Research Article
Policy Issues on Win-Win Growth of Purchasing Practices Between Department Stores and Suppliers
Sogang University
Published: January 2013 · Vol. 17, No. 3 · pp. 233-250
Full Text
Abstract
Department store is one of the oldest corporate retail formats in South Korea. After Korea financial crisis, department industry has been reorganized into big three companies, Lotte, Shinsegye, and Hyundai department stores, then they have had dominant position in their relationship with vendors or manufacturers. Over 70% transactions between departments and vendors consist of “Tukjeongmeip”, which purchase in credit from the manufacturers and sell to the customers. In this purchasing system, vendors take a risk for sales and the stock. Department stores, instead of direct purchasing payment, received sales commission. From the perspective of department store, this purchasing practice can reduce financial burden, get rid of stock risk, and decrease fixed cost such as interior and sales forces. However, for manufacturers or suppliers, this system can increase sales uncertainty, stock risk, and additional fixed cost, and reduce negotiation power in relation with department stores. This research offers various policy implications in order to improve purchasing practices between department stores and suppliers from the perspective of Win-Win Growth of both parties.
