Merchandise Sourcing

Five-step process
1. 2. Identifying the sources of supply Contacting and evaluating the sources of supply

3.
4. 5.

Negotiating with the sources of supply

Establishing vendor relations Analyzing vendor performance

Step 1 : Identifying the sources of supply.

Sourcing from Domestic or International market? If Domestic market
Visiting central markets, trade shows or expositions Contract Farming Eg. Reliance Retail is in the process of making Kerala its national sourcing centre for spices.

 If International Market
Common trend in the West where trade barriers are considerable low Uniqueness of merchandise Unavailability of the merchandise in the domestic market Low cost and good quality

Costs associated with global sourcing

Country origin effects Foreign Currency Fluctuation Tariffs Cost of Carrying Inventory Transportation Costs

Step 2 : Contacting and Evaluating the Sources of Supply

Vendor initiated contact Retailer initiated contact

The evaluation criteria to be kept in mind :

The merchandise itself suitability of the merchandise, quality & price of merchandise. Adaptability of the supplier to the requirements of the retailer Delivery terms

Step 3 : Negotiating with Vendors

The retail buyer then needs to negotiate the price, the delivery dates, the discounts, the shipping terms and possibilities of returns. Discounts that could be available to the buyer are
Trade discounts Quantity discounts Seasonal discounts Cash discounts

Step 4 : Establishing Vendor Relations

To maintain strategic partnership with vendors, the buyer needs to build on :

Mutual trust Open Communication Common Goals Credible Commitments

Step 5: Analyzing Vendor Performance

The total orders placed on the vendor in a year Quality of merchandise The initial markup on the products The markdown, if any Participation of the vendor in various schemes and promotions Transportation expenses Cash discounts offered by the vendor The sales performance of the merchandise