The Buyers task is to select a range of merchandise, for a specific season or time period, in line with agreed parameters, including space and budgets, to be offered for sale and produce a profit for the company.
Space and budget is allocated carefully by product category, to optimise the use of retail space, whatever its format. So whether space is physical footage in a store, pages in a catalogue, hours of airtime on a TV shopping channel, or items on a website Stocking Units (SKU’s) must be allocated.
There must be control of the number of them because each SKU causes an on-cost for the company in terms of stock management, cost of inventory, shipping and distribution, and warehouse space.
The frequency of range planning will depend on the retail model. It may be annual, quarterly, monthly, or even on an ongoing basis.
Range planning is the process by which budget and space is allocated. Sales performance is analysed against retail space, and measured against other categories. Ranges are allocated space on an “earned” basis for the period under consideration.
Once budget and space are allocated the buyer can begin to plan in detail.
The buyer selects the product and specifies its quality, price and delivery method. They may be assisted by colleagues in other departments to specify packaging, shipping, distribution, delivery dates, lead time, and returns policy. This will vary from one retailer to another, depending on the size of the operation. In a small company, the buyer will negotiate all aspects of the deal.
Every aspect of each contract will be carefully considered, because the detail of these will directly affect the company’s profitability and some thought and planning now will have far reaching effects on efficiency and the company bottom line
Planning Buying Strategy
The buyer will first of all review sales history, which will reflect customer demand for recently stocked products. The buyer researches and analyses consumer trends, and then develops their buying strategy so that once they start to review product for selection they have an outline plan.
First they will allocate the space they have been given by sub-range, again considering the sales and profit performance of each category. For example a White Goods Buyer would decide the split between washing machines, fridges and freezers. For fashion it might be menswear, ladies wear and children’s wear
Then they will consider which lines should be re-included, that is, have earned a slot in the next range on the basis of their performance in this one. They will plan to include them if market conditions indicate favourably and the supplier is still supporting the product. Sometimes a product will be withdrawn and replaced with a new one by the supplier. Sometimes a line may not merit inclusion but if the company is carrying long stocks, it may have to be re-included.
Then with the re-inclusions planned the buyer turns their attention to new products that are available for selection.
They will then visit Trade Fairs, possibly visit the source markets, and meet with suppliers. They will see what is available in the market, look at market trends, both current and forecast for the season for which they are selecting. They will review all available product from various sources.
This process will vary enormously by product category and will be very different for a White Goods Buyer for example, and a Toy Buyer, who must be aware of forthcoming films and TV programming and associated licensed merchandise.
The buyer will have targets to achieve in terms of sales and profitability, and needs to plan the range mix to achieve them .They will consider product sourcing, product mix and margin mix, to ensure that the final range offers the consumer the product they want to buy, and profit is maximised for the owners and shareholders. Selecting a range is like building a jigsaw, with the correct parts carefully planned to produce the right outcome.
We will look in more detail at a number of topics including product sourcing, both direct imports and domestic purchases, and also product mix and margin mix, to build a picture of how selecting a range is achieved.