Selection of Kinds of Goods

Freedom in determining the kinds of goods to be purchased varies from one type of business to another. In many lines of manufacturing the materials to be bought are fixed automatically by the nature of the product manufactured. The manufacturer of cotton textiles must buy cotton yarn or raw cotton, and the butter manufacturer must have cream. Installations and industrial equipment are determined largely by the nature of the manufacturing process, with the result that there is sometimes rather limited freedom in their purchase.

For most merchants, on the other hand, the determination of kinds of goods to be purchased is a real problem, since the firm may not constantly handle exactly the same merchandise. While within certain limits most wholesalers and retailers find their choice of merchandise circumscribed by their clientele and competition, nevertheless it is a rare mercantile business which does not have some latitude.

This problem has been aggravated considerably by a pronounced tendency for many types of stores to expand or diversify their merchandise lines. Self-service grocery stores, for example, have sought to handle any type of merchandise that is suitable for sale by self-service methods. In seeking new items to purchase, they have been attracted by the higher margins obtainable on numerous items normally handled by drug-, department, or hardware stores. As a result, numerous advertised brands of proprietary remedies, toilet preparations, cosmetics, housewares, magazines, and alcoholic beverages have been successfully added to the lines carried by many supermarkets. Drugstores, hardware stores, and other kinds of business, feeling the pressure of this competition, have also sought to expand their offerings by invading fields hitherto foreign to them. Similarly, most variety chains have abandoned their limited-price position, and some have become in essence junior department stores. Department stores, in turn, have expanded their sales volume by the addition of departments for sporting goods, cameras and photographic equipment, and other kinds of merchandise that have been sold traditionally in specialized types of establishments.

Many marketing establishments have made costly mistakes in experimental attempts to diversify their merchandise offerings. For most small establishments, experience has indicated that new items cannot ordinarily be added successfully unless (1) they are in keeping with the general character of the business as reflected by firm name, atmosphere, location, and advertising and promotion policies; (2) they can be sold according to the present method of sale and by present employees; and (3) sufficient space and capital investment can be devoted to the new merchandise to offer customers a reasonable range of choice within the classification to which it belongs. Obviously, these rules have not been important limiting factors for very large wholesale or retail firms where it is more feasible to add specialized personnel or facilities to handle the merchandising of items not closely related to those previously sold.