Page 133 - DMGT554_RETAIL_BUYING

Retail Buying

Notes So although there are a number of models of grocery sales that have been developed, the online
retailer would need a different type of model from a majority of these, needing a model that
would jointly predict purchase frequency and purchase quantity rather than simply a model of
total sales. Almost all of the few existing models in the literature for the joint distribution of
purchase frequency and purchase quantity condition on known purchases elsewhere in the store
or treat the frequency and quantity decisions as independent. A recent model of unconditional
purchase frequency utilized data from an investment brokerage to model the time between
transactions for each customer. An alternative method of accommodating purchase frequency
and quantity is to aggregate sales over long time frames such as months or quarters although
aggregate models do not offer insight into the separate effects of frequency and quantity.

Task Visit a garment retailer and find out about the sales in peak and off peak seasons
and how he/she handles it.

Self Assessment

Fill in the blanks:
14. .................... are my customers going to purchase and .................... are they going to spend
on their purchase are two important questions that any retailer would like to answer.

15. Due to the cost structure of traditional retailers, most of the existing models focus
exclusively on retailer profits as a function of ....................



Case Study Dillon’s Hardware

illon’s Hardware is an independently owned and operated business located in a
small rural community. The store’s owner, Hank Dillon, built the business on a
Dsimple but effective policy: to sell quality merchandise at reasonable prices.
Hank and his assistant, Mike McFarland, are responsible for all decisions involving the
purchase of merchandise stocked by the store.

During a recent week, Mike met with a number of salespersons who represent distributors
that sell fasteners. Mike has narrowed his choice of possible suppliers down to two
companies that both offer the quality and assortment of products he is interested in
purchasing. He asked each sales representative to give him pertinent information regarding
his company’s pricing structure and terms of sale.
Midstate Fasteners quoted the price of assorted machine bolts and nuts at $10.50 per box
(2 pounds net weight); assorted wood screws at $14.70 per box (3.5 pounds net weight); -
inch threaded steel rod at $0.75 per foot; 3/8-inch threaded steel rod at $1.10 per foot; and
3-inch brass plated hinges at $25.20 a case (24 units per case). Midstate offers a 10%, 5%, and
5% trade discount on purchase orders over $500, and terms of 3/10, n/30 ROG. The company
ships all merchandise by truck FOB shipping point.

Industrial Supply sells assorted machine bolts and nuts at $5.40 per lb., assorted wood
screws at $4.05 per pound, -inch threaded steel rod at $2.20 per piece (3-foot sections),
3-inch threaded steel rod at $3.40 per piece (3 foot sections), and 3-inch brass plated hinges
Contd...

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