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CHAPTER 13—BUYING MERCHANDISING CATAGORIES OF PRIVATE BRANDS (4)—premium, copycat, exclusive brands, generic brands NATIONAL/MANUFACTURER LABELS— ADVANTAGES : build image/traffic flow, reduce selling/promotional expenses, more desired, customers patronize, some financial risk on vendor— DISADVANTAGES : lower margins, vulnerable to competitive pressure, limit retail’s flexibility PRIVATE LABEL— ADVANTAGES : unique merchandise not available to competitors, exclusivity, difficult for customers to compare to competitors, higher margins— DISADVANTAGES : significant investment, develop expertise developing/promoting brand, unable to sell excess merchandise, typically less desirable ACQUISITION: LIMITED BRANDS ACQUIRED MAST INDUSTRIES—one of the world’s biggest contract manufacturers, importers, distributors of apparel, Have manufacturing operations and join ventures in 12 countries, Also provides private label merchandise for Abercrombie & Fitch, Lane Bryant, New York & Company, Chico’s CHAPTER 14—RETAIL PRICING CUSTOMER IN POSITION TO SEEK GOOD VALUE-- Value = perceived benefits/price PRICING STRATEGIES— EDLP : assures customer low price, reduces advertising/operating expenses, better supply chain mgt. (fewer stockouts, higher inventory-turnover)— HI-LO : higher profits through price discrimination, excitement, build short-term sales and generating traffic) CUSTOMER PRICE SENSITIVITY & COST—relationship between price sensitivity and demand, when price increases, sales can decrease, as fewer customers feel that production is a good value PRICE ELASTICITY —commonly used measure of price sensitivity: = % change quantity sold/% change in price SETTING RETAIL PRICE—Retailers need to set price for over 50,000 SKUs many times a year, set price based on pre-determined markup and merchandise cost, make adjustments to markup price based on customer price sensitivity and competition RETAIL PRICE= cost of merchandise + MU, cost of merch. + retail price x MU%, cost of merch./1-MU% (as fraction)
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