International Retailing Buying Process – Overview

The job of a Merchandiser in International Retail Company is one of the most challenging and rewarding career options for one to consider. The job of a Merchandiser entails strategizing and executing the strategies for procurement and supplier management on behalf of the Company. An experienced Merchandiser brings a lot of value and contributes to the profits of the Company by way of managing the Product development, Supplier Management and Procurement functions.

Apart from managing and overseeing the ongoing procurement or repeat purchases, the Merchandiser’s major responsibility is to develop new products and suppliers. The process of identifying Suppliers and developing reliable Supplier networks takes considerable time and effort on the part of the Merchandiser.

To get an idea of the activities and tasks involved in developing new Supplier Network, we shall discuss briefly the process of Vendor development.

Identify Supplier

The first task starts with gathering market information and identifying the Suppliers who may be available locally or overseas. We must assume that in current times with globalisation, the suppliers are mostly situated in developing countries and in markets like China, S.E Asia etc where the cost of production and labour are less. The Merchandiser can obtain the information from various trade journals, trade directories, internet and more importantly from Trade Exhibitions as well as from the competition. On the other hand, major suppliers are likely to embark on a marketing spree and thereby contact the Merchandiser as a potential customer.

Assess the Supplier Capability

Different International Retailers follow different internal processes for validating and assessing the capability of the Supplier. At the early stages, detailed information about the Supplier’s Organisation, Management, Technical and Production Capability, Details on quality and history of business relations and performance etc are sought in the form of Presentation and documentation.

Visit to Supplier Site & Assessment

Once the Supplier submits or presents the marketing and other information, the Merchandiser with his team [involving technical, quality and marketing] undertakes a visit to the Supplier site to assess the capability and obtain firsthand information. Multi National Retail Companies normally follow strict rules regarding ethical practices and human resource management including safety and health and expect the Suppliers to follow the same. Site visits help the Companies assess not only the Supplier’s technical and production capabilities but understand its management and work culture as well as its adherence to the ethical and moral principles as well as legislation and HR policies. Suppliers who are serious about their business and in seeking to service such International Retail Companies will ensure that they set up and follow international standards that are acceptable to the Buyers.

Sample Submission

On completion of Supplier site visit, if the Merchandiser and his team accept the Supplier’s capability, they are likely to engage the Supplier in the next stage of sample design development and submission of trial samples. Such trials can be exhaustive involving the technical and quality teams from both sides. In fashion industry, the design and sample submission is very critical in terms of quality as well as time. The sample batch of products submitted are released to the market to obtain customer feedback or sometimes evaluated internally by the Buyer’s team. In most cases the Merchandiser provides the detailed product specification, design, quality and branding details to the Supplier and expects total compliance accordingly.

Commercial Negotiations

On successful submission of trial samples and acceptance by the Buyer and the Buyer being convinced of the Intent, capability and quality of the Supplier engages the Supplier into commercial negotiations. Generally the Merchandiser will provide Buyer’s agreement document along with details of Terms of Contract detailing, Order Quantity, Delivery Expectations, Delivery Mode, Pricing, Terms of Payment, and Procedure for acceptance of delivery, time cycle for payment, mode of payment etc. Negotiations that ensue will cover commercial agreements including order quantities for a certain period or season, discounts, advances etc.

Trial Procurement & Normal Procurement

On acceptance of the commercial terms between the Buyer and Supplier, the Buyer|Merchandiser releases Purchase Orders for a trial period or quantity. Trial supplies give a chance for both parties to experience dealing with one another and understanding each other’s requirements. Successful completion of trial orders results in Buyer issuing the Buying Agreement [Covering specific period of time] and Supplier singing the same in acceptance. As per the terms and conditions laid down under the agreement the Merchandiser will then arrange to release specific Purchase Orders or release Monthly Delivery Schedule as per the requirement.

Though the above process looks simple, it is time consuming and demands a lot of effort from the Merchandiser to bring both parties together. An experienced and mature Merchandiser who is good in relationship management as well as negotiations skills is able to approach the Supplier on a Win Win approach and build a relationship to start with. Merchandiser’s job doesn’t end at this stage. Further on he continues to manage the Supplier relationship and engage with Supplier from time to time as per his business needs. Merchandisers have a very critical and important role to play in the Company’s relationship and experience with Suppliers and their performance.