Merchandising

FASHION MERCHANDISING

Fashion Industry- Levels of Merchandising • Retail Organization Merchandising • Buying Agency Merchandising • Export House Merchandising

What is Merchandising? IN RETAIL ORGANISATION Merchandising is a specialized management function within the fashion industry. It is the business that moves the world fashion from designers showroom to retail sales floor and into the hands of consumers.  It is the internal planning that takes place within a retail organization in order ensure adequate amount of merchandise are on hand to be sold at prices that the consumers are willing to pay to ensure a profitable operation.

Marketing Vs Merchandising Marketing function Focuses on broadly defining a company’s market and characteristics. It pinpoints new opportunities for growth through self analysis and market research and promotes company’s image and products. Merchandising function is more specific concerning itself with the development, execution and delivery of the product line with its close ties with the market it serves. Merchandising is not only able to adjust to market variations rapidly but is capable of actually anticipating and helping to create market changes.

Merchandiser Merchandiser is a person who get converted inspiration into design , use technology to conceptualize and address the planning , production, promotion and distribution of products in the fashion industry to meet the consumer needs and demands

Merchandising - involves 6 rights • Right Merchandise

Right Merchandise Retailers must fill their shelves with the merchandise that customer wants.

Right Place The location of the merchandise is of prime importance since it decides the accessibility.

Right Time Much merchandise is seasonal in nature and must be on hand when it is most needed.

Right Quantity A profitable balance between volume of sales and amount of inventory is the desired goal.

Right Price Merchandiser must arrive at a price that is high enough to give the store profit and yet low enough to meet the competition and customers expectations.

Right Promotion Right balance between the investment and the appeal created for the customers

THE CARDINAL SIN OF FASHION MERCHANDISING IS TO BE OUT OF TREND

MAIN PRINCIPLES AND DYNAMICS OF FASHION  The constant in fashion is change  Changes in fashion are gradual and evolutionary rather than revolutionary.  Fashion is cyclical  Customers make fashion  Acceptance level of fashion vary  Fashion depends on place and reflects lifestyle

INTERPRETING CONSUMER DEMAND

Elements of Customer Demand TARGET MARKET BUYING MOTIVATIONS

Identifying Target Market Demographic

Behavioral

Market Segmentation

Geographic

Psychographic

Demographic Segmentation Mainly grouped on the basis of:• Population • Age • Income • Sex • Occupation • Education

Geographic Segmentation Mainly grouped on the basis of:• Cities • States • Regions Climate plays an important role

Psychographic Segmentation Grouped on the basis of the lifestyle– – – –

Social activities Interests leisure pursuits needs and wants

People having similar lifestyles can make up a target market group.

Behavioral Segmentation Grouped on the basis of opinion on specific products or services• Rating of usage of products & services. Help in improving the service/product and make it different from others.

DETERMINIG WHY CUSTOMERS BUY BUYING MOTIVATIONS

RATIONAL MOTIVATIONS

EMOTIONAL MOTIVATIONS

•Durability

•Imitation

•Dependability

•Emulation

•Comfort

•Prestige

•Economy of Operation

•Pride of Appearance

•Price

•Distinctiveness

FASHION PURCHASES SPECIFIC SELECTION FACTORS

 Silhouette- Degree to which an item is considered moderate or extreme in form in relation to the currently popular shape or form of such products.  Decoration or trim- Presence or absence of all types of ornamentation  Material/Fabric-Quality of fabric  Surface interest- Texture, Hand feel  Color-Actual hues used  Workmanship- construction, stitching, finishing

 Size- Preciseness of Fit  Sensory factors- Touch, Taste, Smell, etc.  Ease and cost of care  Brand- Identity of manufacturer or distributor of an item  Utility- Extent of usefulness and service  Appropriateness-Degree of suitability and acceptability  Price- Value placed by individual customer

FASHION RETAIL ORGANISATIONS Organizational Structure & Responsibility

Organizational structure includes the clear understanding of the authority and responsibility for each job to be done.

Organizational system differs with the difference in type of merchandise, size of retail firm, and target customer.

Various Fashion Retail Businesses Three basic Formats• The Small Single- Unit Store • The Departmentalized Store • The Chain Store

The Specialty Store, Discount Store are also few of the other formats

Major Divisions & Responsibilities • Merchandising division- buying, merchandise planning and control, selling, fashion coordination • Sales and promotion division- advertising, visual merchandising, special events, publicity and public relations • Finance and control division- credit, account payable, and inventory control. • Operational division- maintenance of facilities, stores and merchandise protection, personnel, customer service and receiving and marking of merchandise. o Personnel and Branch Store Division may function separately if the store operations are very large.

Stock holders Board of Directors President STAFF Legal counsel research department

Merchandising division GMM

-BUYING OFFICES -COMPARISON BUREAU -DIVISIONAL MANAGERS -department managers -assistant buyers -sales people -FASHION COORDINATORS -HOME PLANNING BUREAU -MERCHANDISE PLANNING & CONTROL -MERCHANDISE RESEARCH

Sales Promotion Division Sales Promotion Manager -ADVERTISING DEPARTMENT -artists -copywriters -direct mail -layout -radio & television -DISPLAY DEPT. -Interior displays -sign room -window displays -exterior displays -PUBLIC RELATIONS -news releases -public fashion shows -special events -use of auditoria

Vice President and General Manager

Finance and Control Division Treasurer & Controller -ACCOUNTING OFFICE -a/c payable -cash office -general a/cing -inventory taking -insurance & taxes -payroll office -sales audit -statistical -CREDIT OFFICE -billing customers -cashiers in office -charge a/cs -charge authorization -credit interviewers -defered payments -CREDIT UNION -EXPENSE CONTROL -LAYAWAY OFFICE -MERCHANDISE STATISTICS

Operating Division Store Superintendent

-ADJUSTMENTS -ARCHITECT’S OFFICE -CUSTOMER SERVICE -sales people -service desk -telephone & mail orders -bridal registry -DELIVERY -ELEVATORS -MAIL DIVISION -MAINTENANCE -PACKING & PICK UP -PRINTING -PURCHASING DEPT. -RECEIVING & MARKING -RESTAURANTS -STORE PROTECTION -TRAFFIC DEPT. -WAREHOUSE -WORKROMS

STAFF Other advisory services

Personnel Division Branch stores Personnel Director Executive in charge of branches

-EMPLOYMENT OFFICE -interviewing -placement -termination -HOUSE ORGAN -PERSONNEL BUDGETS -PERSONNEL TESTING -RECORDS & REVIEWS -budgets & records -job analysis -rating & reviews -TRAINING -induction & system -on the job -WELFARE & HEALTH

-Audit -credit -store planning -maintenance -receiving -transfer of merchandise -employment training -merchandising -sales planning -advertising -displays -special events -liaison with main store

The Merchandising Division General Merchandise Manager (GMM)

Divisional Merchandise Manager (DMM)

Merchandise Managers (MM)

Buyers

Assistant Buyers

Trainees

Soft Line

Hard Line

Qualities of a Fashion Buyer • • • • • •

Dedication Enthusiasm Awareness Stamina Foresight Creativity

• Product Knowledge • Decision-making skill • Mathematical ability • Communication skills • Negotiation skills • Managerial skills

Work Area of a Fashion Buyer • Liaising with suppliers (immediate vendor) • Liaising with internal departments Buying Colleagues Design

Quality Control/Tech Buyer

Finance Marketing/PR

Fabric technology Retail Sales people

THE BUYER’S JOB • Planning • Buying • Selling

Planning • Based on 2 factors -How much the store expects to sell? -How much inventory is needed to achieve that sales goal?

• The buyer must plans stocks so that the store image is reflected in the merchandise. • Preparation of 6 months buying plan with knowledge of fashion trends, market conditions, economic factors, other records of the past seasons. • Flexibility is the most important factor to be kept in mind. • Includes provision for constant adjustment to actual results.

Buying • Adequately stocking the department’s price lines and securing the best possible mark ups on all purchases. • Supervising the physical inventory or stock counts to verify the accuracy of stock records. • Establishing and maintaining effective buying relationships with vendors.

Selling • Communication and promotional activities. • Determining the selling features of the merchandise for promotion purposes and the timing of these promotions.

What is the difference between Buyer & Merchandiser ?

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The buyer’s role in USA includes the administrative and financial input part also besides core buying responsibility.

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In USA buying is often a subdivision of the merchandising team, whereas in many companies in UK, Buying is perceived as central role and merchandising as parallel department to buying.

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Job Details for both these profiles are different with different organizations and are quite overlapping but all fashion buyers are responsible for overseeing the development of range of products aimed at a specific type of customer and price bracket.

BUYING PATTERNS

CENTRAL BUYING The centralization of all buying activities from a central headquarters with the authority and responsibility for the selection and purchase of merchandise limited to buyers of particular merchandise categories

Three Forms of Central Buying • The central merchandise plan • The warehouse and requisition plan • The price agreement plan

The central merchandise plan • Central buying assumes complete authority for buying the assortment of goods, pricing, warehousing and distribution to the many stores. • Central make their purchases and have the merchandise delivered to the warehouse. Buyer has an opportunity to check the goods to be sure they have been shipped as ordered.

The central merchandise plan ADVANTAGES• It provides a steady flow of merchandise provides for specialists in each merchandise category. • Goods are inspected before delivery. • It allows better stock control. DISADVANTAGES• Adjustment to local conditions is difficult • Cooperation may be lacking • An enthusiastic selling force may be lacking

The warehouse and requisition plan • The central buyer arranges for the initial assortment and has the merchandise shipped to the individual stores. Used for staple goods. • The store manager is provided a list of the stock that is inventoried in the warehouse where the central buyer will see it is properly filled. • The store manager has the responsibility for ordering enough merchandise to carry the store through the buying season.

The warehouse and requisition plan ADVANTAGES• Gives the store manger some responsibility in merchandise selection. • Reorders or fill-ins are usually filled promptly. DISADVANTAGES• There is little control over the composition of the merchandise selection. • Poor warehouse control may lead to an imbalance in store inventory.

The price agreement plan • Central buyer working with vendors and manufacturers will agree on the retail price, color, size, style and assortment of staple types of merchandise as well as the terms of shipping. • The merchandise is illustrated and described adequately in catalog to be given to store manager. • The central buyer is responsible for prearranging the minimum amount of goods to be purchased by the entire chain, keeping the store catalog up to date, adding new items, canceling old items. • The store manager has complete authority for the composition of the stock and orders can be placed directly with the vendors concerned.

The price agreement plan ADVANTAGES• It develops a feeling of responsibility on the part of the store manager. • Reduces the expense of warehouse and the necessity of keeping detailed records of each unit. DISADVANTAGES• Problems arise with tardy deliveries and with high transportation cost.

THE PLANNING & CONTROL FUNCTIONS THE DOLLAR MERCHANDISE PLAN

Objectives 1.To satisfy the needs and wants of customer 2.To earn profit

Planning for the profit Major goals of planning in retail merchandising are: 1. to maintain an inventory enough meet the anticipated customer demand. 2. to time the delivery of purchase so that merchandise is available for sale for customer demand. 3. to keep purchases in line with the store’s ability to pay for them. 4. to have funds available for the purchase of new goods when needed. Dollar merchandise plan: it is the specific budget that the buyer uses to project both, sales goals and the amount of stock that is required to achieve the goals.

Earning a profit •

Net sales are all of the sales that have been made minus ‘customer returns and allowances’.

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Cost of goods sold is the amount the buyer has paid for the merchandise that the store has held for that same time period.

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Gross margin is the margin of dollars between what the merchandise cost and what it was sold for.

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Expenses is the amount of money spent to run the business. It includes salaries, advertising, rent, heat and light.

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Profit-the amount of money that is left over after all of the merchandise that is offered for sale has been sold and all of the expenses of running the business have been paid.

Earning a profit Net sales – cost of goods sold = gross margin expenses

= profit

$ 70,000 – 42,000

-

% 100 – 60 40

28,000 24,000

–34.3

4,000

5.7

‘Net sales – cost of goods sold = gross margin’ ‘Gross margin – expenses = profit’

Use of retail figures Majority of departments and stores operate under the accounting system known as retail method of inventory. In this system, all transactions affecting the store’s inventory, such as sales, purchases, markdowns, transfers, and return-tovendor, are recorded at their retail prices.

PERIOD OF PLAN The period plan may vary for a month to an year. The usual planning is of six months. – The Spring Season- Feb.- July – The Fall Season- August- January

Procedures for Preparing the plan The store’s accounting department supplies the buyer with a planning form several months in advance of the start of the actual buying season

On it are figures of the same department’s merchandising operations during the same season last year.

These goals are established by the store management, not by the departmental buyers

The buyers then using the planning form and his knowledge of market conditions, trends, and demand cycles, prepare figures on anticipated sales, stocks, markdowns, and purchases for his department for the upcoming season.

The plan made by the buyer is then reviewed by his divisional merchandise manager.

The merchandise manager then consolidates all the plans made by the buyers of the same division into a divisional plan and submits it to the general merchandise manager.

All the plans are reviewed by both, the store’s controller and the general manager or president.

when approved, departmental plans are combined into a master plan for the whole store.

Steps of dollar merchandise planning 1.PLANNING SALES: • •

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The buyer makes a realistic estimate of prospective sales during the upcoming season. Reviews past sales figures, examine external internal factors that may effect sales, study general fashion trends that may influence the department’s sales. These estimated plans are then broken down into sales goals for each of the months.

(Ability to work with % is helpful tool, it is easier to understand the increase of 4.95% in sales than an increase from $ 24,200 to$ 25,400)

2. PLANNING STOCK To estimate the amount of stock that will be needed to support the planned monthly sales . In order to support planned sales, a Beginning of Month (BOM) has to be estimated. Considerations influencing the planning of BOM stocks : There must be adequate opening assortment on hand in sufficient quantity to meet anticipated consumer demand until stock replacements for goods sold can be secured. The planning must be such that the desired seasonal stock turnover may be realized , markdowns minimized, and a steady flow of new, interesting merchandise assured throughout the month.

Variations in monthly stock goals In planning monthly stock goals stocks should be bought to a peak just prior to the time when sales are expected to reach their peak By peaking stocks before consumer demand reaches its crest the buyer will be able to present maximum assortments in needed styles, sizes and colors when the public is in the mood to buy. Similarly BOM stock plans should be reduced as a selling season approaches its close or demand decreases. MARKDOWNS can be used as tool of reducing inventory as the season ends.

Stock-sales relationships Stores are guided by two stock-sales relationships: 1.

Monthly stock sales ratio The monthly stock-sales ratio uses the no. of months that would be required to dispose of a BOM inventory at the planned rate of sales for the month.It also directly relates stock requirements to the planned sales. Stock-sales ratio = $ BOM stock / $ Planned Sales for month

10. Rate of stock turnover Refers to the no. of times that an average stock of merchandise has been turned into sales in any given period . Stock turnover = $ net sales / $ average inventory (In general the rate of stock turnover is higher in women’s apparel than in men’s clothing or home furnishings. It is also higher in departments featuring lower price ranges than in those featuring higher price ranges. )

What is Average Inventory How to calculate average inventory for February to July Season, BOM stocks of February till July + EOM Stock of July / 7 =Average Inventory

3. PLANNING MARKDOWNS  Markdowns are usually planned as a percentage of each season’s planned sales.  They may then be allotted to individual months, according to the buyer’s estimates of when and to what extent the monthly markdowns are going to be needed to sell the goods.  The chief factors to be considered in establishing seasonal markdown goals are: the past experience of the store or department comparative figures of similar stores amount of the old stock on hand at the beginning of a new season

Markdown % is the amount of dollar markdowns taken during a given period expressed as % of the net sales Markdown % = $ markdown / $ net sales

4. PLANNING PURCHASES Planned purchases means the amount of money buyer can spend on merchandise during a given period without exceeding the value of the inventory planned to be on hand at the end of that period. In most of the large stores ,purchases are planned on monthly basis. The planned purchase includes Planned EOM stock + planned sales + planned markdowns = total needs for the month . Planned purchase = total needs for the month - BOM stock

SUPPLEMENTAL ELEMENTS RELATING TO DOLLAR MERCHANDISING PLANNING Many retail stores , particularly large departmentalized stores , expand budgeting procedures beyond the four basic elements . Important elements are as follows: •initial markup •gross margins •cash discounts earned as percentages of purchase on sales •rate of stock turnover •shortage reserves •operating expenses

Markup: Markup is the difference between the cost price and the retail price of the merchandise. Retail markup % = $ retail - $ cost / $ retail The dollar difference between the delivered cost of the merchandise and the retail price placed on it when it is first brought into stock is called initial markup. Retail stores plan initial markup percentages to ensure that the income derived from sales will be adequate to cover : • all expenses incurred in the operation of the business • anticipated reductions in the retail value of the inventory , such as mark downs , stock shortages, and employee discounts • a reasonable margin of profit for the store The planned markup should be aimed at achieving the goal figure indicated on the dollar merchandise plan; no less or no higher.

Gross margin: Gross margin represents the amount of money left from sales income after deducting the total cost of merchandise sold during that given period. It also indicates the amount of money available to pay all operating expenses and taxes with a reasonable profit left over. GROSS MARGIN = NET SALES - NET COST OF MERCHANDISE SOLD $Gross Margin / Net Sales = %Gross Margin

Cash discounts: Cash discounts are the percentages or premiums allowed by manufacturers off their invoices if payment of the invoice is made within a certain specific period of time. Such discounts are allowed to encourage to the prompt payments of the invoices. It is an additional income for a store . Cash discounts increase gross margin, because they reduce the actual cost of merchandise purchases.

Terms of sale: The combination of allowable discounts on purchases and the time allowed for taking such discounts is referred to as terms of sales.

Stock shortages: Stock shortages or overages represent the dollar difference between the book inventory ( the value of inventory on hand as indicated by the stores accounting records) and the physical inventory ( the value determined by taking a physical count ). When the book inventory is greater than the physical inventory there is said to be stock shortage. When the physical inventory is greater than the book inventory there is said to be stock overage.

THE BUYING CYCLE

What is Buying cycle? The key events and process in which the fashion buyer is involved in order to buy a garment range.

Fashion Industry traditionally splits the year into two main seasons, Spring/Summer- February- July Autumn/Winter- August – January The competitive and constantly changing fashion business requires a more frequent introduction to merchandise, resulting in most stores introducing new ranges many times in between these two main seasons. The occurrence and the names of sub seasons vary from company to company.

Seasons

Approximate Durations (with overlaps)

Spring Transition

Mid Jan-End Feb

6 Weeks

Spring

Beg Feb - End Mar

8 Weeks

Spring promo

Beg Apr- Mid Apr

2 Weeks

Summer 1

Mid Apr-End May

6 Weeks

Summer 2

Mid May to Mid July

8 Weeks

Summer Sale

Mid July to Beg Aug

2 Weeks

Autumn Transition

Mid July to End Aug

6 Weeks

Autumn

Beg Aug -End Sept

8 Weeks

Winter 1

Beg Oct -Mid Nov

6 Weeks

Winter Festive/Holiday

Mid Oct-Mid Nov

3 Weeks

Winter 2 /Christmas

Mid Nov-Beg Jan

6 Weeks

Winter Sale

Beg Jan - Mid Jan

2 Weeks

Four distinct and two promotional season within each half of annual retailing Period

• PHASES- Various ranges introduced within the season. • TRANSITIONALS- Ranges which bridge the gap between one season and the next season.

The Buying Cycle Review of current Season’s sales Budget Planning Comparative Shopping Directional Shopping Sourcing for product development

The Buying Cycle (Contd…) Range planning Garment samples sourcing for range Pre Selection of garment samples Price negotiation with suppliers Final Range Selection

The Buying Cycle (Contd…) Placing orders for ranges Pre production sampling & approvals Bulk garment manufacturing Delivery of products to the retailer Purchase by customer Review of current season’s sales

Comparative Shopping Often referred as comp. shop  Undertaken at the beginning of each season and continues with once a month visit  Byers & Designers are involved  Starts with the looking at current merchandise in the stores of competitors which sell comparable ranges  Report will be produced with few sketches & information grid  Analysis of missing important trends in own range

Directional Shopping Term used for trips to gain inspiration for design concepts  Trips depend upon the buyer’s product range & travel budget  Buyer may visit designer RTW ranges to mass market ranges  Makes note on key shapes, details, colors and fabric for ref.  Buyers usually have budget to buy samples which are referred as bought samples  Designers may share responsibility of directional shopping with buyers.

Pre selection • Time after the Range planning stage at the Buyers’ end can be in form of the Line review/Range review meeting. • Garments samples featuring on the Range plan are presented. Participants are the Design, Marketing, Merchandising and QC teams. • Range is reviewed vis a vis: – Styling, Colors , Price and Delivery – Sourcing strategy regarding product and Supplier base.

Period after Line/ Range review • Finalization of the Styles , suppliers, prices for the Final Range. • Involves: • Informing suppliers regarding the styles which have been included in the final Range. • Change in styles if any. • Price re-negotiations • Order Delivery dates re-negotiations. • Styles dropped. • Request for additional samples if required for the final range review meeting by the buyer.

Final Order Placement After the Final Range Selection meeting, orders are placed with the suppliers in form of sending Purchase orders /Purchase sheets for each individual items selected to be on the range. These may be generated by the Merchandising department or by a separate Purchase department.

Critical path/Time and Action Calendar for the buyer The key activities and the timelines associated with them, for processes like product development and production of any item forms the critical path or the Time and Action calendar. By virtue of the T&A the various activities involved in the Product development/Production processes and the responsible party is fixed

Critical paths for product development, production & delivery (Time & Action Calendar) Style no.

Style Description

Size set Bulk fabric & approval trim approval

Supplier & Country of Origin

Lab dip/strike off approval

Trim approval Fitting Sample approval

Pre production sample approval

Bulk production

Ex factory

Due in warehouse

MANAGING MERCHANDISE ASSORTMENT

MERCHANDISE ASSORTMENT •It refers to a collection of varied types of related merchandise that are intended for the same general use. • A merchandise assortment is usually grouped together in one selling area of the store. • Assortment plan is a compressive and detailed listing of all the merchandise that will carry in stock during a given period, classified by size, type, and price line. •A balance assortment is in which types, quantities, and price lines of merchandise in inventory closely match the demand of your target customers.

DEVELOPING TAILOR MADE CLASSIFICATION SYSTEM To evaluate the classification system according to the department buyer and customer needs we discuss below • the purpose of classification, • explanation for the setup classifications where there is no existing system. • Examining how the classifications of a fashion department is unique.

PURPOSE OF CLASSIFICATION CLASSIFICATION is : An assortment of units or items of merchandise which are all reasonably substitutable for each other REGARDLESS of who made the item, the material which it is made, or the part of the store in which it offered for sale. REASONS FOR SUBDIVIDING MERCHANDISE INTO CLASSIFICATION – To precisely define the NATURE and extent of customer demand so that merchandise is readily available to satisfy that demand. – It provides with a means of better PLANNING and CONTROL of the merchandising operation.

ESTABLISHING CLASSIFICATIONS AND SUBCLASSIFICATIONS •

Begin the process of setting one up by listing every item at every price line that is currently in stock and also those which were in stock during the preceding 12 months.

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Next sort out the listed items by classification or end use.

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After one has established broad classifications on the basis of END USE and non substitutability, one continues to set up sub classifications.

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For merchandise planning and control purposes, each classification and sub classification is assigned a permanent identification code, usually a number. The code of classification consists of a fixed range of consecutive numbers. each sub classification is assigned a specific range of numbers within the wider range assigned to the broad classification.

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All price lines within departments price range are represented in the assortment plan The best selling price lines are appropriately represented with the widest variety of types, colours, materials and sizes. Duplication of merchandise has been minimized, if not prevented.

“DOES THE SYSTEM REFLECT THE WAY IN WHICH THE CUSTOMERS BUY MERCHANDISE?”

TAILORING THE CLASSIFICATION SYSTEM •

If majority of your Customers ask for merchandise by COLOUR , FABRIC, and SIZE you can put the store brand merchandise together with that of a number of different DESIGNERS within the same SUB CLASSIFICTAIONS.

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IF – EXAMPLE: if customers look for blue wool pants in size 10,then you make classification of all pants together and under it sub classification of all wool pants. – CONCLUSION: DNKY, CK etc would be in the same sub classification.

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HOWEVER – EXAMPLE: If customers look for Calvin Klein pants in size 10. – CONCLUSION: All CK pants would be in one SUB classification. And DKNY pants into another ,and all other pants into another.

APPAREL SOURCING

Suppliers of Fashion Goods Suppliers of Fashion Goods Suppliers from Domestic Market

Local Manufacturers Importer wholesaler Exporter Foreign selling agents Resident buying Office Import trade fairs

Suppliers from Foreign Markets

Buying trips abroad to market & Manufacturers Foreign Buying Office Foreign trade fairs

Advantages of Domestic Manufacturers • • • • •

Delivery Proven specification Availability of merchandise in selected quantities Availability of reorder Very close control on the merchandise planning and production • Accommodation of changes due to any reason is easy • Planning and control of stock relatively easy • Permit the stock adjustment to new trends

BUYING FOREIGN MERCHANDISE

Objectives Of Foreign Buying Prestige- image store & Uniqueness Better quality Lower cost Specification buying

Foreign Buying Problems Variation of quality standards Deliveries and reorders Size discrepancy Monetary problems Time involved Other conditions

Other Problems • Language Barriers • Unethical practices (e.g. Child Labor) • Political unrest

Methods Of Buying Foreign Merchandise Domestic sources Domestic importers Resident buying office Foreign selling agents Import trade fairs

Foreign sources Liaison Offices Foreign buying offices Direct Exporters

Domestic Importers/Wholesalers • • • • • • • •

Stockers of foreign merchandise Prove to be more useful for smaller stores Goods can be bought closer to the time of need Risk involved lies with the importer Costs higher than direct buying Offers less exclusivity No concessions are offered Very small qty. of merchandise can also be purchased. • Sells through showrooms or directly from warehouse

Resident Buying Office (RBO) • RBO situated in the same place where the retailers are. • RBO has many retailers as their members. • RBO also offers trend inputs in forms of periodicals and catalogues to the members. • Goods are sourced keeping the member stores and their target customers in mind. • The orders can be large or small as they can absorb • Group purchasing plan is also offered which lowers the cost for the participants. • Commitments must be made far in advance of the selling season • Risk & problems of off shore sourcing are managed by RBO.

Foreign selling agents • They are a group of foreign manufacturers who may or may not carry stock in the importing country. • They make periodic trips abroad to be up to date with the foreign market developments. • Buyer can actually see the merchandise with the styling and uniqueness. • Orders need not be large as many orders are compiled together before sending • No guarantee of quality standards, size discrepancies etc.

Import Trade Fairs • Fairs organized in the importing countries with the goods from the exporting countries • Some trade fairs feature the fashion merchandise of only one country, such as Italian Donna Moda. • Although there is an advantage in being able to view so many lines in one place, because of space limitations ,most manufacturers can only show a small portion of what they can manufacture.

LIAISON OFFICE • Store owned foreign buying offices • Located in major fashion centers & in exporting bases of the world • Advise buyers about new trends • Accompany buyers on their market visits acting as interpreters and planning market itineraries • Because of their broad & strong base in the local market they get the best resources according to the need of the buyer • Function as a follow up service to ensure prompt delivery and quality control • Each liaison office works as a separate profit centre • Types of stores that have such offices are – GAP,NIKE

Foreign Buying Offices • Generally located in a major city of the foreign buying area and facilitates indirect exporting • They are independent buying agencies and are also known as Foreign Commissionaires • They work for many buyers/retailers • They often organize buyer manufacturer meet in their offices and also take the buyers to visit manufacturer's’ facilities. • They must have very strong vendor base with them. • They do not make purchases for the client unless authorized to do so • The client pays them fee usually a percentage of the first cost • They then follow up to make sure the delivery is made on time and the quality is checked

Direct Exporters • The manufacturer- exporter undertakes the entire export process. • Increases its profit margin by saving on payments to an intermediary • Develops a closer relationship with the overseas buyer. • Cost of establishing another market may overweigh the monetary benefits of direct exporting • The exporter may be exposed to more direct risks.

MERCHANDISING RESPONSIBILITIES IN BUYING & EXPORT HOUSES

Export House • Coordinator of all activities at the manufacturer's end • Correspondence with buying Agencies • Could be handling many buyers at a time • Takes care of PD, sampling, costing, negotiations, delivery schedules, production planning, fabric and trim orders, regular follow up. • Sources of information are limited as compared to buying house merchandiser • Is directly responsible for the merchandise • Ensuring inspections and quality levels.

Buying House • Could be looking after one account/ one division of a buyer but many vendors • Product exposure is much more • Depends for all information on vendors • Are responsible for- PD, sampling, costings, negotiations,delivery schedules, production planning • Responsible for vendor selection and development