 11

12. Name That Price
The selling price of merchandise or services must be balanced between the price that customers will pay and the price that makes a profit for the retailer.
price amount of money a retailer asks a customer to pay for merchandise or a service 12

13. Factors Affecting Selling Price
The cost of the merchandise
The expenses of getting the merchandise to the store
A share of the retailer’s overhead expenses
A return on investment
Selling Price 13

14. Factors Affecting Selling Price
Markup is an important term when discussing pricing.
markup the difference between the cost price of merchandise or services and the selling price 14

15. Factors Affecting Selling Price
Three major factors that affect the selling price of merchandise are:
Competition
Supply and demand
Customer acceptance 15

16. Other Factors
Other factors that retailers consider when setting their prices are:
return on investment percentage figure representing the return (or profit) on the cost of merchandise or services plus the expenses necessary to sell them
Return on investment
Market share
market share one retailer’s part of total sales of merchandise and services in the retailer’s selling area 16

17. Markdowns Two main reasons for markdowns are: To reduce inventory
markdown reduction in the original selling price of merchandise or services
To reduce inventory
To generate sales 17

18. Selling Markdown Merchandise
Sell, or job out, the merchandise to another retailer.
Consolidate the merchandise and sell it at another store under the same ownership.
Unsold marked-down merchandise
Place the merchandise on an auction Web site, or create a special clearance Web site.
Carry over the merchandise to the next season.
Donate the merchandise to charity and use the cost value as a tax deduction. 18

19. Buying and Selling
Though many things contribute to the choice of products a retailer may offer, it is the customers’ wants and needs that determine what is bought and sold. 19

20. Boutique for the Unique
You know that shopping bots may find the best prices for merchandise on the Web—but the customer must act as a store to determine quality and unique style of an item.
Operating an e-tail business on an electronic channel—the Web—can be costly, due to design, delivery, returns, and operating expenses.
Though Many larger dot-com companies crashed in the 1990’s, small stores like Harris Cyclery of West Newton, Massachusetts, actually increase sales using a basic Web site. Today, a third of Harris’s bicycle business rides in on the Web to get hard-to-find parts and personal service.
Describe an e-business’s home page to your class after viewing one through marketingseries.glencoe.com.
For people looking for cutting-edge gadgets and equipment, e-tailers such as Technoscout.com do both and offer their pick of custom-searched merchandise. Weekly s alert customers to the latest items from atomic watches to 3D TV converters.
For more information on retailing,
go to marketingseries.glencoe.com. 20

21. Name three factors that affect selling price. 1.
Name three factors that affect selling price.
What are factors that a retailer considers when setting prices?
What are two reasons that a retailer takes markdowns? 2.
Quick Check Answers
competition, supply and demand, and customer acceptance
return on investment, market share, and competition pricing
Reasons include: to reduce inventory; generate additional sales. 3. 21

22. Checking Concepts 1. Explain the buyer’s job. 2.
The buyer purchases merchandise for a business. 1.
The buyer determines when customers want merchandise and times deliveries for the moment when the customer is ready to buy. 4.
The buyer determines what to buy, using target-market information, sales records, customer preferences, customer requests, and shopping the competition. 2.
The buyer uses sales records, customer preferences, and customer requests. 3. 2.
Describe how the buyer determines what to buy. 3.
Describe how the buyer determines what quantities to buy.
Checking Concepts Answers
The buyer purchases merchandise for a business.
The buyer determines what to buy, using target-market information, sales records, customer preferences, customer requests, and shopping the competition.
The buyer uses sales records, customer preferences, and customer requests.
The buyer determines when customers want merchandise and times deliveries for the moment when the customer is ready to buy. 4.
Describe how the buyer determines when to buy.
continued 22

23. Checking Concepts 5.
Explain three major factors affecting pricing decisions.
It is one retailer’s part of total sales of merchandise and services in the retailer’s selling area. 6.
Markup is the difference between the cost price of merchandise and the selling price. A markdown is a reduction in the original selling price. 7.
Factors include competition, supply and demand, and customer acceptance. 5.
Explain market share. 6.
Define markup and markdown. 7.
Checking Concepts Answers
Factors include competition, supply and demand, and customer acceptance.
It is one retailer’s part of total sales of merchandise and services in the retailer’s selling area.
Markup is the difference between the cost price of merchandise and the selling price. A markdown is a reduction in the original selling price.
continued 23

24. Checking Concepts Critical Thinking 8.
Explain how the consumer influences a buyer’s purchasing decisions.
Buyers must purchase merchandise with customer preferences and buying habits in mind. 8.
Checking Concepts Answers
Buyers must purchase merchandise with customer preferences and buying habits in mind. 24

25. Customizable slide 25

26. End of