BUS 450: Buying & Managing Merchandise

National Brands

• Aka. Manufacturer’s brands

• Family or umbrella brand

• Sub-brands

• Can be different product categories

  • Ex: Umbrella brand: Kellogg’s → Sub-brand: Frosted Mini Wheats, Rice Krispies

Buying national brand merchandise

• Wholesale markets & Trade shows

• Process:

  • Attend market week or trade show

  • Buyer returns to office, review requested merchandise samples

  • Meet with supervisor to review merchandise samples

  • Decide which items are most attractive

  • Negotiate with vendor

Store Brands

• Aka. Private label, house or own brands

• Premium, exclusive, or copycat brands

• Not always perceived as premium, how you position the brand

  • Ex: Target, Trader Joes, Kirkland (Costco), Great Value (Walmart)

Develop store brands merchandise

• Developing store brands involves retailers owning or operating manufacturing

• Smaller retailer may often ask national brand supplier to make mini changes to products and label them as store brands

Source store brands merchandise

• May involve global sourcing

• Pros/Issues: low labor costs, tariffs, currency changes, long lead times, transportation costs

• Concerns: quality control, speed to market, political risks

• Resident Buying Offices: help retailers find vendors

• Reverse Auctions: vendors compete by bidding lowest price

Generic Brands

• No-frills product

• Often at discounted price

• Targets at price-sensitive consumer segment

• Sales are declining

What are some negotiation issues that can arise?

• Price and gross margin setting (includes slotting fees and slotting allowances)

  • Need commitment from vendor

  • Margin guarantees with markdown money

  • Slotting fee - changes imposed by retailer to stock new items

• Additional markup opportunities

  • Discounted prices to take excess merchandise

  • Problematic for buyer’s inventory management

• Terms of purchase

  • Payment periods (Buyer - Longer, Vendor - Shorter)

• Exclusivity

• Advertising allowances

  • Co-op advertising: Retailers share cost of advertising through cooperative arrangements with vendors

• Transportation

Legal, ethical, and social responsibility issues for buying merchandise

• Counterfeit merchandise

  • Goods sold without permission of the owner of a trademark or copyright

• Commercial bribery

  • Vendor or its agent offers or a buyer asks for “something of value” to influence purchase decisions