An Introduction to Retail Management

&Marketing

Book 4Retail

Marketing

Book 4 Sessions

Session 2: Retail buying

Session 3: Supply chain management

Retail logistics in the UK: past, present

and future

Session 2: Retail buying

1. The buying task

2. Buying objectives

3. Retail buying decisions

4. Organization of retail buying

5. Conclusion

Introduction• The role of the buyer can be very rewarding but it

involves highly complex and demanding tasks. • When buyers are making P selections they look for

items that can deliver 'value' to the customer. • To meet customers' needs, buyers consider new

consumer trends, consumer purchasing patterns, changes in fashion & tastes & new P & brands entering marketplace.

• Develop right mix of P to suit a range of consumer tastes & purchasing occasions.

1. The buying task

• Retail buyer need to buy exactly right amount of

P for customers needs & to ensure that all P are

sold so there are no items left on shelves.

• Managing buying & merchandising for seasonal

& special events can be particularly demanding

for seasonal events depending on P sector &

season.

• Retailing is a distributive trade which provides

employment for individuals with a wide range of

skills.

• Some Government bodies help build relationships

between industry and education providers to help

attract young people into retail distribution trades.

Challenges for retail buyers• Buyer is responsible for managing P a retailer sells• They work from centrally located offices at the

company's headquarters.• He is responsible for selecting the right P as well as

negotiating with suppliers. • Negotiations involve procuring & sourcing P for the

business & negotiating for very large quantities of G • Pressure is on buyer to get right volume of purchases• So P are brought into business in sufficient quantities to

meet consumer D & be available at the right time

• Buyer's negotiations have to ensure deals with suppliers

enable retailer to sell P at a suitable level of profit.

• They are concerned with logistical question of how P

get to store to put on display ready for customers.

• The larger the retail organization, the more complex the

buying and logistical tasks become.

• A large retailer has specialist buying teams, rather than

individuals, who are supported by logistics or

distribution operations within organization

2. Buying objectives• Buying is critical to success of marketing planning • P/S are core part of marketing mix which generates

sales & as a result the process of retail buying needs to meet certain objectives.

• To succeed buyers have to ensure several guiding principles of buying are met.

• Competitive positioning is based on the consumer's perception of what a brand means to them personally.

• Retailers focus on consumers' perceptions in order to differentiate themselves from other retailers selling similar P

Buyers & merchandisers aim to achieve the following guiding objectives & ensure retailer has fulfilled the following criteria:

• Right product

• Right time

• Right quantity

• Right place

• Right price

The right product

• Retailers need to be sure that the selected P

ranges deliver the right level of value the

customers are looking for & with the brand

positioning of the business.

The right time• Different P are needed & wanted at different times• Retailers must manage their stock so that P offer reflects

requirements of customers at any particular time. • For ex, a newspaper retailer must make sure that latest

edition of a newspaper is available as the shelf-life of a daily newspaper is only a few hours.

• P such as Easter eggs & sun cream have seasonal sales patterns, whilst main P such as bread, milk, tea & coffee have a more constant demand pattern.

• Shelf-life, seasonality & fashion are key factors in the time aspect of retail buying, referred to as 'stock control'

The right quantity•  Buyers must manage quantities of P brought in to

ensure the customers' demands are met. • Shoppers can easily become dissatisfied when the

items they want to buy are out of stock. • However, it is equally important for buyer to get right

balance between availability of stock & overstocked. Excess stock ties up financial capital, uses storage

• Too much stock means price reductions to sell items quickly to make space for new season's ranges. Getting balance between amount purchased & amount sold wrong means a reduction in profits for retailer

The right place • Earge retail organizations such as Co-operative,

Tesco are not only selling ranges of P on a wide geographical spread (local, national & international)

• They also sell P in a variety of retail formats, e.g., hypermarkets, superstores & convenience stores

• Each has its own characteristics in terms of size, location and target customer profile.

• Each of store formats is aimed at specific customer segments & at satisfying specific needs

• key point is that P ranges sold in each outlet are

selected by buying team based on variables affecting

potential sales, customer D & environmental forces

(such as changes in sales tax)

• Place where G are sold can have a significant effect

on the range of merchandise on offer.

• Think about how tourist gift shops adapt their

ranges to suit very specific buying requirements.

The right price• Retail buyer will negotiate 'right' price for P from

suppliers & will consider role of the P in terms of its contribution to profitability of retail business.

• Negotiations are informed by a retailer's corporate & marketing objectives, e.g., market penetration, sales & profits.

• Retailer may be happy with a small profit margin, (on a frequently purchased item), but expect a higher level of profit from a (less-frequently purchased P).

• Different levels of profit will be determined by price

retailer sets & cost price that retailer pays its suppliers

• Overall profitability will be determined by rate of sales of

whole P range & profit margins set within P range • For ex, some retailers sell at lower prices & use sales

promotions to generate a fast turnover of G, whereas others look for relatively slower turnover of stock but higher value sales & profit margins.

• Rate of sales is influenced by price level consumer is

willing to pay, so setting of prices becomes another area

of complex decision making for retail buyers

3. Retail buying decisions•  Buying decisions vary in complexity depending on

size & type of operation of the retail business & the types of P on offer.

• Some P (e.g., beans & washing powder) are always available & patterns of D are very stable whereas others are not (e.g., contemporary fashion & perishable seasonal goods)

• buying situations can vary from a simple restocking task to an entirely new & complex task

Figure 2.1 Flow chart showing three different buying tasks involving different stages in the buying decision process.

• In local store manager is buying a P that is regularly sold in store. We refer to this as a 'straight re-buy' as manager habitually buys a quantity of same G from same supplier.

• Sweater buyer has other considerations & new suppliers may be sought to supply new P , so this is a 'new buying situation'. 

• ‘Modified re-buy' – It lies between these two extremes & requires changes to types of P & suppliers.

4. Organization of retail buying

• Large retail organizations have complex buying

tasks

• Thus, employing large teams of people, each

with quite specific tasks within the buying

function.

• Organization of the buying group is usually

spread across various layers of management.

Centralization•  Multiple retailers with more than ten stores carry

out buying operations through a central organization• Trend to centralize buying function has had impact

on the evolution of retail industry by reforming buying function & making it more efficient.

• Smaller retailers have been acquired by larger retailers & buying operations have been fused, leaving central buyers in control of larger volume of G with increased financial responsibility

• Advantages: scale economies & augmented

buying power & opportunity to employ P

buying specialists.

• Centralized buying allows P offer to be

centrally coordinated, supporting the corporate

retail brand.

Buying departments and teams

• Retailers manage buying by dividing the total P range

into smaller P specific subsections & then have teams

responsible for managing specific P area.

• To develop maximum efficiency within buying teams

P ranges are divided up based on P characteristics,

which enables teams to develop P K & buying

expertise.

• Some organizations, buying responsibility is

allocated according to the turnover of department.

Dep handles same proportion of total buying budget

The larger the retailer, the more narrowly the buying

areas will be defined because of the larger volumes

of P & cash flowing through the organization.

• In large retail organizations, buying decisions are

rarely left to one individual, unlike independent

retailers, where owner /manager is responsible for it

• Buying team consist of people with ≠ roles • Buying function is broken into role concerned

with 'right P & price' functions & stock control role concerned with other factors (time, quantity, place).

• Those people work interdependently, towards same departmental goals.

• Buying teams are supervised by senior managers (merchandise manager or buying director)

Buying committees• A highly complex buying decision such as introducing a

new P line will have an impact on all areas of retail management.

• Buyers have to consider supply side; merchandisers consider stock levels & space allocation for P; & store managers concern themselves with how P should be displayed & how it should be sold.

• At the end the most important person is consumer. • Retailers need to have mechanism by which needs of

people involved with Pare considered in buying decision making process.

By using a group of people to make buying decisions

These groups are referred to as buying committees representatives from all areas of retail business get together on a regular basis to consider P ranges

Advantages: committee is made up of people who together have a considerable wealth of P expertise, & whatever decision is made has backing of all members.

But, gathering committee takes time & the group may not be able to reach a consensus view, which may result in some buying opportunities being lost.

Decentralized buying• For most multiple retailers, buying decisions & operations

are carried out within central buying organization. • However, it may be more efficient to carry out some

buying on a regional basis, or even at store level. • Fresh produce such as meat is sometimes bought by

regional buyers because of geographically fragmented nature of supply.

• Likewise, it makes sense for regionally-specific P such as newspapers or heritage gifts to be managed by store

• Areas are increasingly tailoring P assortment to suit regional preferences achieving differentiated P

Sustainability and ethics• whatever we feel about environmental issues,

changes having implications for retailing.• Government initiatives, consumer movements &

campaigns are focusing on environmental impact & encouraging companies to look for better ways to manage global resources.

• During last 30 years, retailers have been looking at their environmental impact & considering opportunities & implications on businesses.  

The theory of developing sustainable supply chains

• Companies aim to build a sustainable supply chains, managers & planners are faced with uncertainties & complexities.

• To deal with such challenges, companies need to constantly scan environment at different levels in order to grasp implications of their purchasing behavior.

• Recently, logistics, store & supply chain management have been revolutionized changing consumer demand for certain P & the development of fully integrated global supply chains to meet this D.

• Currently, many organizations are playing catch-up to cope with expanding scale & scope of supply chains by reorganizing & streamlining their supply chains to cope with varying demand.

• However, regardless of the level of sophistication of a particular retailer's supply chain, in the future supply chains will have to become more collaborative & involve a network of firms that will manage the flow of G from 'the earliest raw materials supplier to the ultimate consumer, & beyond, namely the disposal and recycling processes too’

• To build a sustainable supply chain, retailers need to be aware of what is happening in immediate & wider environment & should scan trading environment across a number of levels.

• Six levels a company should be aware of & scan for the latest information in order to increase their ability to respond effectively sustainability issues.

This figure shows six levels which potentially might affect

the sustainability of the supply chain:1. Societal level, where the focus is on the macro-environment2. Network level is where the scale & scope of supply chain are

considered & represents where analysis of the inter-linkages between scale, scope & levels of supply chain are brought together

3. Chain level looks at existing supply chain to identify opportunities for improvements

4. Firm level focuses on company & its involvement in the supply chain

5. Functional level refers to the various areas of a firm that is affected by supply chain issues

6. People level is concerned across the supply chain.

'sustainable development issues cannot be

grasped at firm level only!

That will be useless and incongruous'.

Companies need to explore what is going on

at each of the different levels if they are to be

able to map-out a sustainable approach to

managing the supply chain.