1. Planning to Buy

2. 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

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

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

5. 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.

6. 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

7. 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

8. 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

9. 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

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

11. 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

12. 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

13. “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

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

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

16. 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!

17. 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

18. 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

19. 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.