Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
Chapter 13 - Buying Merchandise
13-21
3. Go to the home page for the Private Label Manufacturer’s Association (PLMA), and read the
What are store-brand products? Who purchases store brands? Who makes store brands? What
store brands are you purchasing on a regular basis?
What are store brands?
According to the website:
Store brands: “have come to represent better selection, value and savings. Simply put, they are
products that stores put their own names or brands on. They may also be called private label,
Chapter 13 - Buying Merchandise
13-22
Who makes store brands?
More and more store brands are appearing on the shelves of stores throughout the country. But
how do they get there, why are they there and who makes them? For many consumers, store
To produce those products for them, they turn to store brand manufacturers. When they do, they
make it clear that high quality across the board – from ingredients to the supply chain, from the
packaging and labeling to the final product itself -- is the number one requirement.
Store brand manufacturers who meet those high standards come in all sizes and many are listed
on stock exchanges. There are thousands of companies in hundreds of categories that produce
the products in partnership with retailers.
What store brands are you purchasing on a regular basis?
Chapter 13 - Buying Merchandise
13-23
ANSWERS TO DISCUSSION QUESTIONS AND PROBLEMS
1. Assume you have been hired to consult with Forever 21 on sourcing decisions for
sportswear. What issues would you consider when deciding whether you should buy
from Mexico or China, or finding a source within the United States?
Students should consider these issues when consulting Forever 21 on sourcing decisions:
Country of Origin Effect, Foreign Currency Fluctuations, Tariffs, Foreign Trade Zones, Cost
2. What are the differences among counterfeit, gray-market, and black-market
merchandise? Is the selling of either legal? Do you believe that the selling of this type of
merchandise should be allowed? Provide a rationale for your position. Would you
purchase a counterfeit wallet? what about a counterfeit car part or prescription
medicine.
Counterfeit merchandise includes goods that are made and sold without permission of the
owner of a trademark, a copyright or a patented invention that is legally protected in the
country where it is marketed. Gray-market merchandise, also known as parallel imports,
Chapter 13 - Buying Merchandise
3. What are the advantages and disadvantages of manufacturer’s brands versus private-
label or store brands? Consider both the retailer's and customer's perspectives.
National brands are products designed, produced, and marketed by a vendor/manufacturer
and sold to many different retailers. The vendor is responsible for developing the
4. Does your favorite clothing store have a private-label brand strategy? If yes, how does
it build store loyalty? If no, how could a private label brand create loyalty?
Students will think of a store brand that they have purchased. Answers will vary.
5. Explain why a grocery store, such as Kroger, offers more than one tier of private-label
brands within a particular product category.
Different types of private-label brands offer consumers different advantages. Kroger may
choose to provide more than one private-label brand within a product category to reach
Chapter 13 - Buying Merchandise
13-25
6. Why have retailers found exclusive store brands to be an appealing branding option?
Choose a department store, a discount store, and a grocery store. What exclusive
private-label brands do they offer? How are they positioned in relation to their national
brand counterparts?
In recent years, exclusive private-label brands have become increasingly prominent in the
marketplace. Before this upswing in popularity, private-label brands were viewed as
representing lower quality merchandise from the consumer’s perspective. More recently,
7. When you go shopping in which product categories do you prefer private labels or
national brands? Explain your preference.
Students will likely respond to current marketplace trends here. Clothing (The GAP and
Banana Republic) cosmetics (American Beauty and Good Skin), and home goods (Martha
Chapter 13 - Buying Merchandise
13-26
8. What are retailers doing to be more socially responsible in buying merchandise? Why
are they becoming more socially responsible? Do you buy products that you believe
were produced in a socially responsible manner, even if they cost more?
In response to significant pressures from the marketplace, retailers have become very aware
of their social responsibilities as part of their global sourcing efforts. Faced with a number of
9. You have decided that you don’t want to take the final in this class. Explain how you
would negotiation this request with the instructor. Consider place, deadlines, past
relationship, possible objections, options for mutual gain and how to maintain a
professional relationship.
The negotiation session should be planned in advance with a consideration of gathering all
the necessary facts (knowledge is power) before the meeting. Next, students should
Chapter 13 - Buying Merchandise
13-27
ANCILLARY LECTURES AND EXERCISES
LECTURE # 13-1: NEGOTIATING WITH THE VENDOR
Introduction
What is negotiation?
Negotiation is a two-way communication designed to reach an agreement when parties have
both shared and conflicting interests.
Three key points:
If we agree that negotiating is simply getting what you want from others, then it stands to
reason that people are involved in the negotiating activity everyday.
Ask students: whom do you negotiate with and for what results?
Responses might include:
1. Spouse - Where to go for dinner.
Everyone negotiates everyday.
Though we all have lots of practice, negotiating is still not easy to do well.
As buyers, the success, i.e., profitability of the business would be greatly affected by how
well they negotiate.
Chapter 13 - Buying Merchandise
13-28
Potential results
Today, planning and execution is the method through which obstacles are overcome.
When involved in negotiating, the results you achieve can be any of the following:
WIN - WIN
This is the best situation.
Based on cooperation and collaboration.
Enhances vendor trust in buyer as a professional.
WIN - LOSE
There are some instances where win/lose can be positive -- if buyer doesn’t want to develop a
long term relationship.
LOSE - LOSE
Wastes time and energy.
No relationship established.
Objectives not met.
Chapter 13 - Buying Merchandise
13-29
How can you determine what negotiating result you are going to achieve?
Your style will play an important role.
Let‘s take a look at a video and see if these buyers are getting the results they want.
Principled Negotiations
The concept of principled negotiating is based on four basic points:
Let’s talk about them individually.
Separate the people from the problem
Negotiators are people first -- all have human aspects.
Relationships between negotiators tend to become entangled with the problem.
Focus on interests, not positions
Position is something you have decided on.
Interests are what caused you to decide (desires, concerns)
Invent options for mutual gains
Think of a wide range of possible solutions that will benefit both parties.
Consider all options -- all sides.
Chapter 13 - Buying Merchandise
Get the options out in the open.
Look for mutual gain and shared interests.
Insist on using objective criteria
Use fair standards, i.e., market value, cost.
Once agreement is reached, what standards will be used to make sure the deal is carried out?
Planning
In addition to style and probably even more important is one simple word/action --
PLANNING.
To be effective in the market, to get the success you want, you must plan effectively.
Being prepared -- ready to anticipate and answer questions gives the buyer confidence.
Confidence breeds success!
What are the areas that we must look at in order to plan?
1. History - To go forward, you must understand what has happened in the past. Know the
Setting objectives
Keep in mind that to set goals you must:
1. Know the market: What are the current trends? How is business generally? How are each
of your vendors performing against the overall market?
Chapter 13 - Buying Merchandise
2. Know the vendor: How is his/her business? What inventory position is he/she in? (Did
they make too much this season? Is he/she a manufacturer or an importer? This will
Negotiating tips
There are several tips that one can use while negotiating:
1. Beware of time pressures. Almost everything happens at or just before the deadline. Think of the
last major labor strike. Give and get appropriate deadlines.
2. Keep the numbers of negotiators even, or even try to have more people on your side. In some
countries in the Orient they will get people to come in from the factory who don't even speak
English just to keep the numbers at least equal.
3. Let the other guy talk. Be patient and listen. The more he/she talks, the more you learn from
him/her about his/her business. The person who breaks the silence first, usually loses.
4. Let the other guy mention a figure first. It might be better than you would ask for. In any case, it
tells you where you are starting.
5. Know when to use your boss as a partner and source of extra power. The bigger your deal, the
higher you go.
Chapter 13 - Buying Merchandise
13-32
10. Before you go into the negotiation, use a technique that Olympic athletes use: envision how the
meeting will go, and picture yourself being very successful -- it will build your self-confidence.
13. Always leave the door open for the future. Finally, here are some key points to remember when
negotiating:
1. Planning is critical
2. Knowledge is power!
3. The secret in any negotiation is that the other person will only do what is right for him!
ANCIALLRY EXERCISE : ROLE PLAYING NEGOTIATIONS
-------------------------------------------------
-------------------------------------------------
Directions
Get two groups of students to volunteer for this exercise.
One group will represent Drip-Dry; while the other will represent Burdines.
Each group should have three to four people.
Provide the entire class with the following handouts:
1. Dealer letter from Drip-Dry
Chapter 13 - Buying Merchandise
13-33
P.O. BOX 999
NEW YORK, N.Y. 10038
October 12, 1992
DEAR MR DEALER
DRIP-DRY is proud to announce a SUPER MARKET SPECIAL on all orders placed in our showroom
the week of June 10.
• INTRODUCTORY SALE ON ALL NEW MODEL WASHERS @ 15% off regular prices!
Here’s how the promotion actually works. On any purchase of 25 units or more, we will invoice you as
follows:
Regular Wholesale Price
$175.00 ea.
Less 15% Sale Discount
26.25
Promotia1On “sale. Price
$148.75 ea.
