Page 191 - DMGT554_RETAIL_BUYING

Retail Buying

Notes This is a highly elastic situation. Let’s take another example using some of the same numbers.
Suppose the price increases from $15 to $20, thus reducing demand from 200,000 units to 100,000
units. Though the numbers being used are the same, the situation is quite different. Let’s see how
elastic this situation may be:

,
1 00 000 2 00 000
,
,
,
/
E  = 1.5 or 5/.333333 = 1.5
P
5 $ /$ 15
In this example, the price is still elastic, but not quite as elastic as in the prior situation. The
coefficient of elasticity of price and demand is 1.5 compared to the coefficient of 4.0 calculated
earlier. In this example, the elasticity of price is closer to unitary elasticity and is less elastic than
in the previous situation, where the calculation was 4.0. When assessing elasticity of price, it is
important to monitor the competition and the legal and ethical constraints placed on retailers in
the United States (or other countries, if the retailer does business there). Numerous laws and
regulations international, national, regional, or local govern price levels. It is essential that the
retailer understand the rules, laws and regulations affecting price. Important laws in the United
States are the Sherman Act (1890), the Clayton Act (1914), and the Federal Trade Commission Act
(1914).

Task Critically examine how Holiday Merchandise Promotion Boosts Member
Engagement. Prepare a report on it.

Self Assessment

State whether the following statements are true or false:
6. In the case of small electronic goods, products can have a lifecycle as short as 7-10 months.

7. If a retailer is own-label active, then establishing a department to manage the corporate
brand is essential.
8. A marketing manager would be able to highlight implications of placing orders that
might not be apparent to the buyer.
9. The gatekeeper’s role is to control the flow of information into the decision-making unit.
10. Group dynamics can often influence the way in which individual retail decision making
units operate.

12.3 Marks Ups and Markdowns in Merchandise Management

Price discrimination occurs when a vendor sells identical products to two or more customers at
different prices. Although the Supreme Court has held that price discrimination can occur between
a national brand and an identical private-label product, the Fifth Circuit Court of Appeals has
ruled that the normal price difference between these two types of products does not lessen
competition, so the price discrimination is not illegal. Price discrimination can occur between
vendors and retailers, or between retailers and their customers, although the legal ramifications
are different in the two situations. We will first examine price discrimination between vendors
and retailers and then between retailers and their customers.
Although price discrimination between vendors and their retailers is generally illegal if it
lessens competition (i.e., if the favoured and disfavoured retailers compete with each other),
there are three situations where it’s acceptable. Firstly, different retailers can be charged different
prices when justified by differences in the cost of manufacture, sale, or delivery resulting from

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