Types of buying houses

Buying house is a very broad based term, which includes two major

classifications:

Classification of buying houses/offices:

The Independent Office The Store Owned Office

1. Salaried or fixed fee office 1. Private office

2. Merchandise broker or Commission office

2. Associated office

3. Syndicated or chain owned office

Independent buying office

• This is privately owned and operated and continuously seeks stores/ chains/ wholesaler-importers as clients. Some of these independent buying houses represent large department store, whole others represent small apparel shops,

• specialty stores and other types of stores, which, require an interface between them and the Indian resources. This type of an office serves its clients with similar merchandise lines. Since non-competing store are members of the some resident office, the merchandiser has the opportunity to work with each member store to develop private branding and encourage volume buying. There are two types of independent buying offices:

The commission of merchandise – broker office

• Commission or merchandise – broker office: this type of independent office receives its fee directly from the manufacturers or vendors it represents. The commission is based on the percentage of orders placed by client stores. The merchandise broker receives a commission from the vendor rather than from the client store though they offer similar services to the ones offered by the salaried RBO’s. The fee ranges from 3-4 percent of the FOB value of exports.

• A major disadvantage of this type of a buying office is that often

there is a conflict of interest between the client stores and the RBO’s and extra effort is needed to ensure continued business.

Salaried or fixed – fee office, and

• Salaried or fixed – fee office: the salaried office is paid a fixed fee directly by the client stores it represents. Contractual arrangements are made between the salaried office and the client store. The typical fee ranges from 5 to 7 percent of the value of merchandise sourced through the buying house, payable in equal monthly installments. The relationship of the buying office to the client store is that of a private professional offering service to a client.

Commission or merchandise

• broker office: this type of independent office receives its fee directly from the manufacturers or vendors it represents. The commission is based on the percentage of orders placed by client stores. The merchandise broker receives a commission from the vendor rather than from the client store though they offer similar services to the ones offered by the salaried RBO’s. The fee ranges from 3-4 percent of the FOB value of exports.

• A major disadvantage of this type of a buying office is that often there is a conflict of interest between the client stores and the RBO’s and extra effort is needed to ensure continued business.

The Store Owned office

• Also referred to, in trade parlance, as the dedicated buying office, it is owned by the store or stores that it represents. It is organized to provide buying services for them. Very large department and specialty stores are generally represented by their offices. This type of an arrangement provides the last conflict of interest. There are three types of store-owned office:

• The Private office• The Syndicate/Chain Owned office, and • The Associated buying office.

The Private office:

• some large retail organizations maintain their own private buying offices in major supplier markets. However, due to the large investment involve and the lack of an opportunity to exchange information with non-competing stores. This type of RBO’s doesn’t have a striking presence here. The buyers in these offices perform the some functions as those in the independent offices, in fact, some stores maintain private offices on the premises of an independent office. This enables them to have access to all the services of the large RBO and yet to maintain on office for a market representative who is directly responsible to them.

The Syndicated or Chain Owned office:

• These are divisions of a corporation that owns a chain of department stores. Therefore, most chain stores have central buyers in the stores as well as resident buyers in the principal supplier markets. The syndicate office is able to maintain a dominant position and can force adoption of its recommendations on stores because of common ownership. Examples of the syndicate BO’s are Macy’s, May & JC Penney. Once the central buyers have determined the needs of their individual stores, they request the resident buyer to line up the arrangements with the vendors/ resources. A major advantage of such an affiliation is the assured source of supplier market feedback. Since the central buyers handle large volumes of merchandise, they require fast, accurate, information on fashion trends, market conditions, prices etc. a central buyer may ask the resident buyer to place orders, follow up on deliveries, and handle special orders, adjustments, claims and complaints.

The associated buying office: • these are owned and operated by a group of stores. They are also called co-

operative offices, since their expenses are distributed among the member stores. Fees are based upon the size of each store and the purchases made. The commissionaire then follows up to make certain that the deliveries of ordered merchandise are made in time.

• • Commissionaire offices are locally owned and the staffs are all usually from the

local area. Because of their contact with the supplier market, the market representatives in these offices are able to direct their buyers to the best resources for their needs. They develop and maintain resource relationship, assist office and store personnel on overseas trips, set up meetings, and follow through on orders after the buyers have left the foreign country. Many of these offices have product development and testing facilities that help to ensure that the garments are sized and constructed to the importing market’s specifications and that, where necessary, the safety and labelll9ng regulations are met.

Agent:

• They get order from importers, wholesalers and retailer and pass them on to the exporter. Being fully conversant with the markets, the agent can appreciate the market characteristics of the particular territory and exploit the potential of the market. The exporter may route the goods straight to the wholesaler or the retailer depending upon the terms of agreement; the agent gets a predetermined commission on the FOB value of exports. The agent also provides the service of sending back commercial and trade information to the buyers. Some countries lay down legal guidelines that all imports be routed through a local resident (a citizen of the importing country).

Job Profile In Buying House(Organizational Chart)

COUNTRY HEAD

MerchandiserTechnical

Administrative

Product development as per buyers objective or own initiative.

Vendor selection

Order placement, Order follow up & communication with buyers

Fabric Approval & trims & Accessories approval Payment & Shipping

Testing (Colour Approval) (Lot Approval)

House Keeping

Quality Control & Quality Assurance

Documentation

Fabric Inspection

Criteria for Vendor selection

CostLead time managementConsistency in lead time

Quality adherenceGoodwill

Financially strongProduction capacity

Location, infrastructure, servicesCredit & other facilities

Historical background

• The resident buying office is a direct growth of socio-economic developments that followed World War I. In fact, these factors led the birth of modern ready-to-wear and the necessity for the insti tution of resident buying:

• 1. The manufacturing of clothing reached mass production levels during the war because of the need for uniforms for both domestic and allied purposes. This new condition decreased the importance of home sewing and the neigh borhood seamstress for children's and women's apparel.

Cont.

• The European social movement for female equality, which was imported to the U.S., and the entry of women into the mainstream of commercial life required styling suitable for business wear.

• The technological developments of the cinema and the automobile resulted in new attitudes and needs for cloth ing.

• The development of the urban population made for a fertile market, where masses of people could accept ideas, therefore clothing, of similar nature.

• The other important ingredient was the product. Rayon was discovered a few years earlier and became available as a fabric for dresses at popular prices.

• The picture was now complete—existing stores could now harvest the benefits. But, a new development in retailing took place —the apparel chain store—with advantages that challenged the en trenched department stores. The chains had:

• 1. Mass purchasing power• 2. The ability to purchase in line with market developments since they

operated from an office in the market itself

TYPES OF RESIDENT BUYING OFFICES

• The type of resident buying office a store uses, or can use, is a matter of the need, size, and nature of the operation. A large store with many departments doing high volume has different re quirements from the specialty store doing a modest volume. To determine the guidelines for office selection, the reader is di rected to: "Small Business Administration Marketers Aids," Pamphlet #116, Ernest Miller, who summarized many factors to be weighed in the selection of proper market representation.

THE SALARIED OR INDEPENDENTLY OWNED OFFICE

• The salaried or independently owned office receives remu neration from the represented stores, usually based on the vol ume of the store. Frequently, the fee is negotiated and a flat sum set.

THE PRIVATE OFFICE (STORE OWNED)

• This type of RBO is maintained by a store or group of stores to achieve a high level of efficiency and control their own personnel located in the marketplace. Private offices are, for the most part, located within an independent (salaried) or associated

• This type of resident buying office is owned by a corporation that owns the stores it services.

AVAILABLE OFFICE SERVICES MARKET COVERAGE

• Market representatives (sometimes referred to as "buyers") are the "eyes and ears" of the store buyer. They gather pertinent information which is relayed by bulletins, individual letters, in some cases telephone calls, and less frequently wires to all member stores.

• Some RBO bulletin types (the titles will vary with the offices)

• Merchandise News Special Attention Reorder• Immediate Action Fashion Activity

SEASONAL PREVIEW CLINICS

• In a seasonal preview clinic, the buyer can review the mer chandise selected by the representative to illustrate trends of the selling season. It can be held in the resident buying office if space is available, or at a nearby hotel.

• During the meeting, recommendations are made regarding such subjects as: classification strengths, depth of purchases, stock peak dates, colors, resources.

BUYING SERVICES

1. Special Order—a commitment for a special customer that requires a personal visit to the manufacturer to insure required delivery.

2. Reorders—an additional order to replace merchandise that sold well. The RBO representative may be in a posi tion to secure preferential or fast delivery, or place the order with another manufacturer making similar goods (with store buyer permission).

3. Sample Order—the placement of an order for new goods. The RBO representative must obtain permission from the store buyer before placing a commitment for newly de veloped styles in minimal quantities to include in stock to determine a rate of sale. The permission is based on the store buyer's respect for the representative's judgment.

4. Open Order—one that is given to the RBO representative with leeway. The store buyer's instructions may include one, or a combination, of these specifics: price of merchan dise, specific colors, manufacturer, sizes, and delivery. What is detailed is dependent upon the store's need and the relationship between store buyer and representative.

ORGANIZATION OF A RESIDENT BUYING OFFICE

• An organization chart for a resident buying office is dependent upon the clientele it serves. In a larger office servicing giant stores, there must be many levels of responsibility and a wide range of buyers and staff because there must be office coverage for all store personnel. It is easiest to say, that every member of a store has a counterpart in the RBO and that they consult during market trips, and in the case of higher store levels, when annual meetings are held.

The line of organization, therefore, of a typical ready-to-wear office operation is:• General Merchandise Manager• Divisional Merchandise Manager• Buyer• Assistant Buyer• Follow-up AssistantIn conclusion, the resident buying office is a necessary adjunct of a store,

particularly in fashion merchandising where the roots of its establishment were first planted.

THE RESIDENT BUYING OFFICE

• One of the most important communication links of fashion marketing is the resident buying office.

• In a sense this institution is a staff department of the stores it represents since its basic function is to service its clientele or mem bership.

• The term buying office is misleading because one could as sume that an office is engaged to procure merchandise for retailers, and in a peripheral sense it has some validity. Factually, an RBO is a service organization that represents stores for three broad pur poses:

Cont.

• 1. Research• 2. Buy with permission• 3. Help to promote merchandise• Buying and achieving a profit is always the responsibility of

the store buyer.• The definition of a resident buying office is a business

organiza tion that is located in a given fashion market and engaged to act as a market representative for a store, or group of stores, with its own complement of buyers. The word representative is the key to under standing the relationship.

• One of the most important communication links of fashion marketing is the resident buying office.

• In a sense this institution is a staff department of the stores it represents since its basic function is to service its clientele or mem bership.

• The term buying office is misleading because one could as sume that an office is engaged to procure merchandise for retailers, and in a peripheral sense it has some validity. Factually, an RBO is a service organization that represents stores for three broad pur poses:

• 1. Research• 2. Buy with permission• 3. Help to promote merchandise• Buying and achieving a profit is always the responsibility of the store buyer.• The definition of a resident buying office is a business organiza tion that is located in a

given fashion market and engaged to act as a market representative for a store, or group of stores, with its own complement of buyers. The word representative is the key to under standing the relationship.

• TYPES OF RESIDENT BUYING OFFICES• The type of resident buying office a store uses, or can use, is a matter of the

need, size, and nature of the operation. A large store with many departments doing high volume has different re quirements from the specialty store doing a modest volume. To determine the guidelines for office selection, the reader is di rected to: "Small Business Administration Marketers Aids," Pamphlet #116, Ernest Miller, who summarized many factors to be weighed in the selection of proper market representation.

• The reader is also advised to refer to Phelon's Resident Buying Book, a book that lists all the resident offices in New York City, the personnel of the offices as well as member stores. You will observe that the salaried office (to be discussed) is the most numerous type, close to two hundred offices; in close second place, the merchandise broker office; the other types of resident offices are relatively fewer in number. There are five types of res ident buying offices.

• THE MERCHANDISE BROKER (INDEPENDENTLY OWNED)• This office was at one time known as the Commission Buying Office. This type of office

secures remuneration from the manufac turers on the basis of a percentage of the net shipment to a store. The store pays no fee. One of the considerations of a store is whether there is a conflict of office interest in order to obtain maximum revenue.

• THE PRIVATE OFFICE (STORE OWNED)• This type of RBO is maintained by a store or group of stores to achieve a high level of

efficiency and control their own personnel located in the marketplace. Private offices are, for the most part, located within an independent (salaried) or associated

• This type of resident buying office is owned by a corporation that owns the stores it services.• AVAILABLE OFFICE SERVICES MARKET COVERAGE• Market representatives (sometimes referred to as "buyers") are the "eyes and ears" of the

store buyer. They gather pertinent information which is relayed by bulletins, individual letters, in some cases telephone calls, and less frequently wires to all member stores.

• Some RBO bulletin types (the titles will vary with the offices)• Merchandise News Special Attention Reorder• Immediate Action Fashion Activity

• SEASONAL PREVIEW CLINICS• In a seasonal preview clinic, the buyer can review the mer chandise

selected by the representative to illustrate trends of the selling season. It can be held in the resident buying office if space is available, or at a nearby hotel.

• During the meeting, recommendations are made regarding such subjects as: classification strengths, depth of purchases, stock peak dates, colors, resources.

• BUYING SERVICES• As previously discussed, the store buyer has the responsibility for buying

merchandise. However, there are instances when the buyer cannot be in the market to place an order advantageously.

• There are several different kinds of orders that a store buyer can instruct the resident office representative to place.

• 1. Special Order—a commitment for a special customer that requires a personal visit to the manufacturer to insure required delivery.

• 2. Reorders—an additional order to replace merchandise that sold well. The RBO representative may be in a posi tion to secure preferential or fast delivery, or place the order with another manufacturer making similar goods (with store buyer permission).

• 3. Sample Order—the placement of an order for new goods. The RBO representative must obtain permission from the store buyer before placing a commitment for newly de veloped styles in minimal quantities to include in stock to determine a rate of sale. The permission is based on the store buyer's respect for the representative's judgment.

• 4. Open Order—one that is given to the RBO representative with leeway. The store buyer's instructions may include one, or a combination, of these specifics: price of merchan dise, specific colors, manufacturer, sizes, and delivery. What is detailed is dependent upon the store's need and the relationship between store buyer and representative.