Buying MerchandiseBuying Merchandise

Pricing MerchandisePricing Merchandise

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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.

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Buying, Selling, and Pricing

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Market Strategy

Decisions

MerchandisePlanning Decisions

RetailingDecisions

Buying, Selling,and PricingDecisions

The Buyer’s Job

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The buyer determines the amount of money available to make purchases for a given amount of time.

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The buyer determines the merchandise the store’s customers want and will purchase.

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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.

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The Buyer’s Job

Open-to-buyOpen-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

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Planned Purchases – (Merchandise Received + Merchandise Ordered) = Open-to-Buy

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

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Target-market information

Sales records

Customer requests– want slipwant slip

Shopping the competition

Customer preferences

The Buyer’s Job

The buyer needs to determine the best vendorvendor for each item.

vendor a company from which a buyer purchases merchandise

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The buyer needs to negotiate the dating termsdating terms and shipping termsshipping terms.

dating terms terms that deal with the date when the bill for merchandise has to be paid

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

The Buyer’s Job

Most shipping terms are FOBFOB.

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FOB a free on board, or the ownership of merchandise in transit determines if freight charges are free

Types of Buying

Centralized buyingCentralized buying allows a buyer to take advantage of quantity discountsquantity discounts.

centralized buying a type of buying in which all buying for a chain is completed from one location

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decentralized buying buying decisions made at the local store level

quantity discounts discounts offered for large purchases

Decentralized buyingDecentralized buying is another approach to buying.

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?

1.

2.

3.

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Name That Price

The selling priceprice 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

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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

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Factors Affecting Selling Price

MarkupMarkup is an important term when discussing pricing.

markup the difference between the cost price of merchandise or services and the selling price

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Factors Affecting Selling Price

Three major factors that affect the selling price of merchandise are:

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Competition

Supply and demand

Customer acceptance

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

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Return on investmentReturn on investment

Market shareMarket sharemarket share one retailer’s part of total sales of merchandise and services in the retailer’s selling area

Markdowns

Two main reasons for markdownsmarkdowns are:

markdown reduction in the original selling price of merchandise or services

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To reduce inventoryTo reduce inventory

To generate salesTo generate sales

Selling Markdown Merchandise

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Unsold marked-

down merchandise

Sell, or job out, the merchandise to another retailer.

Consolidate the merchandise and sell it at another store under the same ownership.

Place the merchandise on an auction Web site, or create a special clearance Web site.

Donate the merchandise to charity and use the cost value as a tax deduction.

Carry over the merchandise to the next season.

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.

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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.

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.

Boutique for the Unique

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 e-mails alert customers to the latest items from atomic watches to 3D TV converters.

For more information on retailing, go to marketingseries.glencoe.com.

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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?

1.

2.

3.

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The buyer purchases merchandise for a business.

1. 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. The buyer determines when customers want merchandise and times deliveries for the moment when the customer is ready to buy.

4.Explain the buyer’s job.

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Describe how the buyer determines what to buy.

Describe how the buyer determines what quantities to buy.

Describe how the buyer determines when to buy.

Checking Concepts

continued

1.

2.

3.

4.

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Explain three major factors affecting pricing decisions.

Explain market share.

Define markup and markdown.

Factors include competition, supply and demand, and customer acceptance.

5. 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.

Checking Concepts

continued

5.

6.

7.

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Critical Thinking

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

8.

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