1. Lesson 2: Purchasing

2. Objectives You will: ► Explain how purchasing impacts sales and profit ► List qualities of a good buyer ► Describe the lifecycle of inventory through a store ► Explain the affect of inventory control of sales ► Calculate stock turnover in terms of items and dollars ► List common problems associated with purchasing and inventory control

3. 1. What a Buyer Does ► Responsible for purchasing the merchandise for a store ► Buyers must be:  Acquainted with customers  Knowledgeable about various types of goods  Good with planning, timing, and negotiating ► Your Buyer ≠ Your Customer

4. 2. Planning ► Purchasing is done weeks/months before product arrives in the store ► Must try to PREDICT what customers will want to buy ► Must stay within business’s budget ► Open-to-buy – amount of money available to a buyer for purchasing items for a store

5. 3. Timing ► Essential part of purchasing merchandise  If goods arrive too early, they could sit on shelves or expire  If goods arrive too late, customers could buy it elsewhere  IE: Kinect, bread, milk, magazines, etc.

6. 4. Negotiating ► Can get deals on terms and pricing if buying or paying for the merchandise early or in bulk ► *Affects profit margin!!!!

7. 5. Selecting Vendors ► Vendor – a business from which a buyer purchases merchandise ► Be concerned with vendor’s:  Reputation for quality  Reputation for reliability

8. 6. Inventory ► The total amount of goods a business has. ► May be in a backroom or on sales floor ► AKA stock ► Use previous buying records to establish customer buying patterns and make decisions

9. 7. Stock Handling ► Receiving the stock and checking it in  Invoice: vendor’s bill for stock purchased  Completed to verify that all the items ordered were received  Completed to verify items are in good condition  Check expiration dates ► Price marking the stock  Add barcodes and selling price with a scanner ► Transferring the stock to the selling floor  New items should be placed in highly visible areas  Create an ‘impulse’ area ► Stock Storage  Group ‘like’ items together

10. 8. Inventory Control ► The management of merchandise a store has for sale ► Just-in-Time Inventory – computerized method of inventory control that involves linking a store to its suppliers through a computer system that purchases new inventory automatically as sales are made

11. 9. Inventory Management Keeping track of your merchandise ► Physical Inventory  Inventory system that makes use of periodic counts of stock to ascertain stock levels ► Perpetual Inventory  Inventory system that keeps track of stock items on a continual basis ► Manual – kept track of by hand ► Computerized – items scanned and kept track of by computer

12. 10. Stock Turnover ► Tells how well the store’s inventory is being managed ► Measures how often stock is sold during a given period in terms of items or dollars invested

13. Key Math Concepts 1. Open-to-buy = Planned Purchases – (Orders Received + Merchandise Ordered) 2. Stock Turnover in Items = # Items Sold ÷ Average # of Stock Items in Inventory 3. Stock Turnover in Dollars = Dollar Sales of Inventory Items ÷ Average Dollar Value of Inventory Investment

14. Sample Problems You have planned purchases of $1,000. You have received orders that total $400 and you have ordered merchandise that totals $200. Calculate open-to-buy.

15. Answer Open-to-buy = $1000 – ($400 + $200) $1000 - $600 $400