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  • Retail Management Tutorial-6.docx-1

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    Melody Adrales
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    The document provides answers to questions about retail buying and merchandising. It discusses key steps that must occur before a purchase order can be created, such as creating a contract and adding items to the retailer's system. It also covers inventory management methods, challenges that can arise from misjudging sales, constraints in merchandise mix design, who is involved in merchandise reviews, important vendor selection criteria, the importance of reviewing a previous buyer's vendor analysis, and that customer theft is typically a larger source of retail shrinkage than employee theft.

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    Buying process

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    The document provides answers to questions about retail buying and merchandising. It discusses key steps that must occur before a purchase order can be created, such as creating a contract and adding items to the retailer's system. It also covers inventory management methods, challenges that can arise from misjudging sales, constraints in merchandise mix design, who is involved in merchandise reviews, important vendor selection criteria, the importance of reviewing a previous buyer's vendor analysis, and that customer theft is typically a larger source of retail shrinkage than employee theft.

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    © All Rights Reserved
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    102 views6 pages

    Retail Management Tutorial-6.docx-1

    Uploaded by

    Melody Adrales
    The document provides answers to questions about retail buying and merchandising. It discusses key steps that must occur before a purchase order can be created, such as creating a contract and adding items to the retailer's system. It also covers inventory management methods, challenges that can arise from misjudging sales, constraints in merchandise mix design, who is involved in merchandise reviews, important vendor selection criteria, the importance of reviewing a previous buyer's vendor analysis, and that customer theft is typically a larger source of retail shrinkage than employee theft.

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    of 6

    Tutorial 6

    1. What must happen after a buyer agrees to purchase a product before a purchase
    order can be created?
    Answer:
    • By selling products to buyer, seller need to confirms that the following term & conditions
    are apply to buyer’s purchase before the purchase order created, which includes the term
    services, where applicable. Create contract purchase agreements with buyer to agree on
    specific terms and conditions with indicating the goods and services that the buyer will be
    purchasing. Buyer can later issue standard purchase orders referencing the contracts, and
    can encumber these purchase orders if the buyer use encumbrance accounting.

    • Regardless of who the retailer purchases from, the buyer must negotiate a vendor
    contract, the buyer negotiates and purchases merchandise. So, the buyer must consider
    how the merchandise will be priced, promoted, shipped, and so on.

    • Adding items to the retailer’s computer system that allow the merchandise to be tracked
    and purchase orders created. If buyers forgets to do so or links it incorrectly, customer
    service and sales problem are bound to occur, and the buyers is likely to be reprimanded
    or fired.

    2. If your annual inventory- turnover rate is four times, which inventory stock level
    method would you use and why?
    Answer:
    • Basic stock method
    Comparison between basic stock method and week’s supply method

    Basic stock method Week’s supply method


    - The minimum amount of inventory - When the retailers whose
    that needs to be maintained for a inventories are planned on weekly.,
    product, category or store, even not monthly basic, where sales do
    not fluctuate substantially.
    during times of low sales.
    - Inventory level should be set equal
    - Calculated as average inventory to predetermined number of week’s
    divide by average sales. supply. (related to inventory
    turnover rate desired)
    - Works best when a retailer has a
    low inventory rate (> 6 times a
    year)
    3. What problems can occur to buyers open to buy if they misjudged planned sales?
    Answer:
     An Open-To-Buy is a budget, and involves the full range of budgetary functions. It
    begins with the planning process, is future oriented, provides guidance on how much to
    buy, and provides benchmarks for evaluating progress, and adjusting future plans.
     An Open-To-Buy is a financial tool, in that the units of measure are typically dollars,
    usually retail dollars but sometimes cost dollars, and that it can be tied back to the
    financial control process.

    Problem that can occur when misjudge planned sales


    - Buying merchandise that is priced either too high or too low for the store’s target market
    - Buying the wrong type of merchandise, or buying merchandise that is to trendy
    - Having too much or too little basic stock on hand
    - Buying from too many vendors
    - Failing to identify the season’s hot items early enough in the season
    - Failing to let the vendor assist the buyer by adding new items or new colors to the existing
    mix

    4. What are the major constraints in designing the optimal merchandise mix?

    Answer:

    • Dollar-merchandise constraints
    -retailers try to overcome the dollar constraint by:
    (Shifting the expense of carrying inventory back on the vendor.)
    • Consignment (pay from scan)
    -vendor retains the ownership of the goods.
    -vendor establishes the selling price which is paid when the goods are sold.
    -helps reduce risk for seasonal products.
    • Extra dating
    -allows the retailer extra or interest free days before the period of payment begins.
    • Space constraints
    -it is important to have enough empty space to separate the distinct merchandise
    lines.
    -Operation guides- tell how much space should be between each fixture, rack,
    display, and so forth

    • Merchandise-turnover constraints
    -retailer must know how various merchandise mixes will affect inventory turnover.
    • Market constraints
    -affect decision on variety, breadth, and depth.
    -have a profound effect on how the consumer perceives the store.

    5. How can merchandise lines have too much breadth yet not enough depth?
    Answer:
     Merchandise Line- Group of products that are closely related because
    they
     Are intended for the same end use
     Are sold to the same customer group
     Fall within given price range
     Breadth
    - Number of merchandise brands that are found in a merchandise line; is particularly a
    problem for retailers selling private-label brands.
    -Battle of the brands: Retailers have their own product competing with the
    manufacturer’s products for shelf space and control over display location
     Depth
    - Average number of stock- keeping units within each brand of the merchandise line.
     Exp. SenQ, Harvey Norman

    6. Who is involved in a merchandise-line review?


    Answer:
     For that buyer, the line or category is his or her strategic business unit. If the buyer
    focused only on the items, problems could quickly arise.
     For instance, price promoting Tide might increase Tide sales, but how much of the
    sales increase would come from existing customers merely switching from other
    products not on sales?
     Similarly, the buyer in such a situation must also consider to what extent some
    customers will simply stockpile (but extra now and less in future)?
     Taking a category perspective, the retailer might choose to price promote an item that
    is above the average margin for the category.
     If done well, the increase in the discounted products could bring up the average
    margin, instead of lowering it. This isn’t always possible, but it’s one of several
    concepts that retail buyers think about when managing category.
     Unless the retailer owns a manufacturing or wholesale operation or both, the retailer
    must consider many criteria when selecting a merchandise source. The criteria used to
    evaluate merchandise sources depend on the retailer’s type of store and merchandise
    sold. Generally, the following criteria, which may vary across merchandise lines,
    should always be considered:-
    -Selling history
    -Consumers’ perception of the manufacturer’s or wholesaler’s reputation and brand
    -Reliability of delivery
    -Trade terms
    -Projected markup
    -Quality of merchandise
    -After-sales service
    -Transportation time
    -Distribution-center processing time
    -Inventory carrying cost
    -Country of origin
    -Fashionability
    -Net cost

    7. What do you think is the most important criterion in selecting a vendor? Why?
    Answer:
    Following criteria should be considered by the retailer in choosing a vendor:-
    • Selling history and consumers’ perception of the manufacturer’s or wholesaler’s
    reputation
    • Reliability of delivery, trade terms, and projected markup
    • Quality of merchandise and after-sales service
    • Transportation time and distribution-center processing time
    • Inventory carrying cost and net cost
    • Country of origin and fashionability

    For my opinion, after-sales service is most important in selecting a vendor. After-sales


    service refer to various processes which make sure the customer satisfied with the
    product and services of the retailer. The reason I choose after-sales service because it
    play an important role in customer satisfaction and retention. For example, car.

    8. Why should a new buyer look over the previous buyer’s confidential vendor
    analysis before going to market?
    Answer:
    • Confidential Vendor Analysis
    - Identical to the vendor profitability analysis but also provides a three- year financial
    summary as well as the names, titles, and negotiating points of all the vendor’s sales
    staff.

    • A new buyer should look over the previous buyer’s confidential vendor analysis
    before going to the market this is because the vendor can clearly analysis the market
    through out the previous financial analysis.

    9. What is the worst type of shrinkage-employee theft or customer theft? What is your
    reasoning?
    Answer:
    Employee theft: Occurs when employee steal merchandise where they work
    Customer theft: Also known as shoplifting occurs when customers or individuals
    disguised as customers steal merchandise from the retailer’s store

    Answer: Customer theft


    Reason: Based on National Retail Security Survey (NRSS) 2015, U.S retail inventory
    shrinkage is 1.38% of retail sales, which is $44 billion in year 2014.
    U.S retailers estimate that shoplifting (38%) accounts for largest part of reported
    shrink, followed by employee theft (34.5%).

    Data from Global The Retail Theft Barometer


    2014

    The above data shown that in countries such as China, Hong Kong and Japan,
    sources of shrinkage highest percentage is from shoplifting. This proved that
    customer theft is worse than employee theft.

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