Transcript Ch_07

Buying Merchandise
Pricing Merchandise
2
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
Market
Strategy
Decisions
Merchandise
Planning
Decisions
Retailing
Decisions
Buying, Selling,
and Pricing
Decisions
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The Buyer’s Job
1
2
3
The buyer determines
the amount of money
available to make
purchases for a given
amount of time.
The buyer determines
the merchandise the
store’s customers want
and will purchase.
The buyer determines
the best vendor or
supplier for each item
to be bought for the
store.
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5
The buyer negotiates
the best terms and
discounts possible for
those items bought
from each vendor.
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-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
Planned Purchases – (Merchandise Received + Merchandise Ordered) = Open-to-Buy
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The Buyer’s Job
The buyer uses the following
tools to help with purchasing
decisions:
Target-market information
Sales records
Customer preferences
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
Customer requests
– want slip
Shopping the competition
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The Buyer’s Job
The buyer needs to
determine the best vendor
for each item.
The buyer needs to negotiate
the dating terms and
shipping terms.
vendor a company from
which a buyer purchases
merchandise
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
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The Buyer’s Job
Most shipping terms are
FOB.
FOB a free on board, or
the ownership of
merchandise in transit
determines if freight
charges are free
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Types of Buying
Centralized buying allows
a buyer to take advantage
of quantity discounts.
centralized buying a
type of buying in which
all buying for a chain is
completed from one
location
Decentralized buying is
another approach to buying.
quantity discounts
discounts offered for
large purchases
decentralized buying
buying decisions made at
the local store level
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1.
What are the five characteristics of the
buyer’s job?
2.
Why is it important to take advantage of
dating discounts?
3.
What factors do buyers consider when
negotiating shipping terms?
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Name That Price
The selling price 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
Markup 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:
Competition
Supply and demand
Customer acceptance
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Other Factors
Other factors that retailers
consider when setting their
prices are:
Return on investment
Market share
return on investment
percentage figure
representing the return (or
profit) on the cost of
merchandise or services
plus the expenses
necessary to sell them
market share one
retailer’s part of total sales
of merchandise and
services in the retailer’s
selling area
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Markdowns
Two main reasons for
markdowns are:
markdown reduction in the
original selling price of
merchandise or services
To reduce inventory
To generate sales
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Selling Markdown Merchandise
Sell, or job out, the merchandise to another retailer.
Consolidate the merchandise and sell it at another
store under the same ownership.
Unsold
markeddown
merchandise
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.
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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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Boutique for the Unique
You know that shopping bots may find
Operating an e-tail business
on an electronic
channel—the
the best prices
for merchandise
on the
Web—can be costly,Web—but
due to design,
delivery, must
returns,
the customer
act and
as a
operating expenses.
store to determine quality and unique
of ancompanies
item.
Though Many largerstyle
dot-com
crashed in the
For
peoplesmall
looking
for cutting-edge
gadgets
and equipment,
1990’s,
stores
like Harris Cyclery
of West
Newton,
e-tailers
such as Technoscout.com
bothusing
and a
offer
their
Massachusetts,
actually increase do
sales
basic
Web
site.
a third of Harris’s
bicycle business
rides inalert
on
pick
of Today,
custom-searched
merchandise.
Weekly e-mails
the Web to get
partsatomic
and personal
service.
customers
the hard-to-find
latest items from
watches
to 3D TV
converters.
Describe an e-business’s home page to your class after
For
more information
retailing,
viewing
one throughon
marketingseries.glencoe.com.
go to marketingseries.glencoe.com.
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1.
Name three factors that affect selling price.
2.
What are factors that a retailer considers
when setting prices?
3.
What are two reasons that a retailer takes
markdowns?
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Checking Concepts
1. Explain the buyer’s job.
2. Describe how the buyer
determines what to buy.
3. Describe how the buyer
determines what
quantities to buy.
4. Describe how the buyer
determines when to buy.
continued
1. The buyer
2.
3.
4.
buyer uses
determines
what
purchases
sales
determines
records,
whento
buy,
using targetmerchandise
customer
customers
want
for a
market
information,
business.
preferences,
merchandise
and
and
sales
records,
customer
times
deliveries
requests.
for
customer
the moment when
preferences,
the customer is
customer
requests,
ready to buy.
and shopping the
competition.
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Checking Concepts
5. Explain three major
factors affecting pricing
decisions.
6. Explain market share.
7. Define markup and
markdown.
continued
5. It
6.
7.
Markup
Factors
is one include
is
retailer’s
the
competition,
part
difference
of totalbetween
sales
supply
of
andcost
merchandise
the
demand,
price and
and
of
customerin theand
services
merchandise
acceptance.
retailer’s
the
sellingselling
price.
area.
A
markdown is a
reduction in the
original selling
price.
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Checking Concepts
Critical Thinking
8. Explain how the
consumer influences a
buyer’s purchasing
decisions.
8. Buyers must
purchase
merchandise with
customer
preferences and
buying habits in
mind.
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