Buyer Reaction
When the ordered garments arrive at the receiving department of the retail store, they are checked in, examined and delivered to the correct department of the store. The retailer will cost the garments with their own mark-up costs. The norm for most department and specialty stores is to double the manufacturer’s price plus an additional 20 to 30 percent, or what the industry refers to as “2.2.” If a garment costs $100 from the manufacturer, it will be $220 on the retail floor.
An initial order may not be very large. Buyers often check how the stock comes through, which means how the manufacturer produces the finished garments. Buyers will also watch for public reaction to the orders. The numbers that prove popular are reordered in greater quantity, whereas numbers that do not sell satisfactorily go on the mark down rack. How long a garment stays on the floor before it becomes sales merchandise varies with the store and the competition. Retailers soon learn what types of garments sell best, and from which manufacturer they come. The stock is analyzed each day, and records show how many of each size, color, and style are sold. Armed with this information, a buyer will return to a manufacturer for reorders or returns.
Selling to large department stores has become a very risky business and new companies should be aware of canceled orders and charge backs. Basically, this is when the store wants part-payment for any of your garments that have not sold and end up on the mark down rack, or if you should ship late. In reality charge backs are much more complex, and are explained later in this book. Mark down money adds to the manufacturer’s overhead costs and may boost the original retail price of the garment. Manufacturers who want to keep the stores as customers try to cooperate. Unfortunately, it has become such a contentious issue that some manufacturers refuse to sell to certain retailers because of these charge back issues. This is a reason for seeing so many manufacturers opening their own retail stores in recent years.
For start up manufacturers, it is best to avoid the large department stores. They can break a small company in one order. Diversify your orders to a variety of smaller stores.
