ETHICAL BEHAVIOR IN BUYING MERCHANDISE

Introduction

One of the important duties of a retailer is to buy the merchandise he

intends to sell. This duty is important because much of the success of his

business depends on the quality and cost of the merchandise he buys. It the

merchandise is of good quality and of low price, and then he can sell this at

an affordable price to the consumer. Merchandise is any article or good

bought by the seller and sold to the buyer for a profit.

• Sources of Merchandise

Merchandise can be bought from several sources. They are the

following:

Middlemen. These are persons who buy the goods direct from the

producers or wholesalers and sell them in retail to the consumers. In this

group are distributors of different merchandise who peddle on foot or drive

trucks, selling their merchandise to retail stores. Another example is the

middlemen who enter into contract with fishermen/ farmers to sell their

product to market vendors.

Wholesalers. These are businessmen who buys big quantity or big bulk

direct from the manufacturers and who sell the merchandise on wholesale

basis. The merchandise is sold in cartons, in packs, by the dozens, by the

hundreds, or in sets.

Manufacturers and Producers. Producers produce raw products for sale

to manufacturers. Examples of these are the farmers. Manufacturers make

refined products from raw materials. Examples are the manufacturers of

soap, paper, oil, processed food and others.

Merchandise Sourcing

The process of merchandise planning takes the buyer through to the

stage of determining the products that he needs to have in the store and the

quantities that he needs of the same. A key decision to be taken by a buyer

is to determine where he has to buy the merchandise from. Determining the

source who would supply the products as required by the retailer, in the

quantities needed by the retailer, as per the requirements of the retailer, is

an integral part of the buyer’s function. Over the years, the importance of

sourcing as a key element of merchandise management has increased. This

has been largely due to the shrinking of world borders and the world

becoming a global village. Global travel and the spread of mediums of mass

communication have also made the consumer more conscious of global

trends and products 

The process of merchandise buying takes place as five step process,

which involves the following:

Identifying the sources of supply

Contacting and evaluating the sources of supply

Negotiating with the sources of supply

Establishing vendor relations

Analyzing vendor performance

Amongst the several benefits of merchandise sourcing some are:

Quality Assurance

Profitability

Compliance

Integrity

Reference: http://www.monashapparels.com/merchandise-sourcing.html

• PRODUCT QUALITY

Rules to Remember in Sound Buying

Besides service to consumers, the retailer should make a good buy for his

merchandise to make a good profit. There are rules to remember in sound

buying.

Buy from the right source. The word “suki” in the Philippines is a popular

name in trading. A buyer with a “suki” means that there is trust and

confidence already established between buyer and seller. When trust is

established, the buyer can buy merchandise by phone or by mail order

without benefit of investigating the product. The buyer is confident that the

goods are of the right quality.

Buy the right kind. Goods are generally classified as high quality or low

goods. The quality depends on the material and quality of the merchandise.

High quality goods usually demand high prices. This is not always true,

though. Fruits when in season are of the highest quality but sell at the

lowest price because there is an abundance of the product in the market,

sometimes even more that what can be consumed. The right kind means the

right quality that will suit the purpose. The right quality may not be the

most expensive but it is the most suited for the right purpose or use.

Buy the right quantity. This means buying only what is needed or in

demand. This helps save money and effort in storing. However, there are

some goods, like the nonperishable ones that can be bought at the time that

they are cheap and stored for a long time. Items like textiles, clothing, and

accessories are examples of these.

Buy at the right time. The right time to buy the merchandise is when it is

in season. This is especially true of fruits and vegetables. At the height of

the season, goods are cheapest and of the best quality. A good guide for

buying other types of merchandise is this, the best time to buy is the period

when supply is great and the demand is low.

Methods of Buying

While remembering the different guides in sound buying, the retailer

should know the different methods of buying. She can choose one or

combination of these methods in buying her merchandise.

- Buying by mail or by telephone. This is convenient because it saves time

and energy that is normally spent in going to the store. Big groceries,

restaurants, bookstore, and supermarkets usually buy by telephones or by

mail.

- Buying through agents of manufacturers and wholesalers who provide free

delivery of thegoods. 

- Buying through foreign representative, if the merchandise is to be bought

from other countries. 

- Buying though a resident buyer who may be the purchasing officer at the

store. The job of this officer is to select and buy the merchandise needed by

the store, either on regular basis or as the demand for it arises. Factories

and manufacturing companies who need raw materials for processing have

purchasing officers who do this job.

In buying and selling the merchandise, the retailer can do this on a

cash or credit basis. Using cash, the retailer pays the amount of the

merchandise as soon as it is bought or delivered. Using credit, the retailer

gets the merchandise with the promise to pay within a specific period of

time. The bases of granting credit are good character, capacity to pay, and

solvent capital. Other retail stores sell on a consignment basis. They sell

merchandise in exchange for a percentage of the profit.

Reference: http://business.wikinut.com/Tips-in-Buying-and-Selling-

Merchandise/-6yg7vxm/

• SLOTTING FEES

Slotting Fees (Slotting Allowances): Are fees paid by a vendor for

space or a slot on a retailer’s shelves, as well as having its UPC number

given a slot in the retailer’s computer system. 

Negotiating on Retail Slotting Fees

Retailers charge their suppliers slotting fees to secure a place on their

shelves. If you're in the process of getting your first product into a major

store, you'll need to be ready to negotiate these fees when you agree on

pricing. Big retailers can be quite ruthless when it comes to negotiating

concessions, so you'll need to have a strategy in place before discussions

begin.

Discuss Early

Raise the issue of slotting fees early on in negotiations. Retailers will

typically wait to secure your best price before discussing concessions,

according to product placement specialist Jim DeBetta writing in "Inventor's

Digest." If you know the company you're dealing with plans to hit you for

slotting fees, you'll be at an advantage. You should also ask about other

price concessions such as cooperative advertising allowance, which

retailers ask for to help market your product once it's on their shelves.

Establish a Bottom Line

Add between 10 and 20 percent to the lowest price you're willing to accept

per unit. This will give you plenty of room to negotiate when it comes to

thrashing out concessions. Play hardball. If your buyer asks for a 10 percent

reduction for slotting fees, say you were thinking more in the region of 2

percent. After a little bartering, you could even walk away having conceded

less than you were willing to.

Negotiate Terms

If your buyer wants more than you're willing to concede, try negotiating

terms. Say you'd be happy to pay higher slotting and cooperative

advertising fees if it meant you were able to sell more product. Suggest

starting from a base and raising concessions after a set period of time if you

see the results you want. However, make sure any upper slotting-fee level

you negotiate will still leave you in profit.

Assert Your Position

Don't be bullied into giving away more than you can afford to. There'll be

little point in getting your product into a store if you're going to be selling it

at a loss, no matter how high-profile the retailer you're dealing with. Your

potential buyer obviously saw promise in your product to begin with, so be

straightforward with it. Say you'd love to be able to give away more, but

doing so would leave you out of pocket.

http://work.chron.com/negotiating-retail-slotting-fees-5790.html

• COMMERCIAL BRIBERY

• A vendor or its agent offers to give or pay a retail buyer “something of

value” to influence purchasing decisions.

• A fine line between the social courtesy of a free lunch and an

elaborate free vacation.

• Some retailers with a zero tolerance policy

• Some retailers accept only limited entertainment or token gifts.

ETHICAL BEHAVIOR IN SELLING

MERCHANDISE

• Products Sold

Should a retailer be allowed to sell any product, as long as it is not

illegal?

Choosing a product for your retail store to sell may very well be the most

difficult decision you will need to make when starting a retail business. The

choices are limitless and the task may be overwhelming at first. Not only

should there be a demand for your products, but it must be profitable and

something you enjoy selling. Before you commit to a product or product

line, consider the following factors while deciding what products to sell.

Marketability

Let's face it, it won't matter what products you sell if your customers

aren't buying. Before considering what product to sell, determine what

market you want to sell to. Once you know what kind of customer you want,

then you'll be able to determine their needs. If your products only appeal

greatly to some people, it may not be enough to sustain a business. Your

product selection doesn't have to appeal to all of the population but it

should be something you can convince a large percentage of shoppers they

need.

Diversity

Keep your product offering simple in the beginning. If your product

line is narrow and focused, then your marketing efforts can be just as

tightly focused, which will bring you the best results for your marketing

dollars. As your business grows, so can your product line as long as you

keep new products compatible with the type of business, your location and

your market.

Some questions to keep in mind while selecting products for resale.

Would you buy it and use it yourself?

Can you see yourself getting excited about this product or service?

Would you sell it to someone you know?

Is there a real need for the product in today's market?

Can you imagine yourself selling this item for the next several?

The key to having a successful business is to know your products and

to believe in the merchandise that you are selling. If you do not believe in

the product yourself, then you probably won't be successful at selling it.

Keep brainstorming and you'll find a product or product line that meets

both the needs of your target market and your own ability to locate it,

purchase it and resell it.

Reference:http://retail.about.com/od/startingaretailbusiness/a/

product_select.htm

• Selling Practices

Should a salesperson, while not saying anything wrong, be allowed

not tell the customer all the facts?

To attain exceptional levels of success in the retail business, you have

to be willing to go the extra mile. In addition to designing a store that

people want to spend time in and filling it with merchandise that they want

to buy, you need to be on top of your game in terms of using effective sales

strategies. The importance of training your salespeople effectively cannot

be overemphasized. You can’t hope to train them properly, though, if you’re

unaware of how to maximize your store’s sales potential. Tips for doing just

that are outlined below.

Educate Yourself about the Products that You Sell

Large, impersonal chains don’t have to be super knowledgeable about what

they sell – their low prices give them a huge edge over the competition. To

compete with the big guys, you have to have in-depth knowledge about

every item that you sell. Learn the pros and cons of each item that you

carry. Keep up to date on new developments, and try to stock the most

current models. When training new staff, try to get them up to speed on

how various products work. Do your best to keep your employee turnover

rate low, because replacing a knowledgeable salesperson is costly and time

consuming.

Be Enthusiastic about Your Products

This point dovetails nicely with the previous one. A customer is a lot more

likely to buy what you’re selling when he gets the sense that you’re

genuinely enthusiastic about it. It helps tremendously to be a fan of the

products that you sell. It’s smart to hire people who are truly into the things

that you have on your shelves. When conducting interviews, then, try to get

a feel for whether or not they care at all about the nature of what you sell.

Be Friendly, Not Oppressive

If you’ve ever been harassed by a store salesperson, you know how off-

putting and aggravating it can be. Give a customer that kind of experience

and you can forget about earning any repeat business from him. You should

make your presence known and be friendly, but you shouldn’t hover over

your customers or breathe down their necks. Suffocating a customer is a

surefire way to chase them away. Breathing space is essential here, so

resist the urge to follow their every move. In the long run, this strategy will

work out well.

Ask the Customer Questions

Asking questions is a lot more effective than pushing a product on a

customer – at least, it is if you want to make lots of sales. Even if you are

dying to unload a lot of a particular item, you shouldn’t alienate your

customers by endlessly extolling its virtues. When you ask questions about

what they want or need, you show customers that you care. This is

especially effective when it is done in a low-key and laid-back way. Keep the

pressure to an absolute minimum and make it clear that you genuinely want

to help them find the right thing.

Avoid Asking “Can I Help You?”

How many times have you walked into a store, been asked if you need any

help and said, “No thanks, I’m just looking?” It’s probably happened more

times than you can remember. Asking a customer that is like handing them

a card that excuses them from interacting with you. A better way to go is to

let them walk in and get the “lay of the land.” Once they’ve roamed for a

minute or so, ask them a question based on where they are browsing.

You’re less likely to be blown off that way.

Sell Add-Ons, But be Savvy About It

Cross-selling related items to a customer is a tried-and-true way to boost

sales. It tends to annoy people, though, when you do it at the register. By

that time, the customer has made his decision and is ready to move on with

his life. Being pestered to buy even more can sour the whole experience for

him. Instead, suggest additional items while he is still out on the floor. If

possible, put a personal spin on things by relating stories about the related

items that you’ve put to good use.

Putting stellar sales techniques and strategies to use can make an amazing

difference in your overall success in the retail game. It’s even better when

you can bolster those strategies with salespeople who are knowledgeable,

friendly and genuinely enthusiastic. The ultimate goal here is to make

people want to come back again and again. When they leave with positive

thoughts about the sales staff, they are a lot more like to come back. Repeat

sales are crucial to developing a robust business, so do your best to keep

the above points in mind. Happy customers develop through unaggressive,

friendly sales techniques that gently steer people to buy what you have to

sell.

Reference:http://blog.cashierlive.com/2011/04/28/6-tips-for-selling-more-

merchandise-at-your-retail-store/

ETHICAL BEHAVIOR IN THE RETAIL-EMPLOYEE

RELATIONSHIP.

• Misuse of Company Assets

Employees must understand that ethical behavior is demonstrated not

only in how they act toward others but also in how they treat property that

doesn't belong to them. The key to success is understanding who owns what

and what boundaries exist for its use.

• Job Switching

Retail jobs can be exciting. However, you may want to leave your

current employer due to reasons such as interest in a new career path,

desire to move to a different location, desire to grow professionally, lack of

opportunities in your current job, differences of opinion with colleagues or

management, stress, or ethical grounds. Switching jobs involves making key

decisions, so it is necessary that you evaluate your current employment

situation before you move.

The following points will help you evaluate your current job and make

the right decision. 

1. Are you currently satisfied with your retail job? 

According to an old saying, a bird in the hand is worth two in the bush. Are

you involved in a situation with your present retail employer that makes you

feel dissatisfied? Are you discontented with your colleagues or with your

retailer’s culture? Has there been a change in the employment situation (for

example, a merger or an acquisition) that has made you feel insecure? If

you feel your satisfaction levels have changed considerably, then it is time

to switch to another retailer. 

2. How do you evaluate your interest in your current job? 

Perhaps you have lost interest in working for your current retail employer

due to the monotony of the job, or perhaps your retail employer lacks the

avenues to make your current job profile more diverse. These factors may

lead to a lack of interest in your current position. Determine whether your

employer is willing to offer you another position that would keep you

interested in your career with the company; otherwise, it is advisable to

seek a change.

3. Does your job offer you an avenue to develop your core skills? 

Maybe you have not been able to develop your skills beyond a certain level

with your current retail employer. If your employer is not able to offer you

avenues to further develop your skills, you might want to move on. Those in

retail careers need to continuously evolve in order to advance in the

industry. 

4. Have you discussed this idea with others? 

Discuss the prospect of switching jobs with friends, family, and

acquaintances. Ask for input regarding whether you are making the right

decision at the right time. Also, access resources online, or visit the nearest

employment center to see if there are enough jobs available to merit your

consideration.

5. Have you researched retail openings that interest you? 

Comprehensively study the retailers that interest you. Conduct detailed

research on their profiles, and check to see if they have suitable openings.

You can do this by reading as much as possible about the retailers in

question in the news or by contacting people you know in the retail industry

to discuss your plans.

6. Do you have the necessary qualifications and experience for the

new positions you’re interested in? 

Consider whether you will need additional qualifications to join another

retailer. Adding to your skill set can be a good idea if you are sure it will

help you get the job you deserve. Many business schools and colleges offer

varieties of courses that will suit your needs. However, do not overextend

yourself. Are you already extremely busy during the week? If so, you might

want to opt for weekend, correspondence, or online programs instead. 

7. Have you looked for internal avenues for promotion? 

Quite often, managers offer in-house opportunities to deserving candidates

that can lead to better pay and prospects with the same retailer. Check with

your employer to see if there are internal programs such as training series

or workshops that you can attend.

8. Have you considered seeking an alternative position with the same

retailer? 

Before pursuing other options, why not try making an internal switch within

the same retail organization? This may allow you to utilize the knowledge

you have already gained in your new position.

9. Is your current retailer losing market share? 

If the retailer you work for is losing revenue and market share to

competitors, then it is advisable to search for a job with another retailer.

10. Is the new retailer you are considering joining offering you more

pay and better working conditions? 

If so, then it is advisable to leave your current job. There are both pros and

cons when it comes to switching jobs. Therefore, it is always best to

evaluate one’s current employment situation before making a final decision.

Reference: http://www.retailcrossing.com/article/350032/Switching-Jobs-in-

the-Retail-Industry/

• Employee Theft

Employee Theft from a retail store is a term that is used when an

employee steals merchandise, food, cash, or supplies while on the job.

However, in the eyes of the law, employee theft is just theft…the elements

of the crime are identical. To commit theft, the employee must “intend” to

permanently deprive their employer of the value of the item stolen.

Employee theft can occur just like shoplifting by concealing merchandise in

a purse, pocket, or bag and removing it from the store. It can also occur by

stealing cash, allowing others to steal merchandise, eating food, and by

refund, credit card, or check fraud. Employee theft can sometimes be

charged as embezzlement due to the trusted fiduciary status of the

employee. All of these methods lead to loss of inventory (shrinkage) and/or

profit for the merchant. Employee theft is an insidious crime because the

merchant is paying a wage and benefits to the thief on top of paying for the

cost of their dishonestly. Studies have shown that employees can do a lot

more damage than shoplifters because they are trusted and have an

insider’s knowledge of store security measures.

Employee Theft Profile

There is no real physical profile for a dishonest employee. Dishonest

employees come in all shapes, sizes, ages, sexes, ethic backgrounds,

religions, levels of education, and economic status. You simply cannot

accurately determine who is likely to steal based on their demographic

status alone. However, an employer can make reasonable assessments

based on their conduct, integrity, and judgment. A person’s past conduct,

integrity, and judgment often provides the best indication of their future

behavior.

Retail store employees have a constant opportunity to steal cash or

merchandise…all they need is the desire and sufficient motivation to do so.

What keeps most employees honest is moral character, loyalty, respect for

the law and their employer, and the desire to be viewed as trustworthy.

Studies support this by proving that shrinkage is significantly less in stores

with reduced employee turnover and fewer part-time workers.

For others, the only barrier to dishonesty is the fear of getting caught. The

employee thief risks getting fired, being arrested, jailed, and paying

restitution. The criminal record and bad job reference will have a

compounding effect that will follow them for years. Merchants must not be

sending a clear message to their employees because most employee thieves

that I have encountered never thought they would be caught.

Reference: http://www.crimedoctor.com/employee_theft.html