1. Dependent on retailer’s type of store and merchandise sold:
a. selling history,
b. consumer’s perception of the manufacturer’s or wholesaler’s reputation,
c. reliability of delivery,
d. trade terms,
e. projected markup,
f. quality of merchandise,
g. after sale service,
h. transportation time,
i. distribution center processing time,
j. inventory carrying cost,
k. country of origin,
l. fashionability, and
m. net cost
2. Private label brands
a. increases as the perceived consequences of making a buying mistake decrease
b. increases when the different brands in the category are perceived to have a wide variance in quality
c. decrease in the quality benefits are deemed to require actual trial/experience rather than being assessable through a search of package label information
3. vendor profitability analysis statement : is a tool used to evaluate vendors and shows all purchases made the prior year, the discount granted, the transportation charges paid, the original markup, markdowns, and finally the season-ending gross margin on that vendor’s merchandise.
4. confidential vendor analysis : is 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.
5. Retailers can classify vendors into five categories:
a. Class A vendors : are the vendors from whom the retailer purchases large and profitable amount of merchandise. The retailer may distinguish these vendors from others by purchasing a certain minimum quantity from them.
b. Class B vendors : are those that generate satisfactory sales and profits for the retailer.
c. Class C vendors : are those that carry outstanding merchandise lines but do not currently sell to the retailer.
d. Class D vendors : are those from whom the retailer purchases small quantities of goods on an irregular basis.
e. Class E vendors : are those with whom the retailer has had an unfavourable experience.
6. Retailers should indentify the image they want to portray as retailers when merchandising and choosing vendor. They should ask themselves:
a. Where does this product fit into the strategic position that I have staked out for my department?
b. Will I have an exclusive with this product or will I be in competition with nearby retailers?
c. What is the estimated demand for this product in my target market?
d. What is my anticipated gross margin for this product?
e. Will I be able to obtain reliable, speedy stock replacement?
f. Can this product stand on its own, or is it merely a “me-too” item?
g. What is my expected turnover rate with this product?
h. Does this product complement the rest of my inventory?
7. Vendor Negotiation
Negotiation: is the process of finding mutually satisfying solutions when the retail buyer and vendor have conflicting objectives.
Retail buyer must negotiate:
a. price,
b. delivery dates,
c. discounts,
d. shipping terms,
e. exclusivity,
f. guaranteed sales,
g. markdown money,
h. promotional allowances,
i. and return privileges
Manufacturers become increasingly aware of the cost of carrying excess inventory. Both manufacturers and retailers have become more concern with the time value of money and the effect on the cash flow. Buyer puts all the upcoming areas of negotiations and previous agreements in letter form and sends it to vendors before going into market to eliminate any misunderstanding afterward. Buyers must also be familiar with the prices and discounts allowed by each vendor.
Trade discounts: is also referred to as a functional discount and is form of compensation that the buyer may receive for performing certain wholesaling or retailing services for the manufacturers. Often express in a chain, or series such as “list less 40-20-10” which represents a percentage reduction from the list on an item.
Quantity discounts : is a price reduction offered as an inducement to purchase large quantities of merchandise. Three types:
a. noncumulative quantity discount : a discount based on a single purchase
b. cumulative quantity discount : a discount based on total mount purchased over a period of time
c. free merchandise : a discount whereby is offered in lieu of price concessions
Promotional discount : is a discount provided for the retailer performing an advertising or promotional service for the manufacturer
Seasonal discount : is a discount provided to retailers if they purchase and take delivery of merchandise in the off season
cash discount : is a discount offers to the retailer for the prompt payment of bills
2/10 net 30 means 2 percent discount is given if payment is received within 10 days of the invoice date and the net amount is due within 30 days.
In order to obtain more advantage from this discount, retailer/buyer could negotiate:
a. End-of-month (EOM) dating: allows the retailer to take a cash discount and the full payment period to begin on the first day of the following month instead of the invoice date.
b. Middle-of-month (MOM) dating is similar to EOM except the middle of the month is used as the starting date.
c. Receipt of goods (ROG) dating allows the starting date to be the date retailer received the goods
d. Extra dating (Ex) merely allows the retailer extra or free days before the period of payment begin.
e. Anticipation is something that is not widely use nowadays. Anticipation allows a retailer to pay the invoice in advance of the expiration of the cash discount periods and earn an extra discount.
8. Delivery Terms
Another factor in negotiation. This is because it determines the title to the merchandise passes to the retailer, who pays the freight and who is obligated to file damage claims. Three most common shipping terms are:
a. Free on board (FOB) factory : the buyer assumes title at the factory and pays all transportation costs from the vendor’s factory
b. Free on board (FOB) shipping point : the vendor pays the transportation to a local shipping point, but the buyer assumes title at this point and pays all further transportation costs.
c. Free on board (FOB) destination: The vendor pays all transportation costs and the buyer takes title upon delivery.
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