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An Introduction to Retail Management
&Marketing
Book 4Retail
Marketing
Book 4 Sessions
Session 2: Retail buying
Session 3: Supply chain management
Retail logistics in the UK: past, present
and future
Session 2: Retail buying
1. The buying task
2. Buying objectives
3. Retail buying decisions
4. Organization of retail buying
5. Conclusion
Introduction• The role of the buyer can be very rewarding but it
involves highly complex and demanding tasks. • When buyers are making P selections they look for
items that can deliver 'value' to the customer. • To meet customers' needs, buyers consider new
consumer trends, consumer purchasing patterns, changes in fashion & tastes & new P & brands entering marketplace.
• Develop right mix of P to suit a range of consumer tastes & purchasing occasions.
1. The buying task
• Retail buyer need to buy exactly right amount of
P for customers needs & to ensure that all P are
sold so there are no items left on shelves.
• Managing buying & merchandising for seasonal
& special events can be particularly demanding
for seasonal events depending on P sector &
season.
• Retailing is a distributive trade which provides
employment for individuals with a wide range of
skills.
• Some Government bodies help build relationships
between industry and education providers to help
attract young people into retail distribution trades.
Challenges for retail buyers• Buyer is responsible for managing P a retailer sells• They work from centrally located offices at the
company's headquarters.• He is responsible for selecting the right P as well as
negotiating with suppliers. • Negotiations involve procuring & sourcing P for the
business & negotiating for very large quantities of G • Pressure is on buyer to get right volume of purchases• So P are brought into business in sufficient quantities to
meet consumer D & be available at the right time
• Buyer's negotiations have to ensure deals with suppliers
enable retailer to sell P at a suitable level of profit.
• They are concerned with logistical question of how P
get to store to put on display ready for customers.
• The larger the retail organization, the more complex the
buying and logistical tasks become.
• A large retailer has specialist buying teams, rather than
individuals, who are supported by logistics or
distribution operations within organization
2. Buying objectives• Buying is critical to success of marketing planning • P/S are core part of marketing mix which generates
sales & as a result the process of retail buying needs to meet certain objectives.
• To succeed buyers have to ensure several guiding principles of buying are met.
• Competitive positioning is based on the consumer's perception of what a brand means to them personally.
• Retailers focus on consumers' perceptions in order to differentiate themselves from other retailers selling similar P
Buyers & merchandisers aim to achieve the following guiding objectives & ensure retailer has fulfilled the following criteria:
• Right product
• Right time
• Right quantity
• Right place
• Right price
The right product
• Retailers need to be sure that the selected P
ranges deliver the right level of value the
customers are looking for & with the brand
positioning of the business.
The right time• Different P are needed & wanted at different times• Retailers must manage their stock so that P offer reflects
requirements of customers at any particular time. • For ex, a newspaper retailer must make sure that latest
edition of a newspaper is available as the shelf-life of a daily newspaper is only a few hours.
• P such as Easter eggs & sun cream have seasonal sales patterns, whilst main P such as bread, milk, tea & coffee have a more constant demand pattern.
• Shelf-life, seasonality & fashion are key factors in the time aspect of retail buying, referred to as 'stock control'
The right quantity• Buyers must manage quantities of P brought in to
ensure the customers' demands are met. • Shoppers can easily become dissatisfied when the
items they want to buy are out of stock. • However, it is equally important for buyer to get right
balance between availability of stock & overstocked. Excess stock ties up financial capital, uses storage
• Too much stock means price reductions to sell items quickly to make space for new season's ranges. Getting balance between amount purchased & amount sold wrong means a reduction in profits for retailer
The right place • Earge retail organizations such as Co-operative,
Tesco are not only selling ranges of P on a wide geographical spread (local, national & international)
• They also sell P in a variety of retail formats, e.g., hypermarkets, superstores & convenience stores
• Each has its own characteristics in terms of size, location and target customer profile.
• Each of store formats is aimed at specific customer segments & at satisfying specific needs
• key point is that P ranges sold in each outlet are
selected by buying team based on variables affecting
potential sales, customer D & environmental forces
(such as changes in sales tax)
• Place where G are sold can have a significant effect
on the range of merchandise on offer.
• Think about how tourist gift shops adapt their
ranges to suit very specific buying requirements.
The right price• Retail buyer will negotiate 'right' price for P from
suppliers & will consider role of the P in terms of its contribution to profitability of retail business.
• Negotiations are informed by a retailer's corporate & marketing objectives, e.g., market penetration, sales & profits.
• Retailer may be happy with a small profit margin, (on a frequently purchased item), but expect a higher level of profit from a (less-frequently purchased P).
• Different levels of profit will be determined by price
retailer sets & cost price that retailer pays its suppliers
• Overall profitability will be determined by rate of sales of
whole P range & profit margins set within P range • For ex, some retailers sell at lower prices & use sales
promotions to generate a fast turnover of G, whereas others look for relatively slower turnover of stock but higher value sales & profit margins.
• Rate of sales is influenced by price level consumer is
willing to pay, so setting of prices becomes another area
of complex decision making for retail buyers
3. Retail buying decisions• Buying decisions vary in complexity depending on
size & type of operation of the retail business & the types of P on offer.
• Some P (e.g., beans & washing powder) are always available & patterns of D are very stable whereas others are not (e.g., contemporary fashion & perishable seasonal goods)
• buying situations can vary from a simple restocking task to an entirely new & complex task
Figure 2.1 Flow chart showing three different buying tasks involving different stages in the buying decision process.
• In local store manager is buying a P that is regularly sold in store. We refer to this as a 'straight re-buy' as manager habitually buys a quantity of same G from same supplier.
• Sweater buyer has other considerations & new suppliers may be sought to supply new P , so this is a 'new buying situation'.
• ‘Modified re-buy' – It lies between these two extremes & requires changes to types of P & suppliers.
4. Organization of retail buying
• Large retail organizations have complex buying
tasks
• Thus, employing large teams of people, each
with quite specific tasks within the buying
function.
• Organization of the buying group is usually
spread across various layers of management.
Centralization• Multiple retailers with more than ten stores carry
out buying operations through a central organization• Trend to centralize buying function has had impact
on the evolution of retail industry by reforming buying function & making it more efficient.
• Smaller retailers have been acquired by larger retailers & buying operations have been fused, leaving central buyers in control of larger volume of G with increased financial responsibility
• Advantages: scale economies & augmented
buying power & opportunity to employ P
buying specialists.
• Centralized buying allows P offer to be
centrally coordinated, supporting the corporate
retail brand.
Buying departments and teams
• Retailers manage buying by dividing the total P range
into smaller P specific subsections & then have teams
responsible for managing specific P area.
• To develop maximum efficiency within buying teams
P ranges are divided up based on P characteristics,
which enables teams to develop P K & buying
expertise.
• Some organizations, buying responsibility is
allocated according to the turnover of department.
Dep handles same proportion of total buying budget
The larger the retailer, the more narrowly the buying
areas will be defined because of the larger volumes
of P & cash flowing through the organization.
• In large retail organizations, buying decisions are
rarely left to one individual, unlike independent
retailers, where owner /manager is responsible for it
• Buying team consist of people with ≠ roles • Buying function is broken into role concerned
with 'right P & price' functions & stock control role concerned with other factors (time, quantity, place).
• Those people work interdependently, towards same departmental goals.
• Buying teams are supervised by senior managers (merchandise manager or buying director)
Buying committees• A highly complex buying decision such as introducing a
new P line will have an impact on all areas of retail management.
• Buyers have to consider supply side; merchandisers consider stock levels & space allocation for P; & store managers concern themselves with how P should be displayed & how it should be sold.
• At the end the most important person is consumer. • Retailers need to have mechanism by which needs of
people involved with Pare considered in buying decision making process.
By using a group of people to make buying decisions
These groups are referred to as buying committees representatives from all areas of retail business get together on a regular basis to consider P ranges
Advantages: committee is made up of people who together have a considerable wealth of P expertise, & whatever decision is made has backing of all members.
But, gathering committee takes time & the group may not be able to reach a consensus view, which may result in some buying opportunities being lost.
Decentralized buying• For most multiple retailers, buying decisions & operations
are carried out within central buying organization. • However, it may be more efficient to carry out some
buying on a regional basis, or even at store level. • Fresh produce such as meat is sometimes bought by
regional buyers because of geographically fragmented nature of supply.
• Likewise, it makes sense for regionally-specific P such as newspapers or heritage gifts to be managed by store
• Areas are increasingly tailoring P assortment to suit regional preferences achieving differentiated P
Sustainability and ethics• whatever we feel about environmental issues,
changes having implications for retailing.• Government initiatives, consumer movements &
campaigns are focusing on environmental impact & encouraging companies to look for better ways to manage global resources.
• During last 30 years, retailers have been looking at their environmental impact & considering opportunities & implications on businesses.
The theory of developing sustainable supply chains
• Companies aim to build a sustainable supply chains, managers & planners are faced with uncertainties & complexities.
• To deal with such challenges, companies need to constantly scan environment at different levels in order to grasp implications of their purchasing behavior.
• Recently, logistics, store & supply chain management have been revolutionized changing consumer demand for certain P & the development of fully integrated global supply chains to meet this D.
• Currently, many organizations are playing catch-up to cope with expanding scale & scope of supply chains by reorganizing & streamlining their supply chains to cope with varying demand.
• However, regardless of the level of sophistication of a particular retailer's supply chain, in the future supply chains will have to become more collaborative & involve a network of firms that will manage the flow of G from 'the earliest raw materials supplier to the ultimate consumer, & beyond, namely the disposal and recycling processes too’
• To build a sustainable supply chain, retailers need to be aware of what is happening in immediate & wider environment & should scan trading environment across a number of levels.
• Six levels a company should be aware of & scan for the latest information in order to increase their ability to respond effectively sustainability issues.
This figure shows six levels which potentially might affect
the sustainability of the supply chain:1. Societal level, where the focus is on the macro-environment2. Network level is where the scale & scope of supply chain are
considered & represents where analysis of the inter-linkages between scale, scope & levels of supply chain are brought together
3. Chain level looks at existing supply chain to identify opportunities for improvements
4. Firm level focuses on company & its involvement in the supply chain
5. Functional level refers to the various areas of a firm that is affected by supply chain issues
6. People level is concerned across the supply chain.
'sustainable development issues cannot be
grasped at firm level only!
That will be useless and incongruous'.
Companies need to explore what is going on
at each of the different levels if they are to be
able to map-out a sustainable approach to
managing the supply chain.