Page 8 - DMGT554_RETAIL_BUYING

Unit 1: The Buyer's Role

 Department Stores: Department stores are either of the full-line designation, in that they Notes
carry a wide assortment of hard goods and soft goods, and occasionally prepared and
gourmet foods, or the specialized entries that restrict their offerings to one or two
merchandise types, such as apparel and accessories. The former group includes companies
like Macy’s, Dillard’s, and Belk, and the latter, Neiman Marcus and Nordstrom.
 Flagship: In the vast majority of these companies, the buyer operates from the store’s
main retail facility, known as the flagship, and is responsible for purchases for that unit as
well as the branches. Others, however, operate from centralized locations, similar to those
utilized by chains. At one time, the sales staff was the buyer’s responsibility, but as
organizations expanded, this management function was generally removed as a day-to-
day activity. Today, with catalogs and Internet Web sites becoming important to these
retailers, some buyers are called on to make purchases for these outlets as well as for the
stores.

 Single-unit Independents: Although the trend has been and continues to be big business in
retailing, there are still entrepreneurs who wish to operate their own stores. Many of
them are extremely successful since they are able to offer their clientele both specialized
merchandise and personalized services. Most important in this classification are specialty
stores that feature just one item such as shoes, jewelry, or apparel, and boutiques that
generally sell limited quantities of higher-priced ladies apparel and accessories, and
sometimes custom-made items. The owner usually has the buying responsibility, although
in these independent ventures, as they grow in size, other professional buyers may be
used.
 Franchised Operations and Licensed Stores: Before you can actually understand the role of
the buyer in a franchised operation, it is necessary to become familiar with the franchising
concept. As defined by the Small Business Administration, “A franchise contract is a legal
agreement to conduct a given business in accordance with prescribed operating methods, financing
systems, territorial domains, and commission fees.”
There are two major parties in a franchising arrangement, the franchiser and the franchisee.
The former is the party who has come up with the concept. He or she has developed a
product, idea, or formula that is generally retail-oriented. After a few units have become
successful retail operations, expansion could take place, as in the case of traditional chain
organizations in which all of the stores are centrally owned and managed. In franchising,
the franchiser chooses to go the expansion route by allowing individuals to open stores in
specific locations. For a startup fee, and other monetary requirements, the franchisees, or
owners of theses individual units, are given the right to operate their own businesses. Of
course, as the earlier definition indicates, the franchisees must follow specific rules and
regulations that have been set forth by the franchisers. The vast majority of franchises are
food-oriented and bear such famous names as McDonald’s, Wendy’s, and Burger King.
There are, however, many others that retail wearing apparel, accessories, and home
furnishings.

 Licensing: Similar to franchising is licensing. The significant difference is that in franchising
there is a startup fee for the privilege of becoming a member of a franchise family. In
licensing, there typically isn’t a startup fee. One of the most well-known licensed
arrangements is Benetton—the largest retail licenser in the world, with more than 500
units in the United States alone. Another is Ralph Lauren. As with the franchise arrangement,
licensees are required to follow the merchandising philosophies established by the
licensers.

The buyer’s role in both franchising and licensing is quite different from that in any of the
other retailing formats. The merchandise sold in the stores is either produced by the

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