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Unit 4: Buying for Off-price Retail Operations

there is always an abundance of well-known, designer merchandise available at closeout prices. Notes
Even at the season’s end, some of these previous hot sellers are included as part of the bargain
packages. By waiting patiently, and knowing where to find the best bargains, the off-price buyer
is able to make a purchase well below the original wholesale price. It is not rare to see labels
such as DKNY, Ralph Lauren, Calvin Klein, and Tommy Hilfiger at comparatively low prices. It
should be understood that the merchandise acquired at discount is generally in-season. In some
cases, when the buy is at such low prices, but the selling season in the store is at an end, the
purchase is made and then packed away, to be brought out for the next appropriate selling
period. This practice is somewhat dangerous since fashion merchandise might lose its desirability.

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Caution When the deals are made, it is the buyer who must ascertain if the goods have
sufficient staying power to be carried over to another selling time.
Table 4.1 shows the timing of the purchases, delivery periods, and wholesale price differentials.
Analysis of these data shows that the only conditions of the purchase that were different were
date of purchase, delivery, and wholesale price. Why was the price different? The department-
store buyer, in the quest for early introduction of the item, had to make an earlier commitment
to the vendor, and by doing so paid the higher price. This ensured receipt of goods on April 15
for selling through the summer season, which concludes toward the end of June. The off-price
buyer didn’t plan to purchase style 842 specifically but did so at the end of the season, when the
price became more attractive. Since, the merchandise was in the vendor’s inventory, it was
available for immediate delivery, at a reduced price, with sufficient time left to sell it to the
store’s clientele. Even though the off-pricer’s selling period is shorter, the price attraction should
make it sell quickly. Waiting for this later date doesn’t guarantee that all merchandise will be
available at lower prices, but considering the enormity of production, especially in fashion
merchandise, the off-price buyer is willing to take that risk.

Table 4.1: Comparison of Retailer Cost and Delivery on Same Style

Style Date of Purchase Delivery Description Wholesale Price
Department store 842 March 1 April 15 Red dresses $52
Off-price retailer 842 June 1 June 1 Red dresses $36

4.2.2 Assortment

By looking at past sales and other buyer sources of information such as the trade papers, reports
from market specialists, and fashion forecasters, the buyer develops a merchandise assortment
in terms of number of styles, and how much inventory is needed for each one. This assortment
or model stock ensures a good cross section of merchandise.

The off-price buyer’s plan is different from that of the department-store buyer. Purchasing
decisions are not as closely based on specific colors, exact size allocations, or styles, but on price.
Because price is the dominant factor in the off-price buyer’s decision making, he or she will
forgo the specificity so common to department-store purchasing and will purchase only
discounted goods that fit into the store’s general concept.

Did u know? When visiting a resource and negotiating the off-price purchase, the buyer
often buys “incomplete size ranges” or assorted colors.

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