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Buying Offices—Your Eyes and Ears in the Marketplace

By Robert Nordstrom

Even Tiger Woods has a coach, and he’s the greatest golfer on the planet,” says Mercedes Gonzalez, Director of Global Purchasing Companies, a full-service buying office based in New York. “Everybody needs a coach.”

For retailers scrambling to keep up with the daily operational demands of their stores, investing in a “coach” can indeed bring impressive returns in terms of buying power, networking, fashion trend information, and, particularly for the more isolated smaller retailer, a trustworthy business confidante who offers encouragement and advice.

Buying offices have been around for a long time, although the services they offer have changed with the times. In the mid-1800s, retailers running outposts in the nation’s hinterlands needed an East Coast agent to buy for them. As the nation grew and transportation improved, many retailers found it easier to travel to the major markets and do their own shopping. As a result, buying offices assumed the role of information central, offering their clients up-to-date information on product, trends, new vendors, and so forth. The rise of the global marketplace has also strengthened the role of buying offices for retailers who need resources around the world in order to stay competitive at home.

Numbers Equals Power
In the cutthroat world of apparel retailing, price rules. American consumers have been spoiled by the deflationary trend in apparel over the past couple of decades; they, and that includes consumers from all demographic groups, expect low prices and shop accordingly.

Which begs the question: How do small and midsize retailers compete with the buying power of mega retailers like Wal-Mart and Target? There’s only one way: by becoming bigger than they actually are and wielding more clout than they actually have. In other words, by joining together to harness the power of numbers.

Buying offices function as the eyes and ears of the retailer. They track down new vendors and new product, often negotiating price and delivery details with the vendor before the retailer contacts the vendor. Some retailers outsource their entire buying operation to a buying office, which, in such instances, generally sets its fee based on a percent of volume.

The beauty of a buying service is that we do all the legwork,” says Sandy Scala, owner of New York-based Discounts by Sandy, an off-price buying service specializing in children’s wear. “A lot of vendors don’t want to show retailers their off-price goods because they want to sell their regular price merchandise. When I come in, though, they know that I’m looking for deals. A buying service is able find product that retailers are never going to find on their own. You have to search…be aggressive and out in the market five days a week. On the weekends I’m shopping the stores to see what’s out there. Being in off-price, I go straight to the sales rack because I want to see what didn’t sell.”

Some buying offices will periodically sponsor buying trips with a group of retailers. One small retailer in the process of opening a high end boutique in the Phoenix area relates how her buying office gives her access to more vendors than she would normally have. This retailer took a shopping trip to Madrid sponsored by her buying office. She, along with a group of other specialty store retailers, found some great product but the vendor had a higher opening order amount than any of the buyers individually were comfortable with. By grouping their buy, however, the retailers and vendor, with the help of the buying office, were able to negotiate a price point everyone could live with.

Marshall Kline, owner of Los Angeles-based Marshall Kline Buying Service, views his service as an assistant to retail store buyers, performing the research and follow-up, placing orders, and resolving disputes.

“Successful stores use a buying service because they have found that economically it’s a good deal,” he explains. “If someone from Kansas has to go to Los Angeles for a trade show, with airfare and hotel they are looking at $1000 per person, plus their time away from the store. If I can buy what they need, they save that money.”

Kline tells his potential clients that he will save them no less than ten times the monthly fee they pay him for his services. “Macy’s doesn’t buy anything unless it’s 25% off,” he explains. “I have enough clients that I can get that same 25% off. A small retailer doesn’t have that kind of buying power. It’s all about volume. In some cases, I will be able to negotiate half off on freight. When you total all the savings, it works out to be at least ten times my fees.”

Mercedes Gonzalez says that a customer’s potential savings is always the winning argument. For a yearly fee, clients get an assistant who is always available to find particular product, handle problems with vendors, discover margin builders, or consult on issues ranging from staff problems to merchandising concerns.
“It pays for itself in a couple of months,” says Gonzalez. “We had one client who was ready to pay $5 for lingerie hangers when you can get them for 80 cents.”

Knowledge Equals Power
But buying offices offer retailers much more than just buying power. Ron Arden, recently retired merchandising manager for the U.S. Marine Corp Exchange, views a good buying office as the specialist—“the person who really knows what’s going on in the market.”

“Most retailers are so busy, they don’t really have the time to seek out the new resources or follow the new trends,” he says, “and many retailers are losing sight of how terribly important it is to keep the merchandise mix fresh and new and exciting. I often found that a new resource could really make your season for you. I feel buying offices serve a very valuable purpose, although unfortunately a lot of retailers don’t use them to their advantage.”

Arden feels that this is particularly true in the off-price arena, which he believes has become an essential part of the retail mix. He says, “Everyone needs off price because retailing has become so competitive. But I find that most retailers don’t know a darn thing about off price. Smaller stores in particular should learn how to use off price to get some of the branded goods that perhaps they don’t have the buying power to afford. You really need someone to tell you what’s out there and who has the best deals.”

A good buying office provides its clients with comprehensive information. According to Abbey Doneger, president of The Dongeger Group, a leading merchandising and trend forecasting consultant for the fashion industry, “The term ‘buying office’ is limited in scope. Our services extend far beyond what a buying office traditionally provides. We delve into all areas of merchandising and marketing. Our objective is to help retailers generate increased sales and profits, gain market share and realize their full potential.”

Price Point Buying, The Doneger Group’s off-price division, staffs a team of market analysts to cover the various apparel classifications—ladies, men’s, and children’s—then communicates their findings with clients. According to Executive Vice President Lee Mandelbaum, Price Point, whose customers are primarily large multi-store retailers and jobbers, has the technology to disseminate information to clients quickly and efficiently so they can make real time decisions as well as the ability to source specific categories of product based on clients’ needs and objectives.

Marshall Kline, whose buying office serves clients ranging from Bloomingdales and J.C. Penny to small retailers in the Marshall Islands, provides clients with extensive market information and fashion reports. “Forty percent of my clients are international,” Kline says, “and of that 40%, half are in the southern hemisphere. These clients use my fashion projections to anticipate the fashion season in advance of the northern hemisphere retailers. Historically, stores in Australia, for example, would copy spring fashion because their spring runs from November through March. Now, with advance forecasting information, they are ahead of many American stores in terms of fashion.”

Mercedes Gonzalez of Global Purchasing Group believes that for specialty stores trying to compete in today’s market, information is key. Things start going wrong for retailers when they are not informed. Some clients, she says, “will come to the market and ask a few minutes before they start shopping, ‘Is such and such still in? Is that still selling?’ They don’t have the time to keep up.”

A good buying office sends out reports often and regularly, providing information not only on fashion trends, which come and go, but on the latest retailing trends. And for the smaller retailers in particular, the personal touch helps. Stacks of reports are impressive but if the retailer doesn’t have someone to sit down with him or her and say “this is what applies to you,” what’s the point?

Networking
Overwork and isolation are problems faced by many retailers, particularly smaller operations with minimal staff resources. As with any profession, networking with peers and colleagues creates new energy that can be channeled into the business.

Retail consultant Allan Zell (www.sellingselling.com) says that independent retailers can benefit by joining together in loosely organized groups, which he calls “skull groups.” The key to success with such groups is gathering businesses that sell similar types of merchandise but whose market areas do not overlap. Such groups can meet periodically and stay in contact via e-mail to share information and ideas. The activities of such groups are limited only by the will and imagination of group members.

Support networks create opportunities for information sharing, which translates into knowledge, which generates power. For example, if a retailer is having a problem with a vendor, he or she can share that information with other retailers who may be dealing with that same vendor to get their read on the situation. It doesn’t take long for a vendor to get the message when it comes from multiple sources.

Mercedes Gonzalez believes that networking is invaluable and organizes meeting events for her clients twice a year. She, in fact, has been trying to make the events more social and less business like because she feels that a social environment is more conducive to developing a support network.

It’s easy to get isolated when you’re small,” she says. “There have been times when I’ve visited a client and said, ‘hey, I didn’t know such and such store opened in your town,’ and the client replied, ‘what?’”

Is a Buying Office for You?
Would your business benefit from the services of a buying office? Perhaps one way to look at the question is by asking yourself whether your business would benefit from a jack-of-all-trades assistant who could be your eyes and ears in the marketplace, an expert resource for finding great deals on product, a consultant offering the latest fashion forecasts and retail trends, and a confidante offering encouragement when you’re feeling isolated—all of this while paying for itself and saving you money. That’s the mission of any good full service buying office.

Retail is a tough career that becomes even tougher if you try to go it alone and do everything on your own. Wal-Mart uses buying offices around the globe and they have the power and money to do just about anything they wish to do on their own. If Wal-Mart sees their value, perhaps hiring the services of a buying office is worth considering. And if Tiger needs a coach, maybe you do too.

Worldwide Distributors —The Independent Retailer’s Ace in the Hole

In 1955, five Army surplus store owners pooled their resources to get a good buy on a load of merchandise that was too big for any of them to handle alone. That night Bob Schlecht, Sr., and Bill Jones, pleased with the deal they had just transacted, discussed the possibility of pooling their resources on a more regular basis. They called several other store owners, arranged a meeting, and the member-owned coop Worldwide Distributors was born.
Today, Worldwide (www.wdi-wdi.com) writes millions of dollars worth of business in both hardlines and softlines categories. Merchandise coordinators negotiate volume discounts, advantageous pricing, and extra advertising dollars for its membership.

While group purchasing power is the primary reason most independent retailers join Worldwide, the coop offers numerous other services, including advertising and marketing support, a private label program, members only buying shows, specialty buying shows for seasonal merchandise, buying opportunities at national retail trade shows (including the Off-Price Specialist Shows in Las Vegas), special insurance, freight and bank card programs, and networking opportunities with fellow independent retailers throughout the United States and Canada.

Worldwide’s centralized billing service guarantees the credit of its members. Vendors, who are screened by Worldwide, like working with Worldwide because they can sell the goods to members and bill the coop. Worldwide pays the vendor and the member pays Worldwide.

Apparel and footwear makes up approximately 45% of Worldwide’s business, with the added advantage of a private label program, which gives independent retailers access to merchandise unique to their stores as well as brands to promote.

With the continuing encroachment of big box chains and regional malls into small towns and rural business territories, Worldwide offers invaluable resources to independent retailers throughout the country.