Page 63 - DMGT554_RETAIL_BUYING

Retail Buying

Notes
Example: If an item was originally bought at the wholesale price of $30 to be retailed for
$60, the desired markup would be achieved if the item sold for that price. If it had to be marked
down 25% to $45, the markup would not be maintained as originally planned. However, if the
buyer was able to buy the same item off-price for $20 and sell it for the new selling price of $45,
the loss on the earlier purchase price would be made up.
In actual practice, many vendors would like to dispose of all of their “distress” merchandise to
their regular department-store and specialty-store accounts rather than to the off-price merchants.
In this way, they do not jeopardize their names and they present a means of greater profitability
to their regular-price customers. Of course, this is not always the case. The regular accounts
might not have the need for more of the same merchandise because they could be making room
for new arrivals, or the close-out inventories may be so significant that the only way to dispose
of the goods is by way of the off-price merchants.

It should be noted that not only are the larger department stores and chains given the opportunity
to buy the closeouts. Small retailers often buy these items, in lesser quantities of course, from
the vendors they use regularly. They too mix these items in with their regular inventories. Some
of the small retailers avail themselves of the heavily discounted merchandise through the
services of resident buying offices or market specialists that make them aware of such situations.
Large or small, retailers are always searching for means to improve their maintained markup
positions, and off-price purchasing is one method they employ.

Self Assessment

Fill in the blanks:
11. ............................... is just another term used to describe purchases at off-price.
12. In order to gain an “overall” higher .......................... for the department, merchandise that
can be “mixed” into the inventory is sought at better prices.

4.7 Internet and Off-price

As in-store off-price retail operations continue to expand, a new type of venture is making
inroads into this type of merchandising. The Internet has joined the bandwagon of merchants
offering goods at less than what is being charged by department stores and specialty chains.
With the enormous success of online discounters such as Amazon.com, others featuring bargain
prices have started to appear in this off-site venue. Another is Ebay.com, where bargains may be
available as fixed prices, or from bidding opportunities where consumers compete with each
other for the best price.
Fashion is now making news on Internet Web sites. One of the early entries that has proven that
there is a market for such items is DesignerOutlet.com. The company sells overruns of current-
season fashion merchandise that is purchased off-price and sold well below the originally
expected retail price. It began in 1996 with just 60 products for sale, and today is running a
business that features 65 lines with more than 1200 products. Now, such mainstays as Amazon
and Ebay, who once sold a wealth of products that were not fashion-oriented, have joined the
fray and feature numerous designer labels.
Day after day, other Web sites are being launched to take advantage of the consumer market
looking for such goods but without the time to shop in stores.

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