The Anatomy of Buylng

(Continued from page 25) effective buyer without an effoctive selling plan. Ruh lBuy with a plan o sell! Rulc 2 - Rer€ad Rule L

There are five identifiable types of buying in general practice in the retail field:

Known Coofi The purchase of production capacity and raw material to minimize cost of goods at the facory. Agreement on profit percentaget, accounting pracries and surplus profit disbibution set cmtracurally.

Yolumc Uscm: Major reail cbains, buying groups and structur€d wholesalers buy in quantities sufficient to hing volume discounts.

Prlvetc Labcl: The product is generally the sane or a sligbtly modified version of the supplier's item.

Open Market Purcbasing by non-affiliated or snall relailer.

Leased Dcpertmcnt: For a percentage of sales (generally occupancy cost plus a profit), a renter of space sells wares not within the owner's ability to provide to customers.

There are numerous reasons to buy, most similar to these:

Demsnd Exlsts: People need and will buy the products.

Product Llne Needs: About 20% of all items in a product line do 80% ofall your business. The next lSVo of sales require an additional 45% of all items available. Selection and assorunent are critical to growth and profits. Don't chase the last 57o of sales.

Budget, Proflts and Landed Costs: You've got to be able to pay for what you buy when due and make money, tbus budgets and buys must focus on hndod costs.

Avrlhblllty, QulW rnd Tcchnology: If ytrt can't ger it when you need it, you can't sell it. If it doesn't slay sold, you've got problems. If it isn't Oe ctneirt stateof-the-art, you've finished socond best before tbe race hes been run.

A plan to sell is the essence of effective buying. Considering these points will help you implement a marketing plan at your stqe:

Prescntrtlon: Where and how arc you going O stock and display wbat you've bought? What will it cost? What point of purchase signage is rceded?

Posltlonlng: Where do tbe items fit price and quality wise in your product line?

Culture: How will your company bandle pass tbrough of the merrchandise? What will make it move?

Rolllng Average Costs: Commodities and seasonal items are subject to variable landed costs. Measuring and/or anticipating tbese allow you to nunage tbem.

GMROI: Gross Margin Return On Investment is a simple ratio btween average invested cost and gross realized margin dollars. Understand and measure this ratio. It's the basis for most of the outlandish selling prices you compete againsl A $l gross margin realized on 100 items sold over a weekend can be extremely profitable, particularly if they were received on Thursday and are gone by Monday. In essence, you sold the merchandise before you had a day for it. Do that 365 days a year and youll leam GMROI for life.

Seasonal Buys: Measure the number of selling days in last year's season. If it's 20 days long, every day is SVo of the season. If you run out of merchandise before the end of

(Continued on next page)

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The Anatomy of Buying

(Continued from page 36) the season, great. If you have 50Vo of. your purchases with 257o of the seiNon left take some mark downs.

Reordering: If you're computerize( automate your purchase orders. Seasonal and commodity buys have to be managed manually.

Pricing: Think psychological price pointing, not gross margin or make up percentage. What's competitive? What's price sensitive? (See "Anatomy of Pricing," p. 32, March t992.\

Advertising: How are you going to tell the customer about the great buying job you have done? Direct mail, cable tv, newspaper, radio, television, billboards, bus placard" erc.?

Marketing has four major components - product line, presentation (display), pricing and advertising. It all starts with product. If the product is "new" to the market place, it's dicey. If it's old, it got that way because the customers bought it. Buying is simple, but it isn't easy and it surely isn't just an act of puchasing.

Recycling Center For D-i-yers

Home Depot and Mindis Recycling will open a Recycling Depot in November in the parking lot of the Duluth, Ga-, HomeDepor

The center will be capable of diverting more than I million pounds of