CHAPTER 8: MERCHANDISE BUYING AND HANDLING

Question 1

What is the process of merchandise management?

Answer 1

1. Analysis.
2. Planning.
3. Acquisition.
4. Handling.
5. Control.

Question 2

What is a dollar merchandise planning?

Answer 2

It projects the amount of in dollars of merchandise needed to achieve planned sales.

Question 3

What are the methods of dollar merchandise planning?

Answer 3

• Basic stock method.
• Percentage variation method.
• Weeks’ supply method.
• Stock-to-sales method.

Question 4

What is the purpose of Open-to-Buy (OTB)?

Answer 4

It uses to determine how many products to buy to maintain inventory level. This is important to prevent overspending.

Question 5

What are some common buying errors that caused OTB to be adjusted?

Answer 5

• buying merchandise that is priced either too high or too low to reflect the store’s target customers.
• buying the wrong merchandise (e.g. wrong colour, design, size).
• buying merchandise that is too trendy (has short product life cycle),
• having too much or too little safety stock (basic stock) on hand,
• buying from too many vendors,
• failing to forecast the coming season’s hot items early enough,
• failing to inform the vendors of any changes in the order of merchandise (because too often, the original order is repeated, resulting in a limited product selection).

Question 6

What is inventory planning?

Answer 6

a process of determining the optimal quantity and timing of merchandise for the purpose of aligning it with sales. It consists of analysing demand and deciding how much and when to order new inventories.

Question 7

What is merchandise line?

Answer 7

A group of products that are closely related because they are targeted at the same customer group, intended for the same end use or fall within a same price range. eg. budget women’s ware, healthy food

Question 8

*Explain the dimensions that ensures optimal merchandise mix.

Answer 8

• Variety
• Breadth
• Depth

Question 9

*What are the constraint factors of optimal merchandise mix?

Answer 9

• Dollar-merchandise constraint ( not enough variety, breadth, depth).
• Market constraint (Customer perception and expectation).
• Merchandise turnover constraint (inventory management).
• Space constraint (Insufficient space).

Question 10

What are the factors that retailers should consider when selecting vendors?

Answer 10

• Track record.
• product and service quality.
• financial stability.
• competitive pricing.
• ethics and integrity.
• delivery reliability.

Question 11

Describe what can be negotiated with the vendors.

Answer 11

• Delivery terms.
• packaging.
• Discounts.

Question 12

*Explain the types of discounts.

Answer 12

• Trade discounts (to buyers who purchase frequently purchase in large quantity).
• Cash discounts (to expedite payment).
• Seasonal discounts (to encourage purchasing products that are off-season).
• Quantity discounts (To encourage customers to buy more).
• Promotional discounts (temporarily reduce the price to attract customers).

Question 13

Describe the types of shrinkage that may happen during the merchandise handling process.

Answer 13

• Customer theft.
• Vendor collusion.
• Employee theft.

Question 14

What are the delivery terms that can be negotiated?

Answer 14

• Free-on-board factory (the buyer assumes ownership for products as soon as they leave the factory.)
• Free-on-board shipping point (the buyer assumes ownership for products as soon as they leave the shipment origin.)
• Free-on-board destination (the seller retains ownership for products until the shipment is complete).