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Unit 11: Wholesale Purchasing and Negotiation with Vendors

names, styles, and depth and width of the product lines. The buyer also looks for discounts Notes
available for buying larger quantities.
A second variable to look at is the vendor’s distribution policies. Does the supplier offer the
same merchandise to geographically close competitors? For an e-tailer, does the vendor offer
competitors the same products? At what price points? For retailers selling merchandise that has
intensive distribution (that is, products that are sold everywhere they can be placed, such as
convenience goods), the vendor’s distribution policies may not matter. If exclusive or even
selective distribution is important to the retailer, however, it may want to go with a vendor that
limits sales of products to given geographic areas.

A third consideration is the vendor’s IMC. In particular, the retailer should look for vendors
who provide promotional assistance such as advertising allowances. Many vendors have product
lines that are overruns or are distressed (such as “seconds”). Depending on the retailer’s strategy,
the retailer may wish to take these vendors into consideration when selecting suppliers.
Closeouts, overruns, and distressed merchandise allow the retailer to offer its customers product
sales throughout the year. Sales attract a wide range of customers, and suppliers that give the
retailer the opportunity to take advantage of these types of products offer the retailer a better
margin when sales times roll around.
The retail buyer also needs to be aware of the shipping arrangements the supplier uses. Many
suppliers ship only large quantities of product to their retailers, whereas others are willing to
ship in smaller quantities. Merchandise buyers decide which of the suppliers provide the “best
fit” for their particular organizations. An imperative for retail buyers is to compare various
vendors’ product prices. Generally, numerous suppliers offer the same products. Product price
may end up being the deciding factor in the choice of vendors. Following are some questions the
retailer considers when identifying potential vendors:

1. Is the vendor reliable?
2. If the vendor has promised products or services to the retailer, has it fulfilled its promise?
3. Can the supplier expedite orders when needed?
4. Can the supplier handle special orders?

5. What are the vendor’s order-processing records?
6. Can the vendor get the products to the store in the shortest time possible?
7. How much risk is the retailer to assume as the buyer? (This is particularly important in
food retailing.)
8. What are the rights of the buyer? (Is the retailer being offered exclusive rights to the
products?)

9. Will the vendor customize orders and products?
10. How does the vendor provide product and company information to its retailers?
11. Do warranties or guarantees accompany the products’ purchase?
12. Does the supplier offer credit? If so, what are the terms?

13. Does the vendor have a reputation for running an ethical business?
14. What is the vendor’s return policy?
The answer to these questions will help the retailer to acquire the best merchandise fit at the
least cost. In addition, by asking and answering these questions up front, retailers can save
themselves a great deal of time and trouble and create a mutually rewarding relationship with

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