Bureau of Business Research Graduate School of Business Administration University of Michigan THE CONTRIBUTION OF THE PROFESSIONAL BUYER TO THE SUCCESS OR FAILURE OF A STORE Working Paper No. 9 by Claude R. Martin, Jr. Assistant Professor of Marketing University of Michigan October, 1970 FOR DISCUSSION PURPOSES ONLY None of this material is to be quoted or reproduced without the express permission of the Bureau of Business Research

,i- 4 70 DEC 4 BACKGROUND OF THIS PAPER This paper is based on experimental research sponsored by Research Group B, of the Bureau of Business Research, Graduate School of Business Administration, the University of Michigan. This group of department stores from seven midwestern states provides financial and logistical support to basic research into consumer behavior. This paper is one in a series of reports on this behavioral research.

THE CONTRIBUTION OF THE PROFESSIONAL BUYER TO THE SUCCESS OR FAILURE OF A STORE Two department stores operate in the same state, do not compete directly with each other, and have shared the details of their operations over the past ten years. One is a success and the other is not. Why? The complexity of reasons for such a difference is obvious to any manager: there are differences in management ability and performance, in the physical plant, and in the economic condition of the individual markets. Certainly the marketing expert could attribute these reasons to differences in the marketing mix for each store. But one executive for the successful store said: "The bulk of the answer lies with who does the buying for the store and what they buy. If you don't have the goods the customer wants you cannot be successful!" While the importance of different factors is debatable, it seems reasonable to assume that what a store has to sell —its product —makes a major contribution to the sales success of that store. Purpose The purpose of this paper is to present the results of a study into the differences between the people who do the purchasing for the two stores —the professional buyers. These are the people who determine the retailer's product mix. Our contention is that differences between -1 -

the two stores' buyers help explain the differences in sales performance of the two firms. The hypothesis which we tested is that there are both demographic and behavioral differences between the buyers for the two stores and that these differences are the result of management policies and procedures. The goal is to provide a profile of the professional buyers for each of the two stores so that possible guidelines for success might be drawn. Success versus Failure The criterion used for characterizing success is simply sales performance. The trend of total sales during the past five years was studied for each store. The percentage of change in the sale of total merchandise for Store X and Store Y from 1965 to 1969 (Figure 1) clearly indicates sales growth for Store X and sales decline for Store Y. While the trend of total sales is indicative of success, a better indicator is the performance of each store in certain key merchandise areas or departments. Interviews with department store owners, general merchandise managers, and the professional buyers in seven Midwestern states and an analysis of data collected over thirty years by the Bureau of Business Research at the University of Michigan reveal an increasing reliance on the so-called "fashion goods" for department store sales. The definition of a fashion good is arguable, but there is general agreement that certain lines of clothing are more susceptible to constant and rapid changes in taste and can be labelled as fashion merchandise. For this study we arbitrarily designated five categories of fashion goods:

Total Merchandise Sales Change (Percentage) I +15. 0 +10.0 + 5.0 + 1.0 0 - 1.0 - 5.0 -10.0 / / / / Store X -e Store Y 1965 1966 1967 1968 Fig. 1. Sales trends —total merchandise, 1965-69. -3 -

-4 - Women' s coats Women's dresses (both Junior and Misses sizes) Women's sportswear (both Junior and Misses sizes) Men's clothing Men' s furnishings The department store members of Research Group B of the University of Michigan report that their sales growth in these five areas is approximately double the sales growth in other merchandise lines and that these five areas constitute more than a 40 per cent share of their department sales. Analysis of the median growth of sales in these fashion categories for X and Y from 1965 to 1969 (Figure 2) indicates that X had a marked growth in sales while Y showed an increasing decline. In summary, Store X shows a growth in sales over the past five years in both its total merchandise classifications and in selected fashion goods, while Store Y showed declining sales in both. Added to this is the fact that X had a sales increase in each of the five fashion categories during 1969, while Y showed a decrease in four of the five with only a small sales increase in men's clothing. All this indicates that we should label Store X a success and Store Y a failure. The Study Store X and Y are members of Research Group B, a group of department stores in seven Midwestern states who share details of their operations in an effort to improve their proficiency. Both X and Y have been members since at least 1965 and have been subject to the joint exchanges of ideas and information. In fact, Store Y (the failure) had access to all internal operating data of Store X (the success).

Fashion Merchandise Sales Change (Percentage) I +15. 7 / / / +10. + 5. /\ Store X / \ / / / / / / / / v + 1.0' 0' - 1. 0. - 5.0' -10. O0 Store Y 1965 1' Fig. 2. Sales trends —fashion merchandise, 1965-69. -5 -

0 The professional buyers of both X and Y were interviewed during the summer of 1970, and information was obtained about their socioeconomic status, their self-evaluation of performance and capabilities, and their actual departmental performance. The management of each store was responsible for identifying their buyers. Each buyer was then given a questionnaire to complete and return directly to the University of Michigan. The respondents were assured that the study was confidential and that it was controlled solely by the Bureau of Business Research. A 100 per cent response was obtained from both stores. All the differences cited were statistically tested and were found to be significant at the. 05 level.-/ Re sults Demographic differences There are striking demographic differences between the buyers for X and Y. Store X buyers are higher paid and rely more heavily on their income from Store X as the sole source of financial support for their family unit (Table 1). Store X has a greater number of young and novice buyers (Table 2), but the significance in these data appears to be that the distribution of X buyers is closer to normal than the skewed distribution of Y buyers toward age and experience. An axiom for success held by athletic teams is balance —the 1/ Samuel Richmond, Statistical Analysis (New York: Ronald Press,, 1964), pp. 184-214, 290-303.

I I I -7 - TABLE 1 Demographic Differences between Buyers' Income (In Percentage of Buyers) Characteristics Differences X Y Percentage of buyers who rely on income from store as sole family income' 43 22 Salary scalet Under $5, 000 3 28 $5, 000 to $8, 999 26 39 $9,000 to $12,999 31 33 Over $13, 000 40 * The difference. between these percentages significant at the. 05 level. was tested and is + The two distributions are significantly different at the. 05 level. Source: Press, 1964), Samuel Richmond, Statistical Analysis pp. 205-207, 290-303. (New York: Ronald

I I I -8 - TABLE 2 Demographic Differences: The Age and Experience of Buyers (In Percentage of Buyers) Differences Age * 18 to 25 yea 26 to 30 yea 31 to 39 yea 40 to 49 yea 50 to 59 yea Over 59 yea X Y Lrs Lrs Lrs Lrs rs Lrs 11 8 17 33 17 14 44 36 20 - I * * ~ 11 17 22 50 23 29 48 Experience (years 1 to 5 years 6 to 15 years+ Over 15 years+ as a buyer) * The two distributions are significantly different at the. 05 level. t The difference between these percentages was tested and is significant at the. 05 level. Source: Same as for Table 1.

-9 -successful blending together of the experience and wisdom of older players with the energy and enthusiasm of younger players. Clearly, Store X (the success) shows more of this balance in its team of buyers than does Store Y (the failure). Perception of self-confidence Each buyer was asked to evaluate his confidence in his general abilities and in his specific functions as a buyer. The objective was to compare the self-confidence of buyers of the two stores, not to measure the level of self-confidence and relate that to other factors as Cox and 2/ Bauer- have done. However, the questions eliciting data on selfconfidence were similar to those used by Cox and Bauer, and we have categorized the responses similarly as general and specific self-confidence. Buyers for Store X perceive that they have a higher degree of both general and specific self-confidence in their judgment of both new trends and new resources (Table 3). Reinforcement for this result came from the answers to questions concerning the buyers' self-evaluation of the certainty with which their decisions satisfied both their customers and themselves. This self-evaluation covered decisions regarding both style and resources. The buyers for Store X exhibit a higher degree of certainty and confidence that their decisions are both customersatisfying and self-satisfying (Table 4). 2/ Donald F. Cox and Raymond A. Bauer, "Self-Confidence and Persuasibility in Women, " Public Opinion Quarterly, Fall, 1964. l;: I

-10 - TABLE 3 Buyers' Perceived Self-Confidence (In Percentage of Buyers) Kind of Self-Confidence X Y General self-confidence Q. How do you feel about your abilities in general? Very confident Usually confident Sometimes confident Almost never confident Specific self-confidence Q. How confident are you, as a professional buyer, in selecting a new buying resource? 31 69 * * ~ 22 67 11 * * & Very confident Usually confident Sometimes confident Almost never confident 43 12 54 71 3 1Z a. ~ 6 Qo How confident are you, as a professional buyer, in your ability to select new trends? Very confident Usually confident Sometimes confident Almost never confident 22 72 6 * * - * * ~ 67 33 * * * a Chi-Square tests show significant differences in these distributions at. 05 level. Source: Same as for Table 1.

I I -11 -TABLE 4 Certainty Concerning Merchandise and Resource Decisions* (In Percentage of Buyers) Degree of Certainty. X Y Q. How certain are you that a style you have not tried will satisfy your customers as well as a style you now have in inventory? Very certain 14... Usually certain 69 61 Sometimes certain 14 39 Almost never certain 03... Q. How certain are you that a style you have not tried will satisfy you as well as a style you now have in inventory? Very certain 28 22 Usually certain 58 39 Sometimes certain 14 33 Almost never certain... 06 Q. How certain are you that a resource you have not bought from before will satisfy as well as a resource from which you now buy? Very certain 22 06 Usually certain 61 65 Sometimes certain 08 24 Almost never certain 08 06 t Chi-Square tests show significant differences in these distributions at. 05 level. Source: Same as for Table 1.

-1ZA possible cause for this self-confidence differential is the difference in the buyers' perceptions of the amount of their own decision making discretion, both in evaluating new merchandise trends and in adding or dropping resources. While cause and effect may be arguable, the buyers for X perceived that management gave them more leeway for discretion in their decision making (Table 5) and that they had a higher degree of self-confidence in their performance than did the buyers for Y. Leaders versus followers Another difference between the X and Y buyers was in their tendency toward leadership in new trends. The following is the description of "new trend" merchandise which was given to them: Each buying season there are new trends available on the market. During recent seasons these have included the midi and maxi in ready-to-wear; colored shirts and coordinated neckwear in men's furnishings; and the softening of the "tsquared-look"t in shoes. These new trends have existed in all categories... for example, in such diverse areas as children's wear, furniture, and cosmetics. The buyers were asked to choose among the following five alternate courses which they felt their store should take in following the trends: 1. They should be first in town. 2. They should be first in the area. 3. They should follow after the high-fashion stores in the major metropolitan areas. 4. They should not follow until the offices recommend it. 5. They should not follow until shown by regular resources. Those buyers who chose 1 and 2 show initiative —a leadership —in new trends, while those who chose 3, 4, and 5 rely on others —they are followers. Of the X buyers 70 per cent were classified as leaders.

-13 - TABLE 5 Perceived Discretion in Merchandise and Resource Selection* (In Percentage of Buyers) Amount of Discretion In merchandise selection Very much Some Not much None In resource selection Very much Some Not much None X Y 80 20 35 59 06 80 14 03 03 50 39 11 * * - * Chi-Square tests show significant differences in these distributions at. 05 level. Source: Same as for Table 1.

-14 - and, by sharp contrast, 76 per cent of the Y buyers were classified as followers. Aggre s sivene s s The final factor that distinguished X from Y buyers was their aggressiveness in seeking and obtaining additional factors from their buying resources. Each buyer was asked whether he normally asked for dating, advertising money, markdown money, or return privileges from buying resources. This was verified by the actual performance records of the individual buyer in obtaining these "extras. tM A higher percentage of X than Y buyers replied affirmatively that they did ask for each of these factors and did obtain the "extra" (Table 6). An index of aggressiveness for the buyers was constructed by assigning a value of 1 to every yes answer and 0 to every no answer for the four questions on the "extras." Those with the total score of 4 or 3 were labelled very aggressive, those with a score of 1 or 2 were labelled somewhat aggressive, and those with a score of 0 were labelled nonaggressive. The buyers in each of these groups were then asked whether they had sole responsibility for adding or dropping buying resources. Those who exhibited more aggressiveness showed a more significant amount of perceived discretion in these decision-making activities than did those with little or no aggressiveness (Table 7). Implications The buyers for the successful store are more aggressive, more I. I

TABLE 6 Buyers' Aggressiveness with Resources* (In Percentage of Buyers) Buyers ' actions X Y Asked for and obtained dating 47 17 Asked for and obtained advertising money 78 61 Asked for and obtained markdown money 23 17 Asked for and obtained return privileges 67 50 p Chi-Square tests show significant differences at. 05 level. Source: Same as for Table 1. in these distributions

-16 - TABLE 7 Perceived Discretion of Aggressive Versus Nonaggressive Buyers* - --- -- ------ --- Percentage of Type of Very Somewhat Aggre s sive Aggre s sive _- -- Buyer Not Aggressive Need management approval to add resources? Yes No Need management approval to drop resources? Yes No 13 88 25 75 47 53 51 49 61 39 52 48 * Chi-Square tests show significant differences in these distributions at. 05 level. Source: Same as for Table 1. -

I II self-confident, and show a greater tendency for leadership in new merchandise trends than the buyers for the failing store. The contention is that these traits have contributed to the successful pattern of sales growth for Store X, while the "follower" behavior, the lack of aggressiveness, and the lower self-confidence of Y buyers have made a significant contribution to the store's sales decline. The higher salary scale for X buyers may indeed be the result of, rather than the cause of the sales growth. However, there are two factors under management control which distinguish the successful store from the failing store. First, the organization recognizes the importance of balance in the buyer cadre so that the older, more experienced buyer is integrated with the younger, more novice buyer. This implies that the firm's personnel administration must continually review the makeup of the buyer corps. Personnel administrators should recognize the direct contribution they may make to the sales growth of the store. Second, the organization should recognize that discretion, both actual and perceived, is important. This discretion is in the decision-making powers given to buyers to determine both merchandise ad resources. The implication for management is that what is important is not just the dispensing of actual discretion, but the perception that the buyers' have of their discretionary range. The objective of this paper has been to pinpoint differences between the people making the product decision for two department stores, one a success at sales growth and the other a failure. In summary the results of the interviews with professional buyers for the two firms indicate that both balance in the buyer team and the discretion given to buyers may be two of the keys to success.