ASSIGNMENTS OF MERCHANDISE BUYING AND HANDLING PROCESS

Submitted to:- Submitted by:-

Mrs kritika Name:- Jatinder kaur
(Faculty of vocational Class:- B.voc (Retail management)4 th sem
studies) Rollno:- 180610
 Merchandise
Merchandise management is the process through which each retailer decides what
items to carry, how much to have on hand to meet the needs of customers, where they
should be displayed in the store to maximize sales, and how they should be priced to
sell the best and maximize profits.
Process for implementing merchandise plans: Merchandise buying and holding is a vital part of
implementing merchandise plans.
This is a step by step process and involves following stages:

1) Collecting information,
2) Selecting vendors,
3) Evaluating merchandise,
4) Negotiation with vendors,
5) Buying merchandise,
6) Receiving and stocking management
7) Reordering
8) Re-evaluate

These steps are explained in

detail below:
1. Collecting Information:
This is a very first step of merchandise buying and handling process. Once the firm’s overall
merchandise plans are defined, exact information about current market needs and potential
vendors is required.

This is essential as a retailer before buying merchandise would like to know:

(i) What consumers are looking for.

(ii) Where the vendors are located and what is their goodwill in the market.

(iii) What their competitors are offering. After understanding these aspects, retailer will be in a
position to decide what he wants to buy and from whom.

For collecting information, a retailer/buyer has several possible sources defined as internal and
external sources.

It depends on the retailer (buyer) which source he would like to choose. Normally, global
retailers rely on both internal and external sources to have the better picture of consumers’
requirements. Undoubtedly, the most valuable source is the ‘study of consumers’. Global
retailers like Wall Mart, Spencer and Noodle Ki Doodle have proper consumer study divisions
those continuously monitor the consumers’ lifestyles, living habits and their changing
demographics in order to study the consumer demand directly.

Vendors (manufacturers and wholesalers), on the other hand, do their own projections about the
future sales and market demand, while finalizing the ‘buying deal’ with retailers. Vendors
present these projections through pie-charts, bar-diagrams and various two and/ or three
dimensional charts.

2. Selecting Vendors:
After collecting the information about consumers’ demands, the next step is to select sources of
merchandise and to interact with them to select the potential vendors.

For selecting vendors, the retailers usually have three alternatives:

I. Company-owned vendors: As the very name implies, these vendors are owned by
the company themselves. Large retailers have their own manufacturing or wholesale
operations. They work only for particular retailers and provide as per their
requirements.
II. External, widely used supplier: This type of supplier is not owned by the retailer
but used frequently by him. The retailer is buying merchandise for long and is aware
about the quality and services offered by him.
III. External, not used supplier: This type of retailer has not been used by the retailer as
he is either a new entrant or retailer has not purchased anything from him so far.
Therefore, what quality he is offering cannot be known in advance. Retailers may use
any one type of supplier as per their requirements, budget and area of operations or
they can use a combination of them. Big retailers often deal with all types of
suppliers. Therefore, after selecting the supplier category, a retailer should interact
with them about the buying terms and conditions.

Following points must be considered while selecting the vendors:

1. Goodwill of the vendor in the market.

2. Guarantee and/or warranty offerings.
3. Which vendor offers merchandise at the lowest total cost?
4. Quality offered by the vendor
5. Will the vendor provide transport storing and other facilities?
6. Is vendor’s merchandise line conservative or innovative?
7. Is vendor offering credit purchase?
8. What promotional support is provided by the vendor?
9. Will mark up be sufficient?
10. Is vendor interested or will be available for long term relations?
11. Will vendor fulfill what he has agreed upon?
12. Will vendor provide conditional/exclusive selling rights?
13. How quick will orders be delivered?
3. Evaluating Merchandise:
After deciding upon the source of merchandise, next step is to evaluate the vendor’s merchandise
quality.

Here, a retailer is encountered with following situations:

(i) Whether the whole lot be examined, or

(ii) Purchasing be made only on vendor’s description.

Retailer after interacting with suppliers should evaluate merchandise under purchase
consideration. Should each unit of merchandise be examined? Or items should be bought
only on the basis of description and demonstrations presented by the suppliers.

For evaluating merchandise items, retailer has three choices in hand:

1. Inspection

2. Sampling and

3. Description

Which method should be followed depends on the items’ features, cost and the frequency of
purchase. Inspection is a process of examining each item of merchandise thoroughly before the
merchandise procurement and also after delivery. Jewelry (diamond, gold, platinum and other
precious stones) is one of the examples where retailer inspects all the items of purchase.

Sampling technique is used when retailer is buying items on regular basis in large quantity that is
perishable, breakable or costly ones. Therefore, retailer uses Acceptance Sampling method. It is
“the middle of the road” approach that exercises control over the incoming inventory without
going through 100% inspection. It simply means accepting or rejecting the supplier’s
merchandise assortment.

Here decision is taken without going through 100% inspection of the entire lot. It is a
compromise between no inspection and 100% inspection. It has two key classifications of
acceptance plans: firstly by attributes (“go, no-go”) and secondly by variables.

4. Negotiation:
Once the retailer has evaluated the merchandise quality and other features, he negotiates with the
vendor for its price and consequent terms and conditions. Both parties listen to each other
carefully and ask questions wherever doubt arises. Terms and conditions are then decided and
contract is made involving total amount to be paid by the retailer, delivery date, delivery
conditions and other legal aspects. A retailer while negotiating also talk about the conditions for
the re-order.

Under Negotiation stage, retailer bargains with the supplier for available discounts and
conditions of purchase. A retailer would like to know what will be the additional discount if he
goes for bulk buying. What is cash discount? What is trading discount etc? Is there some off-
season discount? Once the merchandise is negotiated for its quality, quantity and price, retailer
places the order and concludes the buying exercise by paying the amount due. The retailer takes
the title of items immediately after the purchase.

5. Buying Merchandise:
After negotiating the terms and conditions and agreed upon price, a retailer after placing the size
of the order (quantity and quality of each merchandise category), pays the initial money as per
the agreement. Big retailers usually place the order and pay the bills online through electronic
data interchange (EDI) and quick response (QR) Inventory planning, small retailers due to
limited sources, conclude purchase manually.

They fill up the order form and deposit it personally or through postage. With the technological
advancement and easy access to internet facility, retailers place their orders online. The small
retailers who are associated with big vendors also pay their bills and process orders through EDI
and QR systems as per policy matters.

6. Acquiring Merchandise:
It means after paying for the invoices, retailer should receive the merchandise and stock it
properly. While acquiring the merchandise, retailer physically receive the items, counts the
supplies, pays the invoices, marks the items, displays the items and stock in
godowns/warehouses to avoid any pilferage and damage. In case of centralized buying, goods
are received by regional office/central warehouse and then transferred to chain stores as per their
requirements and order received from them.

After paying the suppliers’ bills, retailer makes provision how and where the items should be
received and stocked. Items should directly supplied to store or warehouse, is mentioned at the
time of negotiation and merchandise payments.
Once the items are received, retailer next step is to make ensure that the items are stocked
properly. Sometimes it may take long time to reach from warehouse to store, therefore, when
orders are received, they must be checked for its quantity and quality. Invoices must be carefully
checked for its description and amount printed to avoid any confusion with supplier later on.

When the merchandise has been procured and stocked, it will be issued to store/s whenever
demand pertains. Therefore, retailer should have an eye on merchandise issued and the items left
in the stock. Whenever the level of inventory comes close to reorder level, goods are ordered for
fresh supplies.

Once a merchandise plan is implemented, it should be re-evaluated at regular interval of time by

close monitoring of implementation plan with the objective of satisfying consumers.

In case of central buying, distribution management is the key to store performance.

Buyers/concerned staff should take care while shifting merchandise to chain stores or
warehouses.

Following precautions must be taken under this stage:

(i) Inspect the invoices physically for its accuracy. Once the invoices are signed and paid, vendor
will not be responsible for any loss in transit or in case of missing items. Therefore, when orders
are received, they must be thoroughly checked for size of order placed and any
breakage/pilferage during transit.

(ii) While unloading merchandise, take precautions that their packing should not spoil. Further,
keep the items at distance and at proper place as unloading generally causes breakage and mixing
of items with one another.