MARMA 7 MODULE 2 LESSON 2 Buying controllers.

Buying controllers are situated in the

buying and merchandising management hierarchy between
The Role of Product Management in Retailing Products buyers and merchandise managers.
are central to most organisations whether they are in the Buyers. The buyer has traditionally been seen as the
form of tangible goods or of services. Traditionally, figurehead of the department that carries out the buying
manufacturers have been concerned with the design and process on behalf of the retailer.
production of products, whilst retailers have had the task of Merchandisers. Merchandisers tend to be concerned with
gathering together a relevant and inspiring selection of the quantitative aspects of buying and are usually
goods and making them available to consumers at responsible for estimating sales, planning deliveries
convenient locations and times. distribution of the goods to stores.
A PRODUCT DEFINED A marketers definition of a product is Assistant buyers. In large retail organisations both buyers
'a physical good, service, idea, person or place that is and merchandisers are likely to have one or more assistants.
capable of officering tangible and intangible attributes that It is important to distinguish between an assistant buyer and
individuals or organisations regard as so necessary, a buying assistant. An assistant buyer plays a key role in the
worthwhile or satisfying that they are prepared to exchange buying process and may be solely responsible for some
money, patronage or some other unit d value in order to buying decisions.
acquire it'. Buying assistants. A buying assistant, or buyer's clerk, is a
RETAIL PRODUCT SECTORS The retail industry is broken junior member of the team, providing administrative support
down into a number of sectors. For the purpose of industry and carrying out routine duties within the department
reporting, the type of product sold determines the sector (frequently performing a combination of buying and
into which an individual business falls. In many cases it is merchandising duties).
perfectly clear which sector a particular retailer would fit Analytical skills Decision-making is at the heart of any job
into. within a buying organisation. Collating data from many
THE ROLE OF PRODUCT MANAGEMENT IN RETAILING different sources, extracting and assimilating important
Traditionally, the retailer's role within the distribution information, reading situations, making evaluations,
channel was to provide suitable selections of products in predictions and judgements are all things that buyers and
small quantities through outlets located close to viable merchandisers do on an ongoing basis and all require some
groups of consumers. In fact, a dictionary definition of the level of analysis.
verb to retail is 'the sale of goods in relatively small Communication skills Working at the hub of a centralised
quantities to the public' retail structure, a buying office must have lines of
An historical overview In the UK it was the abolition of communication with all other sections of the retailer.
resale price maintenance legislation i 1964 that accelerated Objectivity. Retail buying personnel operate on behalf of the
the changes within the retail distribution industry retailers commercial organisation which employs them. Decisions
were allowed to determine their own pricing strategy for their are made for the benefit of the organisation rather than the
product ranges, rather than having to adhere to prices set by individual, therefore the ability to divorce personal taste or
the manufacturers. preference from the business role is an essential
CENTRALISED RETAIL BUYING ORGANISATIONS Product qualification.
management in most sizeable retail organisations is a Product knowledge. Buying personnel may join a retailer
centralised operation, and buying offices are usually housed with some formal product training otherwise it is likely that
at or near the company headquarters. some on-the-job training will be required to ensure that
DECENTRALISED BUYING Retailers who have a product specific technical product features are fully understood by
range that is dominated by products with relatively stable the retail product manager.
demand have more opportunity to allow the retail outlets ADDITIONAL BUYING DECISION-MAKERS As well as the
have an element of control over the buying for their stores. people working within each product or buying department.
BUYING ORGANISATION MANAGERIAL ROLES Here we other people or sections within a centralised retail buying
describe the managerial roles at each level within a 'typical' organisation may play a central role in buying decision-
multiple retail buying organisation. making, including technologists, product development
Buying Director There may be more than one buying teams and corporate design teams.
director in a retail organisation, but it is not likely to have Technologists Although most of the buying decisions are
more than one represented at main board level. The centred on the ability of a product to satisfy a customer need
multinational grocer J. Sainsbury plc for example, has a at a price the customer is willing to pay, a retailer has to
'Group Commercial and International Buying Director' ensure that it meets its legal obligations with regard to the
sitting on their ten person strong board of directors. products it sells.
A buying director is likely to be involved in the following The product development team Where a retailer is involved
types of decision-making: in putting together a product offer which is unique to its own
• Changing major suppliers: company, and where suppliers are not able to provide the
• Introduction of new product ranges (not new items); required level of input into product innovation, it may be
• Deletion of product ranges or categories; necessary for the retailer to set up a development team for a
• Concessions arrangements; particular product area.
• Major promotion campaigns: Corporate design If a retailer is own-label active, then
• Strategic aspects of range planning, such as multi- establishing a department to manage the corporate brand is
channel retailing: essential.
• Adoption of systems and management approaches, THE RETAIL BUYING PROCESS: A TRADITIONAL VIEW
within the product management area. Retail buying is one of a number of instances where an
Merchandise managers. Merchandise managers are senior individual is purchasing products on behalf of a business
buying and merchandising person who oversee a division or organization.
a number of interrelated buying departments.
Recognition of retail customer needs. Product CATEGORY MANAGEMENT Product management activities
management contributes to the strategic success of a retail are essentially shared between buyers and merchandisers
business. The product range needs to be managed so that working in tandem within a product-orientated department.
the changing needs of customers can be satisfied. EFFICIENT CONSUMER RESPONSE (ECR) ECR is an
approach to supply chain management which originated in
The following information sources may be used: the US and gained support from major European retailers.
• Internal sales data; Information flow and data technology A key feature of
• Trade publications: ECR, is the information flow. ECR relies on efficient
• Consumer publications; information flows above all else, and as such the
• Suppliers: development of ECR systems has relied on the increasing
• Competitor analysis. sophistication of 'enabling technologies' such as electronic
• Market research (internal or external); data interchange (EDI) and the internet.
CATEGORY MANAGEMENT When organising for an ECR
Write specification of product to satisfy need The system, category management is a useful framework within
identified or recognised customer requirement then has to which the areas of demand management for efficiency
be turned into a product opportunity for the retailer. This improvements can be considered.
stage of the buying process involves the consideration of a Category management as a philosophy As an approach to
set of product features which blend together in the most thinking about how products are managed within a retail
appropriate way to benefit the target customer. business, category management requires a broader vision
Search for a supplier Even though one particular supplier than its preceding management orientation, which typically
may have made a product suggestion, this does not would be buying and merchandising led.
necessarily mean that it will be the supplier who ultimately Category champions Many of the ECR projects that have
receives an order for that product. helped to develop the category management philosophy
Specify order. Once the product and supplier combination have involved large multiple retailers and leading
has been decided, the supply requirements have to be product/market suppliers.
formalised in terms of how, when and where the product is PRODUCT MANAGEMENT IMPLICATIONS In order to begin
delivered. It will also be necessary at this stage to determine exploring the challenges of non-store product management,
the quantities needed. it is perhaps useful to be explicit about the principal
Evaluate performance of product and supplier Evaluation differences between store and non-store retailing; and in
of the buying process is essential if the product order to make meaningful generalisations, the direct selling
management objectives are to be met. Monitoring methods (party plan, pyramid selling, door- to-door selling
performance involves both quantitative measures, such as and telesales) are not included in the comparison.
sales information and supplier performance indicators, and PRODUCT PRESENTATION Non-store retailers have a real
qualitative measures, such as customer research and challenge when it comes to product presentation. If a
feedback via retail sales personnel. product is largely standardised and its tangible features
BUYING COMMITTEES The extent to which buyers have wholly understood, for example a CD or a book, then the
authority to place orders on behalf of their organisations presentation of the product is less problematic. If the
varies from one retailer to another. benefits of a product are mainly functional rather than
The Retail Decision-making Unit When various members aesthetic, then again a photographic image and a wealth of
of the buying committee gather to consider purchase for the product performance detail is likely to be sufficient.
retail organisation, they will be acting as a decision-making However, for goods where the aesthetics and the sensory
unit (DMU). elements of the product are important, for example, fresh
Group dynamics. The roles fulfilled by buying personnel in food, clothing and cosmetics, then a two-dimensional
their operational day-to-day activities can be generalised to image may not adequately represent its benefits.
a certain degree. THE SELLING ENVIRONMENT Creating an atmosphere
LIMITATIONS OF THE TRADITIONAL BUYING PROCESS within the brick walls that represent the store is not easy, but
MODELS. Product and market specifics often have creating an atmosphere on the flat and static page of a
considerable influence on the way which the buying process catalogue or on a website is even more difficult.
is carried out. PRICING Home shopping retailers have the potential to
BUYING GROUPS. The buying aspect of retail product offer goods at competitive prices because they do not have
management is a time consuming process and requires the expense of running a portfolio of stores.
considerable expertise, which are resources that some SERVICE Both customer service and stock service are
retailers, especially small, independent concerns, do not important when carrying out a retail transaction. Dealing
have access to internally. with live people in real time is one aspect of store shopping
Buying alliances. In the competitive world of retailing, the that eventually may be its salvation.
major players have become adept at exploring a whole CONVENIENCE One of the most oft-quoted sayings in the
gamut of strategies to achieve some kind of advantage over retail industry is the following: There are three factors for
their rivals. success in retailing; these are location, location and
CONSUMER-LED APPROACHES TO RETAIL PRODUCT location' (anon.).
MANAGEMENT One of the problems associated with a large ORDER FULFILMENT AND DELIVERY In theory, the
and complex retail organisation is that there is a danger that advantage of a product representation to sell from rather
those people responsible for carrying out the buying retailer than 'live' stock is that the retailer can effectively operate a
may get detached from the realities of retailing. stock-free order fulfilment system.
SUMMARY Multiple retailers, by definition, have to a greater Determining order quantities in non-store retailing As
or lesser degree a central buying operation, which liases indicated above, non-store retailers will wish to commit
with the retailer's supply sources and makes decisions themselves to as little stock investment as possible.
about product variety and assortment on behalf of the
network of outlets.
Delivery The product categories that have seen early OPERATIONAL PRODUCT MANAGEMENT
adoption of internet retailing (such as books, CDs and • Product development
services) all have the characteristic of being easy to • Sourcing
distribute, either physically through the post or digitally • Sales forecasting
downloaded. • Supply chain management
Non-store retail infrastructure The apparent simplicity of • Pricing
the internet retailer in itself is what bodes ill for retailers in • Space allocation
general, as it is as easy for a consumer to reach a producer's • Store profiling
website as a retailer's. • Visual merchandising
MULTI-CHANNEL RETAILING As this text goes to press, • Promotions
retailing via the internet is being rapidly adopted using both PRODUCT MANAGEMENT WITHIN THE OUTLET
PC and the more affordable and accessible TV as a shopping • Allocate space to merchandise:
'route'. Consumers are getting used to the time flexibility that • Display merchandise Receive and prepare stock
virtual shopping allows. • Implement promotions
SUMMARY Retail Management New methods of retailing • Sell merchandise
emerge and shopping processes evolve, but the product
management issues associated with retail operations which
do not enable customers to interact with the 'real' product
will not disappear.
INTERNATIONAL ASPECTS OF RETAIL PRODUCT
MANAGEMENT Very few large retailers can ignore the
opportunities afforded by an international approach to their
business.
INTERNATIONAL RETAILING AS A STRATEGY For many
retailers an international strategy has been central to their
success; for companies like Woolworth's and Safeway, and
more recently Ikea, Ahold, Tesco and Wal-Mart amongst
many others, international operations have been a logical
way to grow.
PRODUCT RANGE: STANDARDISE OR ADAPT? - As a
retailer opens more and more outlets in an increasingly
diversified set of locations, it would seem logical to tailor the
product range to the needs of the population.
THE INFLUENCES ON DIFFERENT PRODUCT STRATEGIES
The differences in consumer behaviour in terms of product
choice, brand preference, consumer economics, spending
patterns and shopping methods, whilst challenging in a
domestic market, become a myriad of changeable variables
on an international scale.
UNAVOIDABLE ADAPTATIONS Whilst the adaptation of the
product range to a new geographic market is a matter of
strategic judgement, there are some product modifications
which are completely unavoidable.
ORGANISATION FOR PRODUCT MANAGEMENT A retailer
has the choice of adopting a centralised approach to its
international activities or a decentralised approach.
LOCAL SOURCING - Local sourcing can help an
international retailer in a number of ways.
GLOBAL SOURCING Operating outlets 'abroad' is the most
common interpretation of international retailing;
nevertheless importing goods from other countries is often
the first step a retailer takes towards being an international
player.
ETHICAL SOURCING One of the difficulties associated with
global sourcing is that the distance away from the supply
source makes it more difficult for buyers to assess suppliers.
STRATEGIC PRODUCT MANAGEMENT
• Product opportunities and objectives
• Market opportunities and objectives
• Sales and profit objectives
• . Resource deployment
• Business environment auditing
• Integrated information systems planning
• Range planning
• Category management