Retail Diary: Retail 101: Buying Decisions - Chapter 3

Insider tips on buying decisions. Ever wonder how Buyers decide what merchandise to bring in? How do they build assortments? If you have a brand how do you get a Buyer's attention? Retail 101 answers

Heads up: This is going to be a different type of newsletter. For the Retail 101 Series I get into the basics of retail. Today I’m sharing Chapter 3, Buying Decisions (I decided this would be too long for Negotiations also, so Negotiations will be Chapter 4. This semester is really moving along! No tests, but I do love student participation.) Buying and Negotiations are incredibly connected and it is helpful to understand what a Buyer is thinking, what the consumer experience is like, future negotiations and how this impacts the buying decisions.

My goal with Retail 101 Series will be to share the foundational parts of retail. It can be for someone looking to explore the industry more, someone who works on the creative side but wants to understand how the other operates OR for a consumer who is super curious and maybe wants to be an even more informed shopper.

Introduction

• Chapter 1 of Retail 101 was about Math & Financials. Here you will find in-depth exploration of retail math essentials, including wholesale, markup strategies, sell-through rates, and pricing strategies, with practical insights and real-world examples for merchants, retailers and curious consumers.

• Chapter 2 of Retail 101 was also on Math & Financials but focused on Markdowns and end of life cycle. Here we delve into the nuances of markdowns in retail, covering hardmarks and promotional discounts, while also explaining the accounting methods behind inventory valuation at cost versus retail and providing insights into decision-making processes for markdowns.

• Now let’s take the opportunity to dig into buying (for the store) decisions and building exciting assortments. How does a merchant decide what products and lines to buy? In a future post we can explore what happens for assortment building in a Vertical Retailer, like J. Crew or even how fashion designers, like Khaite, might approach wholesale when they have their own retail stores and also want to work with other retailers.

So let’s get into it

Understanding Buyer Decisions

• There are a lot of different scenarios and types of stores, for this chapter I’m going to explore an imaginary department that is fashion focused with some basics. It is much more fun I think to explore a bit of a fashion trend and as long as you have foundations of managing the two you can run other categories too. Let’s start with two definitions:

  • Fashion - this means the trend might change year to year or season to season. If you have a handbag department in 2024 you likely have an assortment of East-West handbags or bag charms. But in 2022 you probably had none featured. Then the trend would have been more slouchy handbags.

  • Basics - this is an item you would always have whether it is trending or not. If we keep with the handbag example, this might be a black tote like this. It’s the same season after season. Someone will likely always walk in looking for it, so you need to have on hand.

What products (or brands) to buy?

• Buyers will see lots of products. It is part of their job to know what is trending in their category and the history. You also need to know the competition and how to differentiate your store compared to another store. How are you deciding which brands to buy - and as we often see in certain departments, how many black totes do you need? Are you buying one from every brand you carry? (Likely, no.)

• First, the buyer is gathering information. Looking at fashion shows, paying attention to magazines, what they are seeing on the street - in real life - and on key influencers, pop culture trends. Often when a popular TV show was on, we would come in the next day and all discuss the trends. The Oscars, what was on the red carpet?? How might this translate into your category? If halter neck gowns are trending on the red carpet, maybe the prom dress buyer will make sure to have that category covered. But the jewelry buyer would decide to over index on bracelets and earrings and buy fewer necklaces than when strapless dresses were trending.

• In addition to focusing on Trends you are also reviewing past season sales. What was the same time of year like the year before (we would look at TY vs LY, or This Year vs Last Year) and you would also look at your trends the last 6 months and 3 months or the last quarter. You would drill into what categories were working and what isn’t. You might even dive into sub-categories and get as granular as you can. What brands are selling. Are there trends in price points. You want to know All The Details!!!

• You also need to go a little deeper to make sure you aren’t just thinking, “oh, we sold this sweater out 100%.” You have to take a look and see how many you bought. If you bought 5 units and sold 5 units that is not really helpful. How many could you have sold? But if you bought 500, sold 350, maybe next year you will buy 325 of a similar style - a bit less because it might not sell as well and maybe a second similar style 200 units to “test” or maybe you will buy 300 but ask the vendor to have another 100 units on hold for you (and thus we have reached another part of the lesson where we should discuss sustainability but I’ll put a pin in that at the moment.)¹

• Now you should have your plans, the financial planning portion is your framework how much inventory you need and broken down into categories and vendors etc. Next you will meet with all the brands and go visit showrooms, have brands visit you to show off their products and discuss what they can do. Some of these brands you might have relationships with already and some might be new ones you are exploring and considering. You can seek out new brands in a variety of ways: trade shows, Instagram and social media, looking at other stores or have brands pitch you as inbound.

• Time consuming and a lot of logistical work, but something that is incredibly useful, necessary and insightful is a Style Out. Think of it like a “dance off” but for products. During this process I always gathered all the products (called in samples from all the brands I was considering) and laid it out in a conference room labeled and had more data than you can imagine. At this point the team (buyers & planners mostly, but also fashion director, marketing would be involved) would review how everything looked together. If we are doing a Style Out for shoes these are conversations you might overhear:

  • How many black ballet flats did we sell last year? Across how many different skus? What are we planning to sell this year?

  • We only have 3 sneakers and that isn’t enough, are there any others we can add in?

  • When did we sell out of snow boots last year? When did we bring them in? Which one had the best sell-thru?

  • What does the bridal assortment look like? Can we highlight this as a category and put them together on a fixture?

  • Brand X only had a 30% sell-thru last year before we did markdowns, why are we bringing them back in?

  • Should we keep a mesh flat on the floor year round? We had 3 LY and they sold well, the trend is picking up, can we increase to 6 different skus TY?

• Now let’s break down how we might approach a trend item - and let’s go with the current hot take, mesh flats.

  • You might have 20 different mesh flats because EVERYONE is doing them now that the silhouette is popular. So you have to edit. At this point you would lay out all 20 of the mesh flats from each brand. If we wanted to select a total of 6, you might choose:

    • the top one from LY to bring back in. let’s say this one is $1,000 (you can still barely keep in stock.)

    • next you would want to have the trend at the opening price point, so you look at all the ones that are $300 and below and you select one at $250 that looks different from the most expensive one.

    • now you want one that is super trend forward. maybe the mesh is even more open, or it is in the trending color.

    • then you want one that ANYONE could wear. something you can (enjoy the pun) dip your toe into the trend with.

    • now perhaps your best brand - a vendor that is a wonderful partner, always helps out if something isn’t doing well, and the silhouette looks good. the brand is strong and they did a mesh flat, so bring it in.

    • for this last one, I might pick something that I just felt like I was personally attracted to - what is my gut telling me??? this is where you can take a chance. Maybe it is a brand new, unproven vendor/brand or something you will have no financial support for and the margin isn’t great, but you know it will get you great press. This is your risk in a trend but a calculated risk.

    • Now that we have the 6 we love, you would line up together. maybe in price point order, and see how they look together. do they all look identical? if so, start over. will one of the vendors support paying for advertising and be involved to help with selling and store events? if you roll up all these orders can you cover it with your OTB²? great! once it passes this test you are good to move on to the next category/vendor/trend. Yes, we would do this same exercise for every category, every vendor and every trend. There is of course overlap but that is how you feel really solid in your selection.

• Many factors influence product selection: brand identity, market trends, customer preferences, previous history of sales and differentiation across the market. All of this is taking place months before products will ship. So you need to make sure a buyer sees your merchandise well in advance to be considered. Buyers will try to keep a little OTB available for last minute trends and opportunities, but that all is based on sales going well and to plan. We can get more into when they don’t with Chapter 4 on Negotiations.

• It is important to create a cohesive assortment with a unique point of view. Customers know if they walk into Nordstrom what they can expect. If they walk into Bloomingdale’s, the Webster, Bergdorf Goodman or Anthropologie they will expect something different. All stores should aim to have a distinct POV (even a Walmart, which is on everyday value) and the buyer/merchant is also responsible for curating and cultivating that POV through to their category/categories.

Strategies for Getting a Buyer’s Attention

• The best tip for getting your product in front of a Buyer or getting a Buyer to be interested in your brand/product? Know your product in and out (honestly) and know the competition. Be able to explain why your product is the better choice and be able to negotiate to get it in the door. What do you do if your product is better or different? Go back and innovate. If you come in with the insights and hard facts it will be difficult to say no. Buyers want to bring in newness, it drives traffic into the store/online and keeps customers coming back. There are so many tools to market your product - DTC, social media, using SEO search terms that a Buyer might use. Cold calling and working with a showroom or a trade show.

• If your *new to the retailer brand is taking the place of an existing brand, the Buyer has to figure out how to get the other product sold thru or out the door. This is going to cost money so they might need support or shown that it will be worth it. They can be profitable in the end by working with you.

• Offer insights into effective strategies for capturing buyers' attention, such as innovative product offerings, compelling presentations, or strategic partnerships. Here is one example and why I love having a DTC³ presence. If you are selling your “crochet sundress” online and can show how strong your sales are, showcase the zip codes that are doing best and that you don’t have any retail in person locations in that zip code but the boutique does, that could be super enticing for a buyer. Maybe the buyer looks in their own search terms and sees that they have hundreds of customers searching for “crochet sundress” and they have zero in their assortment. These are two examples of how to use data driven insights for buying decisions.

• Partner with other brands - if a buyer is already working with one vendor, perhaps in another category and you have data about synergy of your brands working together and sales increasing for both brands that’s another way to make it easy for the buyer.

Curious from a consumer’s POV

As a Buyer you use your sales as feedback. If something doesn’t sell that is data - wrong product, wrong price, wrong trend etc. Spending time on the floor with customers and sales associates regularly is so important. For online sales, I really love doing UX testing and research and working closely with data scientists to build reporting I can use. There are ways to gain insights by surveying shoppers or bringing them in to give feedback. It is also just as important to be constantly shopping the competitors and getting out to see stores.

Relevant Content - to dive even deeper

• The Kingdom of Prep: The Inside Story of the Rise and (Near) Fall of J.Crew by

  Maggie Bullock
  has great insights on store strategy and building an assortment.

• Let’s keep going on the J. Crew theme because I’m such a Mickey Drexler fan. This New Yorker profile from 2010 by Nick Paumgarten simply titled “The Merchant” and an interview with Lauren Sherman when she was at Business of Fashion with Drexler from January 2020 (!) “How to Make Things People Will Buy”

• The Nordy Pod is a good listen.

• Fashion People with Lauren Sherman interviewing buyer Elizabeth von der Goltz on pricing.

• Should we rewatch when Rachel Green (aka Jennifer Aniston) was a Buyer for Bloomingdale’s? I’m kidding, but that was so fun!

• Ask me questions! I’ll answer and add more Chapters to Retail 101.

Wrap Up and What’s Next

• Here we discussed what goes on behind the scenes for making buying decisions. How a Buyer builds an assortment. There is a lot more, but this is a good overview to get a sense.

• I’d love to hear what questions you have. I can help answer any questions or work through real world examples. Comment and I can respond.

• What’s next? In the Retail 101 series I will write about Negotiations next. Please also use the comments and chat for any questions. If you are on Substack we also have the DM feature so you reach out directly with any questions or email me at sarahshapiro@substack.com

  

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  If you are new here, check out these classic posts:

  Fashion 🌀 Spiral: In The Trenches

  Book Club - Deluxe: How Luxury Lost its Luster

  This Will Be Quick 4.23.24 - WNBA Style, Belts, Spring Styling & Fast Fashion vs Resale

  Sunday Scoop - Larroudé, Beauty, Trends & Substacks to Scroll

  Retail Diary - Week of February 26th, 2024 - MFW & PFW & Collabs

1. Maybe we do a Futurist or Idea post where we explore ways to disrupt and repair challenges in the retail industry.

2. Open To Buy. Think of this as your checkbook. How much a Buyer has to spend to bring in merchandise that is thoughtfully calculated to be profitable and bring in the appropriate amount of merchandise.

3. DTC = direct to consumer. When a brand sell directly to the customer and not through another department store or boutique.