Planning to Buy

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

The Merchandising Cycle

Planning– Forecasting

Buying– Obtain merchandise

through vendors

Selling – Direct and Indirect

selling

The Planning Function

Retail BuyersSelect and purchase goods for their companies

Responsible for one or more classifications or departments

Develop the merchandise plan

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.

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

Buying Terminology

Stock turnover (TO)– 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

Assortment Planning

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

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

Inventory Management

Computerized inventory-management systemsElectronic point-of-sale (EPOS) equipmentVendor-managed inventory (VMI)– Quick response

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

Other Sources

Web and catalogs– No sales pressure– Only photos, no fabrics

Importers– Favored by mass

merchandisers– U.S. agents take orders– May be shipped direct

to store

“Shopping” for a VendorGeneral 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

Other Considerations

Services– Training of salespeople– Promotional assistance– Fashion shows– Markdown insurance– Vendor pre-ticketing– Floor-ready merchandise

(FRM)

Look at Past Performance

Working practices

Word of mouth reputation

Fairness

Accuracy of orders

Deliveries

Quality

Turnaround time (from order to delivery)

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 costsDon’t be pressured into anything!

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

Offshore Sourcing

Advantages– Lower cost, higher

markups– Unique products– Consumers cannot

shop and compare– Add status or prestige– More variety of goods– Jobs to developing

countries

Disadvantages– 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.

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.