Theory of merchandise buying behavior

Theory of merchandise buying behavior:

Inter organizational factors>>>

Retailer size > Retailer type > Retailer location> Management mentality >

Intra organizational factors>>>

Type of merchandising > Product positioning > Regulatory constraints > Types of decision

Merchandise requirements > Choice calculus > Supplier Selection>

Competitive structure > Corporate image > Relative marketing effort

Business climate > Actual supplier/ Product choice> Business negotiations

Company’ financial position> Actual supplier/Product choice > Market disturbance

In the business negotiations i.e. the negotiations between the manufacturer and the retailer are important in establishing the terms of trade and whether there will be any trading. If negotiations break down, the retailer will have to settle for a less than ideal supplier. Similarly, factors like market disturbance, which includes unexpected events like strikes, disasters, force majeure, economic sanctions etc and the business climate i.e. to macro economic trends, will also play a role in the buying decisions. Finally, the company’s financial position influences the buying decision, for example retailers with limited liquidity will tend to be more interested in good credit terms.

Thus, different factors influence merchandise buying requirements. In the real worlds, a retailer may have other considerations influencing his decision on buying. Some of these factors could be the stage of the life cycle that the product and the retailer are in. The type of purchase that the buyer is making, for example could be for a new product being launched, a repeat purchase, or private label that is being created. The technology with the retailer and the level of technology adaptability with the supplier are also factors to be considered.

The above mentioned factors affect the merchandising philosophy of the retailer. The merchandise philosophy is a reflection of the retailer’s target market that is the customer segment he wishes to cater to. It is keeping this target market in mind that the retailer has to evolve a strategy for store location, pricing and the product assortment that he is going to offer to the customer. The merchandising philosophy will also help the retailer determine the role to be played by the various persons involved in the merchandising function. The duties and responsibilities can be clearly defined and this helps in the smooth functioning of the merchandising departments.

The merchandising philosophy varies form retailer to retailer. In the apparel industry, some companies may be design driven, while others may be price driven. Design driven company may depend upon innovative designs to attract its target market, which is generally composed of fashion innovators. As the target market represents a very small number of customers, competition among design driven companies is intense and the odds of company succeeding are slim. Designers for design driven company rely on their skill, reputation, image and advertising to lure customers. Examples of design driven companies include Calvin Klein. Donna Karan, Anna Sui, etc.

The procurement of merchandise requires a basic understanding of the consumer and the retail buying environment. The starting point of the buying function is the sales forecast, which is an estimate of the pieces and the lines, which need to be sold in the retail store during a specific period of time, usually one year. After determining the sales that are targeted, the person responsible for procuring the merchandise needs to ensure that he is able to procure this merchandise in the right quantities at the right price and at the right time. The buyer and merchandiser usually handle the function of procuring the merchandise. While buying merchandise the expertise of negotiation technique holds good like any other industry input buying of materials.–