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 Buyers
Select 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
inventorymanagement systems
Electronic point-ofsale (EPOS)
equipment
Vendor-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 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
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
Don’t be pressured into anything!
transportation costs
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.