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Unit 4: Buying for Off-price Retail Operations

as “20% to 50% Lower than Department Store Prices” or “Famous Designer Labels for Less.” It is Notes
this guarantee to the vendors that enables the off-price buyer to purchase the same merchandise
as the department stores.

4.5.3 Unconditional Purchasing

Many vendors are willing to make certain concessions to their regular accounts who purchase at
full price. They often accommodate them by allowing chargebacks or discounts on merchandise
that didn’t sell as well as expected. By doing this, retailers are able to reduce the merchandise on
the selling floor and not take discounts that will cause them monetary losses. In some cases, they
might even allow the stores to return the unwanted goods for a full credit to their accounts.
The off-price buyer, however, does not enjoy the same conditions. He or she buys the goods at
the negotiated prices and takes his or her chances as to their salability.

Notes Since the goods are often purchased in job lots—a term used to describe an assortment
of goods without any consideration for specific colors or sizes—there might be some
pieces in the closeout that are not “perfect.”
The condition of the sale is generally on an “as-is” basis. Once purchased, the goods cannot be
returned to the vendor. This is the nature of buying off-price, and the purchaser is well aware of
the risks involved.

Self Assessment

Fill in the blanks:
9. The off-price merchants usually locate themselves in ............................ where other “bargain”
merchants locate themselves, in neighborhood clusters, or in freestanding stores.
10. The condition of the sale is generally on an “............................” basis.

4.6 Traditionalists as Off-price Purchasers

Although the discussion thus far has concentrated on off-price merchants who deal exclusively
in merchandise that is bought at rock-bottom prices, it should be noted that traditional retailers
also avail themselves of such merchandise.

Example: If one carefully scans the newspaper advertisements of department stores, the
term special purchase will often be seen.
Special purchasing is just another term used to describe purchases at off-price.
The reason for the traditionalists to participate in such merchandising is to bolster the markups
they finally achieve for the goods they sell.

Example: When some items do not sell as quickly as expected, the prices are reduced. By
cutting these prices, the buyer is actually realizing a lower markup than initially expected.
In order to gain an “overall” higher markup for the department, merchandise that can be
“mixed” into the inventory is sought at better prices. By doing this, the merchant is improving
his or her average markup.

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