Page 188 - DMGT554_RETAIL_BUYING

Unit 12: Merchandise Pricing

In retail buying, the user is a retailer’s customer, or potential customer. It is difficult to involve Notes
customers directly in retail buying decisions, so a decision making unit must consult market
research sources and retail sales personnel to obtain an accurate representation of the customer’s
viewpoint. Larger retail concerns may use consumer panels as part of their marketing research
operations, to provide qualitative feedback on new initiatives.
People who play the role of the influence in the decision process can come from various sources.
Technologists, designers, product developers and engineers provide expert opinion on specific
product attributes, whilst merchandisers or logistics managers may exert a commercial influence
based on the knowledge of previous sales patterns and supply problems of similar products.
The buyer is the person who organizes the day-to-day running of the buying process. Buyers
themselves, or their assistants, usually carry out this role, which is different to the role of the
decider, who makes final decisions regarding the purchase of products. The decider is normally
in a position of higher authority in the buying office, such as buying plans; but in a straight
re-buys situation, buyers, or even their assistant, may act in both the buyer and the decider roles.
The gatekeeper’s role is to control the flow of information into the decision-making unit. The
role may be taken by a junior member of the buying team who makes the initial assessment of
products and suppliers, and therefore checks the flow of irrelevant information into the group.
On the other hand, a buying controller or a merchandise manager, who controls information
because of their seniority or experience in product markets, may perform the role.

12.2.4 Group Dynamics

The roles fulfilled by buying personnel in their operational day-to-day activities can be
generalized to a certain degree. However, each person who contributes to the process is an
individual, with his to her own set of characteristics, background and personality. Buyers have
often played the role of opinion leader and change agent in the retail organization, and as such
may have a form of authority over those with ‘higher’ status within the organization. Group
dynamics, therefore, can often influence the way in which individual retail decision making
units operate. In addition, the culture of the organization in which the DMU operates will also
have a bearing on the buying process.

Example: Some retailers have a highly structured hierarchy in their buying offices,
through which product plans have to be dragged in a series of presentations and reviews, whilst
others have a flatter, more entrepreneurial, culture, where new ideas are quickly trailed and
either supported, or eliminated.
Similarly, the external business environment may impact on the way in which the group works
together; for example, in a growing economy, more risks may be allowed, whereas in adverse
trading conditions buying organization personnel may be less confident to implement new
ideas without a consensus of opinion. Any person entering the field of the retail buying office,
whether as an employee or as a potential supplier, should familiarize themselves with the
workings, of the various individuals within the buying organization and how the organization
works as a whole.

12.2.5 Planogram Implementation

Although the step of determining pricing flexibility comes after that of setting price objectives
in the Figure 12.1, in practice pricing flexibility for goods and services helps the retailer establish
its pricing objectives. Pricing flexibility refers to the best range of prices that the retailer can set.
Two factors retailers consider when determining pricing flexibility are the costs associated with
running the business and selling the products (both fixed and variable costs) and the demand by
the store’s existing or potential customers. These factors help the retailer develop the range over

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