The buying process
The buying process within retail companies has become such a significant factor when deciding on, and managing merchandising that they have had to introduce a merchandise management function to their retail operations.
According to Gilbert (1999) p.161 ‘The complexity of modern retail operations often requires the grouping of the buying process into an individual category’
Kent & Omar (2003) p.293 supports this statement as they indicate that due to the complexity of the buying function; the need for incisive marketing focus and intense competition has resulted in the development of retailers adopting ‘centralised buying departments staffed by teams of buyers, and merchandise managers’.
Buyers and Merchandise managers, although work in the same department within an organisation, they have different role’s to play with regards to what their day-to-day duties are within a retail organisation.
The buying process is an individual category within the merchandising department where there is normally a buying director, buying managers and a team of buyers. Varley (2001) p.25 states that ‘The Buyers role within a department is traditionally seen as the figurehead that carries out the buying process on behalf of the retailer.’
The main role of the buyer is to successfully purchase attractive merchandise, negotiate on the price, quality and the availability of the merchandise offered that meet customers needs. By fully understanding the customers’ wants and needs, buyers are able to maximise profits and provide commercially viable range of merchandise at competitive prices.
Varley (2001) P.269 says that ‘The buyer must be just as concerned with the selling price of goods as with their cost, because each of these functions affects profits equally.’ Setting the right price is a key factor for a Buyer in making sure that the merchandise chosen by them is successful in maximising profits.
Kent & Omar (2003) P.273 states that ‘All buyers will be involved in negotiation’. This involvement in negotiating will be with the selecting of the suppliers, where the buyers will negotiate on the price, delivery agreement, the discounts available in bulk purchasing, the terms and condition of contract, and the settlements terms to establish the period time that the supplier receives payment.
Retail buyers must be able to understand and predict customer needs and the saleability of an item based on cost, style, and competitive items available. This is important because they must order items months ahead of time. A buyer needs to put aside their own personal tastes and focus on what and how much customers will buy. Not only that, but retail buyers must accomplish this within a specific purchasing budget that the merchandise manager will have set. They need to be confident in their decisions and be able to defend them. Buyers must be experts in the merchandise that they purchase and must know the best places to buy. Varley (2001) p.25 supports this as it states that the buyers:
‘Must be aware of all the features of the product that bear upon its ability to give customer satisfaction and they must have an extensive knowledge of what is available within the product market for which they have responsibility.’
The buyers’ role within a merchandising department has become more important these days as John Karonis of the Financial Times, 17 March 1998 as cited in Gilbert (1999) p.167 states that
‘Negotiating prices on the true profit contribution are made more difficult by currency fluctuations, extended transportation channels, and commercial practices unique to each culture.’
The role of the Merchandise Manager is to concentrate mainly on the inventory side of the department. Gilbert (1999) p.166 states that ‘the merchandiser is responsible for planning and controlling stock ranges and replenishment.’
Not only this, but the Merchandisers are responsible for ensuring that products appear in the right store at the right time and in the right quantities.
The merchandiser must decide on the availability of funds for the buyer in order to divide the budget accordingly. This will be decided once ‘the analysis of past sales for the entire operation and considering any economic factors that might increase or decrease future sale, the merchandise budget is established.’ Diamond & Pintel (2001) p.37.
Gilbert 1999 p.166 says that ‘The role of the merchandiser is driven ultimately by the budgeting process,’ and once the budgeting plan is prepared, the merchandiser is able to concentrate on monitoring and evaluating the performance of the business.
To ensure that the merchandisers’ duties are completed properly, they must work loosely with the buying team to accurately forecast trends, plan stock levels and monitor performance. The role of the merchandiser according to Varley (2001) p.25 ‘is now seen as more strategic and as having a greater impact on the product management process.’ While the buyers select the lines, the merchandisers decides on how much money should be spent, how many lines should be bought, and in what quantities. Merchandisers set the prices to maximise profits and manage the performance of the ranges, planning promotions and markdowns if necessary. Merchandisers also oversee the delivery and distribution of the stock and deal with problems with suppliers as they arise.
A merchandiser takes decisions about what is ordered from suppliers and then what is sent out to stores: what sizes, what quantities, which lines to regard as risky. A merchandiser also analyses what should be marked down to increase sales. Samson & Wingate (1975) p.313 gives this reason why markdowns are caused as they say that ‘Most markdowns are caused by errors made in merchandise selection (buying), in initial pricing, and in selling techniques.’
This shows us how it all comes together within a merchandise management function, where the buyer and the merchandiser are inevitably responsible for every aspect of the merchandise process. This is supported by Lewisen & DeLozier (1987) p.595 where it is stated that ‘Markdowns results from errors that retailers make in buying or procuring merchandise.’ Price reductions are often necessary to adjust for errors in the assortment, support, and quality of merchandise the retailer (buyer) purchased, as well as for mistakes in the timing of purchases and the selection of buyers.’
Carrying on with the formation of the merchandise management function, where the buyer and merchandiser comes together as one, John Karonis of the Financial Times, 17 March (1997) as cited in Gilbert (1999) p.167 states that within ‘merchandising: retailers must create the right mix of product to appeal to local needs, and still have rapid response processes in place when the mix must be changed or replenished.’
With regards to this statement, buyers are responsible for recognising the needs of the consumers by obtaining the right mix of product within their product range, whilst the merchandiser will undertake the response processes of the changes required. Gilbert (1999) p.160 says
‘As merchandise has to be acquired for future purchase opportunities, forward planning is needed in relation to changing consumption tastes and demand.’
This shows the true extent of the understanding that exists between the buyers and the merchandisers with regards to their relationship within their working environment.
Gilbert (1999) p.174 also defines the importance of having a merchandise management function in place as he states that ‘The role of merchandiser is central to the pursuit of the strategic objectives of the retailer, and the operational activity surrounding planning and controlling stock ranges and replenishment.’
This is supported by the buyers’ role within the merchandise management function as Gilbert 1999 p.174 goes on to state that
‘No plan will be able to succeed unless the negotiating and contracting skills of those involved ensure that quality, delivery and cost are acceptable to the consumer.’
The future for merchandise managers looks promising according to Gilbert (1999) p.340 as he says that ‘consumers as a potential market are easy to predict even until the year 2020 as they are already born.’
The extensive research that Buyers undertake in order to predict promising merchandise for potential consumers will inevitably be supported by the merchandise managers with their planning and control of the merchandising process.
As stated earlier, the role of the merchandiser is now seen more strategic and as a result of this, Varley (2001) p.25 goes on to say that ‘this can have the effect of pushing the buying role further into the area of design, product development and selection, with less control over range planning and direction.’
The buyers’ role is inevitably supported by a successful managing of the merchandise function, by having this function in place it ensures that consistency is carried throughout the department, that there are no complications in the roles of either division, and that all areas of managing the chosen merchandise is done successfully.
To conclude, Gilbert (1999) p.174 has answered the question on the importance of having a merchandise management function in place by stating that ‘No plan will be able to succeed unless the negotiating and contracting skills of those involved ensure that quality, delivery and cost are acceptable to the consumer.