REVIEW

15 KEY TERMS FILL IN BLANKS WITH BANK

• MERCHANDISE PLAN- A BASIC BUDGETING TOOL THAT ASSISTS THE RETAILER OR BUYER IN MEETING DEPARTMENT OR CLASSIFICATION GOALS. • SEASONAL MERCHANDISE - SELLS WELL AT CERTAIN TIMES, OR SEASONS, OF THE YEAR• FASHION MERCHANDISE - SELLS WELL FOR SEVERAL SEASONS, BUT NOT YEAR AFTER YEAR• STAPLE MERCHANDISE - SELLS WELL OVER A LONG PERIOD OF TIME • CONVENIENCE MERCHANDISE - MERCHANDISE BOUGHT WIHTOUT MUCH PLANNING OR THINKING

• OPEN-TO-BUY - AMOUNT OF MONEY AVAILABLE TO PURCHASE MERCHANDISE AFTER OTHER PURCHASES HAVE BEEN SUBTRACTED. • DATING TERMS -DEAL WITH THE DATE WHEN THE BILL FOR MERCHANDISE HAS TO BE PAID TO VENDOR. • SHIPPING TERMS- REFER TO HOW MERCHANDISE WILL GET FROM THE MANUFACTURER TO THE STORE.• VENDOR - A COMPANY FROM WHICH A BUYER PURCHASES MERCHANDISE. • MARKDOWN - A REDUCTION IN THE ORIGINAL SELLING PRICE.

• CENTRALIZED BUYING OCCURS WHEN ALL BUYING FOR THE CHAIN IS COMPLETED FROM ONE LOCATION.• DECENTRALIZED BUYING MEANS THAT BUYING DECISIONS ARE MADE AT THE LOCAL STORE LEVEL.

• MARKUP IS THE TERM USED TO EXPRESS THE DIFFERENCE BETWEEN THE COST PRICE OF MERCHANDISE/SERVICES AND THE SELLING PRICE OF THE MERCHANDISE.• MARKET SHARE IS ONE RETAILER’S PART OF THE TOTAL SALES OF MERCHANDISE AND SERVICES BY ALL RETAILERS IN THE SELLING AREA. • PRICE IS THE AMOUNT OF MONEY RETAILER ASKS A CUSTOMER TO PAY FOR MERCHANDISE OR SERVICE.

MERCHANDISE LIFE CYCLE

• INTRODUCTION – PRODUCT IS ESTABLISHED; PRICES DEPEND ON QUALITY AND MARKET SHARE; PLACEMENT IS LIMITED; PROMOTION IS USED TO EDUCATE CONSUMERS• GROWTH – PRODUCT IS MAINTAINED BUT TWEAKED; PRICE IS MAINTAINED WITH IN DEMAND BUT LITTLE COMPETITION; PLACEMENT IS INCREASED; PROMOTION AIMED TO TARGET• MATURITY – PRODUCT IS ENHANCED TO SET APART FROM COMPETITION; PRICE IS LOWER; PLACEMENT IS INTENSE AND INCENTIVES OFFERED; PROMOTION USED TO DIFFERENTIATE PRODUCT • DECLINE- SALES DECREASE, PRODUCT IS EITHER MAINTAINED OR REJUVENTE, REDUCE COST BUT CONTINUE TO OFFER, DISCONTIUE AND LIQUIDATE

BUYER’S JOB • 1. DETERMINING AVAILABLE MONEY DETERMINED BY THE MERCHANDISE PLAN• 2. WHAT CUSTOMERS WANT• 3. VENDOR SELECTION• 4. NEGOTIATING TERMS AND DISCOUNTS• 5. TIMING MERCHANDISE DELIVERIES

OPEN-TO-BUY EXAMPLE• TOM IS RUNNING A BEACH SHOP. IN JUNE, PLANNED PURCHASES TOTAL $3,300. HE ORDERED MERCHANDISE THAT COSTS $1,400 AND RECEIVED A SHIPMENT OF GOGGLES WORTH $300. WHAT IS THE OPEN TO BUY FIGURE?

• 3,300 – (300+1,400) = 1,600

DATING DISCOUNTS

• 3/15, NET 60

• 3% DISCOUNT OF TOTAL BILL IF PAID WITHIN 15 DAYS OF SHIPMENT, OR PAY FULL BILL WITHIN 60 DAYS

• SAVES MONEY AT END OF YEAR!

FACTORS BUYERS CONSIDER WHEN NEGOTIATING SHIPPING TERMS• HOW MERCHANIDSE WILL GET TO STORE

• WHO PAYS FOR THE SHIPPING ( MANUFACTURER OR BUYER);

• AND WHEN OWNERSHIP OF THE MERCHANDISE CHANGES HANDS.

3 FACTORS AFFECT SELLING PRICE

• 1. COMPETITION• 2. SUPPLY AND DEMAND• 3. CUSTOMER ACCEPTANCE

EXPLAIN SUPPLY AND DEMAND• LAW STATES: • SUPPLY LIMITED < HIGHER PRICES • SUPPLY PLENTIFUL > LOWER PRICES • DEMAND = QUANTITY CUSTOMERS WILL PURCHASE• SUPPLY = QUANTITY OF MERCHANDISE THAT IS AVAILABLE FOR PURCHASE.

MARKDOWNS• REASONS: • ATTRACT NEW CUSTOMERS• REDUCE INVENTORY - SELL MERCHANDISE NOT SELLING

AS WELL AS EXPECTED• GENERATE NEW SALES• PART OF DOING BUSINESS• PART OF THE MERCHANDISE PLAN ALLOWING FOR PRICE

REDUCTIONS UNDER PLANNED REDUTIONS.

5 Way Retailers Sell Markdown Merchandise• 1. SELL, OR JOB-OUT TO ANOTHER RETAILER SUCH AS T.J. MAXX• 2. CONSOLIDATE AND SELL TO ANOTHER STORE UNDER SAME OWNERSHIP• 3. USE INTERNET • 4. DONATE AND USE AS TAX DEDUCTION• 5. CARRY OVER INTO NEXT SEASON