The Buyers skill is needed to make the most of the space available to them to select a range that will satisfy and delight their consumers, and drive volume sales .There is normally more product competing for the retail space available than can be accommodated
So the challenge for the buyer here is to select the lines that will achieve their targets for sales and margin. Sometimes these are mutually exclusive. Product and margin mix are the tools the Buyer will employ here. The Margin mix influences profits earned based on the sales and product mix.
They can probably spot the likely best-selling lines –which are likely to be heavily promoted TV advertised brands that are discounted by retailers .Usually referred to as lead lines, they are deliberately targeted by the manufacturer and importer to sell at a slim margin.
Those lines will be heavily price promoted in some sectors to drive traffic and footfall. Margins will be paper thin. Will their stock requirements be fulfilled? What is the point of allocating retail space to a line that will create demand that probably won’t be filled, thereby annoying customers? And if they do get any stock, it will not yield a margin that remotely resembles their target.
Yet customers expect to see that product in stock in the retailers range, it’s the hottest line of the year, why have they not got it? And they will expect to buy at a competitive price-if you price way above the market to make margin targets, customers may perceive your store as expensive and move all their business to another store.
Why some lines are heavily discounted
Manufacturers and importers will sacrifice margin on this line to ensure its success and get it into the hands of as many children as possible to spearhead the sale of other products and accessories in the range. The Elsa doll from Disney’s Frozen is an example of such a line.
Retailers will fall into line with the suggested selling price, to avoid being benchmarked as expensive by customers, and to drive traffic or footfall. Should the buyer not list the line, so solving the margin problem? Is it better to offer a range around that concept that does not include the lead line? In this case, the supplier may not deliver other product, so there may not be an option.
If there is suitable direct import product available, the buyer may be able to balance the margin across the concept.
They need the lines that will give them the highest demand, but that can be kept in stock; and will make a margin
And this is the product mix dilemma for the buyer.
Some ranges such as toys offer a broad range of products, with basic items such as bikes, craft toys and dolls they can import directly and achieve great margins. There are wholesale ranges which will include basic toys, and some licensed merchandise. Major suppliers will carry heavily branded or licensed merchandise, perhaps Film or TV related merchandise, for example product based on Disney’s Frozen, which will sell in large numbers but will be discounted by retailers who want “footfall“ .
Other product areas may not have such a broad mix of margins. For example white goods such as washing machines, fridges and freezers do not obviously seem suitable for Direct Importing from factories as consumers will want the backing of a well-known brand for such purchases. If the retailer is well known and trusted they may run their own brand product and import it directly.
Another opportunity might be to purchase branded merchandise in container loads from a factory, cutting down on distribution costs, and inventory costs for the brand owner. This price should allow a better margin than buying from domestic stock.