International Retailing Buying Strategy

International Retailing is a procurement intensive industry. Being dependent upon Suppliers entirely for the merchandise, it becomes imperative the Companies to form a strong Supplier Strategy for Buying. Prior to 1990s, the supplies were controlled by the Suppliers. Most often, faced with limited capacity for production, the supplies would be affected as per the Supplier’s convenience and the Retailers had to wait and accept the consignments whenever they received. Part consignments, late and short deliveries with high freight plagued the supplies. With the onset of ECR movement, the dynamics of Supplier and Retailer positions and power play changed. Retailers began to gain control over the Supply chain as well as built alternate supply networks to reduce dependencies. In some cases, the Retailers began to procure Raw Materials and supply to the Manufacturers, thus controlling the supplies. As the Retailers moved to implement the concept of Product Replenishment, the entire supply chain had to adapt to the new system wherein the Suppliers had to fall in line and effect deliveries as per the call off by the Retailers. At this stage the Supplier-Retailer relationship was purely transactional.

Retailing Companies and Merchandisers having realised the value of developing Supplier Network and to reduce the Risk thereof to their business have developed detailed legal formats to bind the relationship and ensure that both parties stick to their part of the bargain as enforced by the legal agreement. Multi National Companies follow elaborate method of Identifying, Short listing and Evaluating Vendors. Considerable effort and management focus goes into analysing the Supplier’s capability in terms of Organisation, Production Capability as well as in understanding the Supplier’s vision and philosophy of business. The volume and value of procurement by International Retailing Companies being very high, they are in a position to engage Suppliers to make investments to produce or process products as per the required quality. The Buying Agreement or Global Agreement with the Buyer and Supplier governs all requirements in detail with reference to Supplier’s Contractual obligations to make supplies under the Contract. On the other hand, the Agreement also describes in detail the Buyer’s commitments and performance obligations. At this stage the relationship between the Buyer and Supplier is mainly contractual.

Buyer-Supplier relationships that function under contractual commitments tend to grow into fruitful relationship over a period of time. When both the parties get used to transacting with one another, understand each other’s requirements and build trust and faith, there exists opportunities to take the relationship to a new high. Over a period of time, Buyer’s may think of investing with the Supplier into manufacturing facility by way of joint venture or equity participation. Such relationships are collaborative and help International Retailers maintain stable and secure Supply sources.

International Retailing Company’s Buying strategy is very crucial in building such partnerships and relationships with Suppliers. Besides the Buying strategy, the Merchandiser too has a major role to play in directing and building such relationships in line with Management directives. Such investments and collaborative partnerships with Suppliers go a long way in helping the International Retailers in building their own brands.