Exam 3 (Chapters 11-13)

Personality Styles in Negotiations

-Before negotiating, analyze your personality traits -During negotiations, analyze the vendor's traits -View concerns as mutual problems, and seek to arrive at solutions

Visiting Vendors

-Establish a tentative itinerary each day -Visit resources in a planned sequence -Be on time for appointments -View all merchandise before placing orders -Price the merchandise while viewing -Make careful notes

Criteria For Selecting Vendors

-Merchandise and prices offered -Vendors' distribution policies -Vendors' reputation and reliability -Terms offered -Services offered

Negotiation Tactics (page 265)

-Take it or leave it -Limited authority -But you can do a little better -But I can't make up my mind -Facts and data -What if? -Let's split the difference -Time pressure

Financing Purchases from Foreign Sources

-buyers may have to present a letter of credit to foreign suppliers -letter of credit: a promise from the purchaser's bank to the seller that money is available to purchase the goods ordered

Preparing to Negotiate

-clarify your interests and needs -consider the best time to raise the issue -consider cultural differences -prepare your statement

US Expansion to Foreign Markets

-decisions must be made about merchandise mix -"Should it remain largely American?" -"Should products reflect local tastes?" -must decide if want to expand by purchasing and existing foreign firm or exporting a store format that has an identify unfamiliar to customers there -another dilemma is whether or not to use the same merchandise sources as for domestic stores

Identifying Drawbacks to Buying from Foreign Sources

-early purchase commitment required -delivery problems -size discrepancies -added expense and time involved -funds tied up

Tactics

-should be based on becoming acquainted with negotiators and their organizations

Trade Shows or Expositions

-shows typically held at convention centers or exhibition halls in large cities to showcase the latest merchandise in a particular product category -buyers are able to easily compare vendor offerings while attending these shows and have the opportunity to identify new trends and resources in the market -usually only held for a few days each year

Identifying Reasons to Buy from Foreign Sources

-unavailability of merchandise -low cost -quality -uniqueness -fashion trends

Before Entering Negotiations

-you need to thoroughly understand the market, and the larger impending purchases will mean a greater need for research -need to understand your customers' needs, competitive and economic conditions, and technical aspects of the products you are planning to purchase -frequently visit various types of vendors to make comparisons -want to keep abreast of current trends by reading newspapers, magazines, and trade journals

Locating Foreign Sources

Make personal buying trips to foreign markets -buyers have developed their own programs that will provide their stores with unique merchandise brands from foreign sources -direct negotiation needed -visit foreign factories, visit expositions and trade shows in foreign markets -buyer must have knowledge of language of the country -buyer must be aware that cultures vary around the world Use intermediaries -middlemen -foreign buying offices: com missionaries, or foreign buying offices, operate in foreign markets and function similarly to domestic buying offices -domestic buying offices -importers: may be able to qualify for quantity discounts and pass the saving along to the buyer

Types of Vendors

Manufacturers Wholesalers Manufacturers' representatives/brokers Rack jobbers

Buyers' Expectations of Vendors

Merchandising help through technology Sales training Fixturing and visuals Packaging Timely delivery

Outcomes of Negotiation

The objective is for both sides to win—to develop understanding, acceptance, respect, trust, and a lasting business relationship

Quota

a predetermined amount of merchandise that a country's government allows to be imported for a specific product category

NAFTA

gradually eliminated trade barriers between the U.S., Mexico, and Canada

General Agreement on Tariffs and Trade (GATT)

reduced tariffs by about 40% on a large number of products and included new trading rules between the U.S. and 123 other countries

Collaborator

view concerns as mutual problems and seek to arrive at solutions that will allow both you and the vendor to win

Visiting the Market

while in the market, you will want to talk with representatives of your buying office, visit vendors and showrooms, tour factories, attend seminars or fashion shows, talk with other buyers, and tour outstanding retail stores in the market

Information you have collected to evaluate each vendor

page 242

Basis for Strong Partnerships with Vendors

page 244

Globalization of Retailing

page 283

Setting the Stage for Negotiating

Build rapport -establish an open, warm atmosphere which will help immeasurably when you get to sought issues -open negotiations by focusing on small issues -be confident and enthusiastic Ask questions -will want to determine the vendor's needs -what is the least the vendor can accept? -what is the most the vendor can offer? -ask questions until you know what you need to know Listen and watch for nonverbal clues -remain still during negotiations, sit with shoulders square, and look the vendor in the eye

Future Trends

Closer Buyer-Vendor Relationships Consolidation of Vendors Vendor-Owned Stores

Working with a Buying Office

-Assists you with travel and hotel arrangements -Scouts the market and previews merchandise lines -Provides outlook of the general market outlook Informs you of any new resources in the market -Presents ideas on resources, styles, colors, or fabrics -May offer a room for viewing samples -Will want to talk to buying office before going on trip -Buying offices may present some ideas concerning resources, styles, colors, or fabrics -May hold fashion shows or seminars for buyers form stores similar to yours

Bargaining

-Compromise: arrived at during the normal course of negotiating, however, the sole intent of negotiation should not be compromise -Ultimatums: one of the most common but least effective negotiating tacts; even if the vendor gives in, he or she will resent you

Visiting Factories

-Gain detailed knowledge of the products your store is selling -Obtain a better idea of how the manufacturer operates, especially if you plan any alterations -Observe evidence of quality control steps -Determine if a new manufacturer can handle the amount of work that would be required

Developing Strong Buyer-Vendor Partnerships

-Vendors want to work with buyers who pay bills promptly, accept goods they order, and do not return merchandise unless it has been authorized -Buyers seek to do business with vendors who ship the merchandise that was ordered in the right quantities and at the time specified

Central Market

-a city where a large number of key suppliers are located -garment district in NYC is the major apparel market in the U.S.

Exclusive Distribution

-a practice of some vendors whereby they sell the product to only on retailer in trading area -vendor usually retains some control over how the product is merchandised and promoted in the store -designer lines typically marketed through exclusive distribution -owners of clothing stores in small communities use this

Negotiation

-a process that involves gathering and using information to your advantage -the process of reaching a mutually satisfying agreement -based on the premise that people are willing to give up something in order to get something else

Merchandise/Apparel Mart

-a single building or complex of buildings located in many cities that offers retail buyers one-stop shopping. -allow for quicker and more frequent buying trips

Rack Jobbers

-a special type of vendor who services client stores themselves -chiefly found in the food industry, some department stores use them in areas where special merchandising techniques are needed -retail stores assign them rack or shelf space that they are responsible for keeping stocked with quick-turning merchandise -store visited by the rack jobber once or more a week to restock shelves and make any needed changes in the merchandise assortment being offered

Manufacturers' Representative/Brokers

-acts a s an agent for the manufacturer -also known as nonmerchant middlemen because they do not take possession of the merchandise before selling it to the retailer -manufacturer pays a fee (usually a percentage of net sales that varies by product category, sales volume, and the number of services provided) to the representative or broker for bringing the producer and buyer together -can visit at showrooms in regional markets or trade shows, most make personal calls on client stores -typically represent several noncompeting lines form manufacturers across the country

Wholesalers

-an organization that purchases merchandise from a manufacturer in large quantities and resells the goods in smaller amounts to retailers -also known as merchant middlemen because they take possession of the goods they purchase from manufacturers -a local wholesaler may be ideal because maintains broad assortment of merchandise that is ready for quick delivery -most accept small orders -may realize improved stock turnover due to smaller amounts of merchandise needed in stock because it can be quickly replenished from a nearby wholesaler -quick shipments for emergency stock fill-ins require purchase from wholesaler -increasingly providing merchandising assistance -primary disadvantage of using a wholesaler, rather than buying direct form the manufacturer, is that merchandise will cost more because a middleman is involved in buying process

Developing a Negotiating Strategy

-analyze your personality traits and the traits of vendors with whom you will be negotiating, then develop tactics or techniques to use in order to reach your objectives

Visiting Online Showrooms

-bring multiple buyers and sellers together at a central hub, where they can collaborate and negotiate at a fraction of the cost and time previously needed for complex transactions -provide easy reach for interactional and geographical areas without easy access to traditional markets -online showrooms make money by charging a percentage of the value of the transaction carried across their hubs, often the fee is the responsibility of the seller, who can be charged less than 1 percent to as much as 15 percent of the purchase price -open the door to more variety and more partners without having to compromise efficiency

Frequency of Market Trips

-buyers usually only visit foreign or central markets once or twice a year and make other trips to regional markets to supplement their assortments -season of year -type of merchandise -size of store or department -stores' merchandise policies -proximity to market -business conditions

Making the Decision to Buy from Foreign Sources

-ensure that products from a foreign source are a logical extension of the store's current product assortment -consider foreign sourcing only when the cost of a product has made it uncompetitive for it to be purchased in domestic markets -recognize that communications may be more difficult when foreign sourcing is used -start small and slowly -initially, keep alternative sources of supply

Vendor's Distribution Policies

-exclusive distribution -selective distribution

Future Trends in the Global Marketplace

-four large trading blocs have emerged: the Western Hemisphere, the European Union, Russia and some of its former satellite countries, and China, Japan, and the western Pacific Rim; trade pithing these blocs will probably flourish, while trade may grow more difficult between these blocs -free trade agreements are coming under higher scrutiny in many countries -American cultural dominance will continue to expand throughout the world

Analyze Your Position

-have info such as your inventory position, desired profit margins, and current market trends for products that you are purchasing -conduct vendor analysis

Analyzing Other Factors Affecting Purchase Decisions

-identify governmental regulations or restrictions affecting their purchases -most imported goods subject to a tax, known as a duty or tariff -duties are charged as a percentage of a product's value and vary according to the type of merchandise and the country of origin

Choosing the Right Foreign Sources

-initially look for reliability, attractive prices, credit terms, assured quality, and timely delivery -always conduct credit check on any potential supplier -references should be routinely requested -if possible visit factories -request samples to analyze

Pricing Merchandise from Foreign Sources

-landed cost: the final cost of merchandise purchased from foreign sources which includes the following expenses: merchandise cost, duties and tariffs, commissions, insurance, storage expenses, and transportation charges

Purchasing and Importing Products from the Global Marketplace

-learn as much as you can about the people, culture, and the retailing practices of the country you are considering as a foreign source -possibly learn a new language or at least a few key phases

Preparing for Market Visits

-most buyers begin searching for merchandise in domestic markets because of their closeness and accessibility

Key Resources

-most stores select a few vendors to handle a large part of their purchases -concentrating your purchases ensures your importance to these vendors because of the size of your order

Purposes of Buying Trips

-obtain merchandise for the upcoming season -gain knowledge about trends and new products -evaluate new resources and merchandise -seek out special values for an upcoming promotion -replenish stock that has been selling well -attend previews of new vendor lines

Negotiation Checklist

-price -discounts -transportation terms -allowances -return privileges -exclusives -off-price -specification buying -private brands -vendor-supported promotions -delivery

Merchandise and Prices Offered

-primary consideration should be whether the merchandise carried by the vendor is compatible with the needs and wants of your customers -merchandise offered meets the quality standards -may look for vendors who distinguish their products in some way -another decision is to purchase national brands or develop private brands

Buyer Initiated Contacts

-primary source of vendors will be found by visiting markets and trade shows -if you are a client of a buying office they will be able to locate vendors for you -reading current magazines and trade journals and subscribing to a retail reporting service are other ways to learn about potential new vendors or more about established vendors

Vendors' Reputation and Reliability

-prompt delivery -quality control -speed in handling complaints and adjustments

Manufacturers

-require a minimum order -buyers of fashion goods typically make purchases directly from manufacturers or their representatives in the market -retailers who want to establish their own private brands also place their orders directly with manufacturers who are willing to make minor changes in their products if a large enough order is being placed; merchandise will not be available in other retail stores -may establish both promotion and pricing requirements for goods they sell directly to the retailer -chief benefit is that costs are lower because intermediaries are eliminated from the distribution process

Determine the Vendor's Position

-research position -buying office may be helpful with information -talking with buyers from noncompeting stores -knowing information about the vendor's firm will be helpful

A Reaction to Globalization: Buy American Campaigns

-retailers are picking up the theme by stocking and promoting American-made products -campaigns have strong appeal to blue-collar workers -pages 286-287

Terms Offered

-some retailers may want substantial cash discounts from vendors, whereas stores with limited financial resources may want more time in which to pay -discounts offered should be at least equal to those prevailing in the industry

Vendor-Initiated Contacts

-some vendors send sales representatives on frequent visits to retailers others rely on catalogues and bulletins -many small stores tend to purchase from those vendors because they assume the cost of the contact because of the expense and time involved in making market visits -most manufacturers' representatives contact their retail clients on a periodic basis to ensure there is an adequate supply of merchandise in the store

Vendors

-sources of supply -provide the merchandise that will satisfy the wants and needs of your customers -manufacturer's, wholesalers, jobbers, and manufacturers' representatives -sometimes have to decide to purchase from the producer or from a middleman

Other Market Activities

-talk with other buyers to learn about their views of the current market and even the elections they have made for their stores -allow time for nonmarket activities, watch people in the streets or at group functions to detect any new fashion trends -may want to tour outstanding stores in the market city

Selective Distribution

-they sell the product to one or more selected retailers in the same trading area -number of stores selected determined by potential sales volume in area -vendor will usually place certain restrictions on retailers selling the product

Develop Negotiation Skills

-understanding people -good negotiators consider own firms' needs and those of the other party -characteristics of a good negotiator: creativity, good listening skills, good organizational skills, and self confidence; force themselves to exert diplomacy and tact; best negotiators are good listeners who ask questions to get information or to stimulate and direct the other person's thinking -knowledge of human behavior -successful negotiators are sensitive to the needs of other -you must be flexible -must keep on friendly terms with the vendor

Vendor-Owned Stores

-vendors doing their own retailing -three key benefits: 1. the ability to display the entire line 2. the ability to create an environment for the line according to the designer's concept 3. the ability to obtain feedback from customers on the entire line, not just pieces of the line

Determine Objectives of Negotiations

-what is the minimum that I can accept? -what is the maximum I can ask for? -what is the maximum I can give up? -what is the least I can offer?

Middleman

An intermediary between the buyer and seller

Services Provided

Cooperative Advertising Arrangements Advertising Aids Return and Exchange Privileges Participation in Store Promotions Sales Training Assistance in Stock Control Preticketing of Merchandise

Planning the Market Trip

Step 1 -you should have a prepared merchandise buying plan -have a vendor analysis form completed for any firm you plan to visit if you have carried their products previously Step 2 -make certain you have obtained all approvals that you need for your buying plan Step 3 -notify your buying office of your upcoming visit, and inform people there about your specific merchandising needs and vendors you would like to visit -make sure that key resources are notified early so you will be assured of an appointment time that best fits your schedule -examine market reports, trade journals, and other publications to identify new manufacturers or designers that you may want to visit Step 4 -determine how many days will be needed for your buying trip, and then arrange your hotel and travel reservation Step 5 -establish a work schedule for your staff members while you are away -prepare an itinerary of your market visits so you can be reached by your staff or management

Most-Favored-Nation Status

allows imports form these countries to be taxed at a lower level

Analyzing Vendor Performance

You might want to record a vendor diary with: -Total purchases for the year or season, at cost and original retail -Returns to the vendor -Initial markup percentage -Advertising allowances granted -Markdowns taken, by dollar value and as a percentage of sales -Cash discounts as a percentage -Transportation expense as a percentage of purchases May also want to consider: -customer opinions about the vendor's merchandise -reliability of the vendor's deliveries, including delivery of reorders -reliability of merchandise quality -promptness of the vendor in adjusting complaints -services provided to your store or department in such areas as conducting stock counts, preticketing of merchandise, and sales training

Vendor Diary

brief summaries of your dealings with each vendor with whom you do business; recommended to record: -total purchases for year/season -returns -initial markup % -markdowns -cash discounts -transportation expense

Types of Markets

central market, merchandise/apparel mart, trade shows/expositions