VIRTUAL BUSINESS RETAILING

1. VIRTUAL BUSINESSRETAILING Lesson 2 Purchasing

2. MAIN IDEA • Purchasing inventory for a store is an important & complicated job • To be successful, a store must have inventory available for its customers to buy • That inventory must be what customers want to buy & must be available when customers want to buy it

3. In this unit, you will learn the basics of purchasing store inventory, selecting vendors, & managing store inventory • You will also practice some of the mathematics often used in purchasing

4. OBJECTIVES • After completing this lesson, you will be able to: • Explain how purchasing impacts sales & profit • List qualities of a good buyer • Describe the lifecycle of inventory through a store—from ordering to sale • Explain the affect of inventory control on sales • Calculate stock turnover in terms of items & dollars • List common problems associated with purchasing & inventory control

5. What a Buyer Does • The person who is responsible for purchasing the merchandise for a store • Large stores – may hire a person • Small stores – usually owner or manager • Must be well acquainted with store’s customers • Must be knowledgeable about the merchandise available for purchase

6. Includes the tasks of planning, timing, & negotiating • Planning • Must plan which merchandise to buy • Purchasing is done weeks/months before arrival at store • Know customers • Be able to predict what they will want to buy • Stay within budget • Amount of $ available to buyer is called open-to-buy • Use a merchandise plan to allocate $ available for new merchandise purchases for a specific time period • Consider merchandise orders that have been placed for the time period & the merchandise that has already been received for the time period

7. Calculating Open-to-Buy • Planned Purchases –(Orders Received + Merchandise Ordered) • Example • You have planned purchases of $1,000 • You have received orders that total $400 & you have ordered merchandise that totals $200 • $1,000 – ($400 + $200) • $1,000 - $600 • $400

8. Timing • A critical consideration in purchasing • Merchandise must be available when customers want to purchase it • Buyer must decide when merchandise will arrive at store • If too early, it will sit on shelves • If too late, customers will purchase elsewhere

9. Negotiating • Negotiate the terms & discounts of the orders with the vendors or suppliers • Important – favorable terms & discounts will have an impact on the store’s profit margin

10. Selecting Vendors • A business from which a buyer purchases merchandise • The buyer generally selects vendors • Reputation & reliability is important • Expected to deliver merchandise when it is scheduled to arrive • Buyer also needs to verify that the merchandise delivered is the same quality & quantity that was ordered

11. Inventory Needs • The total amount of goods a business has • May be in a backroom or on the sales floor • Sometimes referred to as stock • Achieving a balance of inventory that is available for sale & the timely delivery of new merchandise is vital for as store’s success • Balance • Empty shelves don’t encourage sales or repeat business • Too much inventory ties up open-to-buy & prohibits the purchase of new merchandise • Use sales records to establish customer buying patterns & to make important decisions about the amount of inventory available at any given time

12. Stock Handling • Once stock is delivered to the store, the process of stock handling begins • Stock handling includes • Receiving the stock • Checking in the stock • Price marking the stock • Transferring the stock to the selling floor

13. Receiving & Checking in Stock • Done at same time • Receiving stock means matching the items & quantities ordered against the vendor’s invoice (the vendor’s bill for stock purchased – it lists the items & quantities being delivered) • Checking in stock is done • To ensure that the items & quantities ordered & invoiced are the ones received • To make sure that the stock is in good condition & undamaged • To check expiration dates of perishable stock to make sure that they stay fresh for customer’s to purchase

14. Price Marking Stock • The store’s order form should indicate the selling price of the stock • The stock can then be marked with a price ticket • Computer scanners can read the stock information from the bar code on each item of stock • The manufacturer can add the selling price to the bar code information • This is an accurate & time-saving way for the store to price mark its stock

15. Transferring stock to the selling floor • New stock is now ready to be moved to the selling floor • Should be transferred as quickly & as carefully as possible • Should be displayed in an area of the store that gets a good amount of customer traffic

16. Stock Storage • Sometimes entire amount of stock purchased can’t be placed on the selling floor • Extra stock should be stored according to its type & requirements • Ex: milk products need to be refrigerated – extra quantities should be placed in a refrigerated case until there is space for them in the refrigerated section of the store • Other stock, such as nonperishable packages of food, can be stored in shelves in a backroom until needed • Each item of stock should be evaluated according to its storage requirements & should be stored accordingly • It is important to keep shelves stocked on the selling floor

17. Inventory Control • The management of the merchandise a store has for sale • This includes assuring that the store has sufficient stock to maintain sales goals • This also means avoiding too much stock at any given time • Also involves managing the stock on the selling floor & in the back room • Just-in-time inventory control system • Usually computerized • A store is linked to suppliers through a computer system that purchases new inventory automatically as sales are made • Reduce the total amount of inventory a store must carry

18. Inventory Systems • Important to keep track of the merchandise a store has in its inventory • Physical inventory system • Perpetual inventory system

19. Physical Inventory System • Makes use of periodic counts of stock to ascertain stock levels • Requires that each item of stock be counted & recorded • To save the time & expense of counting all stock items, many store owners will rotate the items that are counted at any given time

20. Perpetual Inventory System • Keeps track of stock items on a continual basis • Can use either manual or computerized methods • The manual method requires keeping track of items received & sold by hand • The computerized method uses a scanner to record items received & sold – the information from the scanner is then sent to the store’s computer, where the inventory is updated

21. Stock Turnover • An important tool that tells how well the store’s inventory is being managed • Measures how often stock is sold during a given time period • Can be measured in items of stock or in dollars invested

22. Computing Stock Turnover • To compute in items of stock • Number of Items Sold / Average Number of Stock Items in Inventory • To compute in dollars invested • Dollar Sales of Inventory Items / Average Dollar Value of Inventory Investment

23. Summary • This unit covered the topic of purchasing & the jobs of the buyer • We have learned about the importance of selecting the right vendors • Also learned about the importance of inventory to a store & how to handle items of inventory as they arrive at the store • Learned about inventory control, inventory systems, & how to compute stock turnover in both items of stock & in dollars invested