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Unit 4: Buying for Off-price Retail Operations

customers can easily discern quality goods. Label removal is thus a small price to pay for Notes
top-quality fashion merchandise at considerably reduced prices.

4.2.5 Transportation

In the negotiation process, traditional store buyers often demand that the seller pay for delivery
of the goods. With large retail organizations, F.O.B. destination, which requires that the seller
pay for the shipping, is generally a forgone conclusion.
The situation is quite different in off-price purchasing. Because the seller has agreed to a reduction
in the purchase price, the “extras” often wanted by the buyer are taken away. One of these extras,
the cost of shipping, is absorbed by the retailer. Many off-price merchants make their own
arrangements, either by private transport or their own trucks, to transport the goods at their
own cost. Of course, this expense is generally figured into the markup on the new merchandise.

4.2.6 Terms of Payment

One major problem endured by vendors concerns payments for merchandise. Retail buyers
demand as much time as they possibly can before they pay their bills.
In some merchandise classifications, the manufacturer permits as long as 4 months for the
invoice to be settled.

Example: Swimsuits is one of the examples of merchandise classifications.
This demand by the typical traditional retailer often causes a cash flow problem for the seller. By
giving in to the buyer’s demands for extended time in which to pay the bills, the manufacturer’s
ability to run a business might be hampered. To compound the problem, many retailers take
even longer to pay their invoices than allowed by the terms of the purchase.

When selling to the off-pricer, the situation is different. Since the wholesale price has been
considerably reduced, the vendor requires earlier payment. In some cases, where the prices are
rock bottom, immediate payment may be required. In this way, both the buyer and seller are
satisfied. Sellers get the money they need to pay expenses, and the buyers get merchandise at a
price that will make it more appealing to the customer.

Self Assessment

Fill in the blanks:
3. The off-price buyer’s plan is different from that of the ......................... buyer.
4. Removal of the ......................... might eliminate the most prominent identifiable mark of a
particular manufacturer.

4.3 Pricing “Off-price”

While we have learned that off-price merchants pay less for the merchandise they bring to their
inventories, many people are under the impression that they take a lower markup when they
price their goods. Although some do work on a lower markup because they “turn” their
merchandise faster than their traditional retail counterparts and generally restrict their customer
services, the vast majority mark up their goods to levels that rival the department stores. The
merchandise is purchased at discount, but it is marked up more than the off-pricers would have
you think.

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