Page 59 - DMGT554_RETAIL_BUYING

Retail Buying

Notes
Example: Table 4.3 shows how the off-pricers can take the usual markup and yet still
offer customers bargain prices.
Table 4.3: Markup Similarities for Department Stores and Off-Pricers
Cost Retail Markup (on Retail)
Department store $52 $110 53%
Off-price retailer $36 $75 52%

In the example shown in Table 4.3, the markup taken by both merchants is known as keystone
plus markup. This indicates that the cost has been doubled and a few extra dollars added to
arrive at the retail price. When keystone markup is used, the cost is merely doubled to get to the
retail price. Most department stores work on keystone plus, as do many off-pricers.

Notes This is to be noted from Table 4.3 that the markups are almost identical. Although
the off-price merchant makes an excellent profit after all of the expenses have been paid,
the off-price customer is saving a significant amount of money. The only differences that
the off-price customer must be willing to accept is the inability to buy early in the season,
environments that may not be comfortable in which to shop, and a limiting of services.
The bottom line, however, is savings.

Task How different are the initial markups made by off-price stores and department
stores?

Self Assessment

Fill in the blanks:
5. Off-price .................. pay less for the merchandise they bring to their inventories.
6. When .................. is used, the cost is merely doubled to get to the retail price.

4.4 Indirect Purchasing

In most off-price operations, buyers are employed to make the company’s purchases just as they
are in traditional department store and specialty chains. As in the case of the traditional retailers,
off-price stores use outside market specialists or resident buyers to cover the markets in their
absence. A daily examination of the wholesale marketplace is vital to the success of the
off-pricer. Distance from the various vendors and tasks required of the buyer in the store prevent
daily market visits. To get a better handle on market conditions, outside agencies and specialists
are used.

Some companies that specialize in off-price purchasing are either in business solely to cater to
this retail segment or have separate divisions that deal exclusively with discounted goods. Not
only is there representation in all of the major domestic regional markets, but also in many
overseas wholesale venues. Price Breakers, based in New York City, deals exclusively in this
type of merchandise, while the Doneger Group has a separate division called Price Point Buying
to handle these purchases. In the following Retail Buying Focus, the Price Point Buying Service
is explored.

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