Ch. 13 Buying Merchandise

national, store, generic

3 types of brand alternatives

national brand

type of brand that have products that are designed, produced, and marketed by a vendor and sold to other retailers

• establishes their own brand image through their marketing

sub-brands

brands that are under the umbrella or family brand associated with a company

store brand

type of brand that have products that are developed by retailers

• contracted with manufacturers to make the products

premium

type of store brand that offers the consumer a product comparable to a national manufacturer’s brand in terms of quality and sometimes modest price savings

• ex.) Trader Joe’s items

• some items indistinguishable from the national brand

exclusive

type of store brand that’s developed by a national-brand vendor often in conjunction with the retailer, and sold only by that retailer

simplest form

type of exclusive brand where different model numbers are assigned with different exterior features for the same basic product sold by different retailers, but the product is still marketed under the manufacturer’s brand

• ex.) a Canon camera sold at Best Buy having a different model number than a Canon camera with similar features sold at Walmart

sophisticated form

type of exclusive brand where a retailer develops a store brand with its own unique identity

• ex.) Macy’s exclusive brands like INC and American Rag

copycat

type of store brand that imitates the manufacturer’s brand in appearance and packaging and are generally perceived as lower quality and offered at lower prices

generic brand

type of brand that has no brand name distinguishing them

• targets the price-sensitive segment

• viewed as lower quality

there is developed loyalty to the brands already, assortment viewed as higher quality

2 pros for stocking national brands

reduces retailer’s profitability through competitive pricing, limited flexibility on pricing, no control of displays and ads

3 cons for stocking national brands

products can be differentiated, price competition reduced

2 pros for stocking store brands

additional costs in designing and marketing the products

a con for stocking store brands

wholesale market center

centers with a concentration of vendors within a specific location that are visited by buyers, particularly for fashion apparel and accessories

• includes showrooms and factories

trade shows

an opportunity for buyers to see the latest products/styles and interact with vendors

• Merchandise is displayed with sales representatives and company executives talking to buyers

markdown money

what is sometimes provided by the vendor to the retailers so that they can cover lost gross margin dollars due to discounts needed to sell unpopular items

slotting fees

charges imposed by the retailer to stock a new item in the store

gray market

the flow of merchandise through distribution channels that are usually across international borders other than those authorized or intended by the manufacturer/producer

• goes from US suppliers, to international distributors, back to US mass merchandisers before reaching US consumers

diverted merchandise

merchandise that moves from a legitimate channel of distribution, sometimes to an off-price retailer to sell at a discounted price

black market

occurs when consumer goods are scarce, heavily taxed, or illegal

commercial bribery

occurs when a vendor or a buyer asks for something of value to influence purchase decisions

• can be avoided by forbidding accepting gifts from vendors

chargeback

a practice used by retailers in which they deduct money from the amount they owe a vendor

• might be used if a vendor has not met the agreed-on terms

buybacks

activities engaged by vendors and retailers to get old products out of retail stores and new products in their place

• buying a competitor’s inventory

• forcing a vendor to buy slow-moving merchandise

exclusive dealing agreement

an agreement that occurs when vendor restricts a retailer to carry only its products and nothing from competing vendors

tying contract

type of contract in which a vendor requires that a retailer takes a product it doesn’t necessarily desire to ensure that they can buy a product that they do desire

• buyer has to buy all items in its product line

fair trade

a socially responsibly movement that ensures producers receive fair prices for their products

greenwashing

the disingenuous practice of marketing products or services as being environmentally friendly with the purpose of gaining public approval and sales rather than actually improving the environment

reverse auctions

a buying process in which retail buyers provide a specification for what it wants to a group of potential vendors

• competing vendors bid on the price at which they are willing to sell their products