Retail planning Reference Guide

R E T A I LME R C H A N D I S EP L A N N I N G R E F E R E N C EG U I D E

V I C T O R I AC O S T A

TABLE OF CONTENTS 1. Today's Buying Environment & The Buying Function in Retail

I Spreadsheet A: Using Computerized Spreadsheets I Retail Math: Markup I Spreadsheet B: Calculating Individual and Cumulative

Markups

2. Buying For Different Types of Retail Formats

I Retail Math: Profit and Loss Statement I Spreadsheet C: Calculating Components of Operating

Statements

3. Purchasing Merchandise & Motivating Customers to Buy

I NRF Trend Report 2018

4. Understanding Product Trends: What Customers Buy 5. Planning and Forecasting

I Retail Math: Forecasting I Spreadsheet E: Calculating Stock Turnover and Stock-Sales

Ratio

6. Preparing Buy Plans

I Retail Math: Preparing Buying Plans I Spreadsheet F: Preparing Buying Plans

7. Developing Assortment Plans & Controlling Inventories

I Retail Math: Developing Assortment Plans I Spreadsheet G: Calculating Assortment Plans

8. Selecting Vendors and Building Partnerships 9. Guest Speakers 10. Buying Project: Bambas in Urban Outfitters

I Presentation I White Paper

11. Index

Chapter 1 TODAY’S BUYING ENVIRONMENT & THE BUYING FUNCTION Retailing v. Buying

BUYERS need to know: -Consumer products – competition, sizing, color, price -Consumer behavior- sale motivated,

selling to end consumer

purchasing products for consumers

Merchandising strategic planning

fashion or basic, gift giving, self purchase -Store’s financial goals – sales, profit, inventory -Forecasting -Pricing $ -Negotiating

tactical planning operational planning

Organizational Structure

1.Merchandising & Planning – procuring merchandise to be resold to customers.

2.Visual Merchandising , Fashion Director 3.Marketing– responsible for stimulating sales through advertising and promotion.

4.Control – responsible for fiscal functions – accounts payable, payroll etc.

5.Store Management – Operations (DC’s), Stores 6.Human Resources 7.IS – Information Systems

Targeting Consumers * Demographic *Geographic *Behavioristic *Psychographic

Producer to Consumer Producer

Consumer

Selling through Retailers Retailer

Producer

Consumer

Selling through Wholesalers Producer

Wholesaler

Retailer

THE CHALLENGE: TREND involves change or movement

Consumer

ABILITY to predict trends before they influence the market ANTICIPATE DEVELOP strategies

Drexel University • Westphal College of Media Arts and Design • Design and Merchandising DSMR 232 -002 CRN, 4.0 credit • Retail Merchandising Planning (Spring 18)

Assignment A: Using Computerized Spreadsheets For this assignment, you will be performing mathematical calculations using a computerized spreadsheet, or electronic worksheet. Spreadsheets can be used to perform a simple operation such as adding two numbers, or for more complex calculations that can involve hundreds of interrelated entries. More significant than performing mathematical calculations on spreadsheets, you can quickly make recalculations by changing one or several of the numbers that you have entered or by changing formulas. Spreadsheet programs allow you to make repetitive and tedious mathematical calculations quickly and efficiently.

A spreadsheet can be thought of as a long, rectangular sheet of paper divided into smaller rectangles, called cells. You can type words or numbers in these rectangles, or you can type formulas that can add, subtract, multiply, or divide numbers in whatever combination you choose.

Spreadsheets are invaluable tools for retail buyers and managers when they are developing “what if” strategies. For example, after formulas have been set up, you may want to enter one set of numbers to estimate sales. Just as quickly, you can enter another set of numbers to estimate sales for a different scenario. You can keep doing this for as many sets of numbers as you desire. Performing repetitive mathematical calculations and “what if” analyses are what spreadsheets do best.

Now you should be ready to see what a spreadsheet looks like on the computer. Follow the instructions below to load the spreadsheet program, select the data drive, and open a file.

BASIC COMPUTER OPERATIONS 1) Reading the Spreadsheet Screen Download and Open SPREADSHEET A from Bb Learn. You should now be able to see a part of the spreadsheet on your computer screen. On the spreadsheet, the highlight bar identifies the current cell. You will also notice letters across the top of the screen. They identify a vertical series of cells in a column. Numbers can be seen on the left side of your computer screen. They are used to identify a horizontal series of cells in a row.

Spreadsheet programs usually contain more rows and columns than you will need in your calculations.

Each cell on the spreadsheet also has an address that is shown on the status line of the screen. The cell address is determined by its column and row location. For example, the cell in the upper left corner of the spreadsheet has an address of A1. The cell is located in column A, row 1. You can move to other cells in the spreadsheet by using the mouse, or after first clicking on a cell, using the Tab key to go across, or the arrow keys to go across or up or down.

Both text and numbers can be entered into a cell, but with numbers you must designate how you want your data presented (e.g., number of decimal places, currency). Using the Format command on the menu allows you to change how numbers are displayed in any cell, row, or column.

You must follow mathematical rules as you work with spreadsheets. Formulas are calculated in normal mathematical order. Operations inside parentheses are performed first, followed by multiplication, division, addition, and then subtraction.

2) Changing the Width of a Column If, after you perform any calculation, the symbol ##### appears, the cell is not large enough to display the data. You can easily enlarge the column to accommodate. The width of the column in which data are to be entered or displayed can also be made smaller if desired.

To change the width of a column: 1. With your mouse, move your cursor to the top of the spreadsheet where columns are identified as A, B, C, and so on. With the cursor, highlight the line to the right of the column that you wish to adjust. The cursor changes appearance when it is positioned correctly.

2. Holding down the mouse button, drag the mouse to make the column the correct width.

3) Changing How Numbers Are Displayed You can also use commands under the Format menu to designate how data in a specific cell, row, or column are to be presented. You can display the data as whole numbers, dollars (currency), or decimals. You can also designate how many decimal places you wish to use.

To change how values are displayed: 1. Highlight the cell you wish to change, or highlight the cells in the row(s) or column(s) you wish to change.

2. Use commands listed under the Format menu to change how your data will be presented.

4) Entering Formulas Formulas calculate a value based on the values in other cells of the spreadsheet. In fact, a formula can include any cell on the spreadsheet. You can also combine mathematical operations—for example, A1+(A2-A3)/A4. Remember that before any formula can be entered, the = sign must be typed first.

To enter a formula: 1. Click the cell where the result of the formula will appear.

2. Type the = sign. Now type the formula. For example, if you want to add the values in cells A1, A2, and A3, type A1+A2+A3 after the = sign. You could also click the cell of the value that you are adding. For the formula presented, you could click cell A1, then type the + sign, then click cell A2 and type +, and finally click cell A3.

3. When you have finished entering a formula, press Enter, which indicates to the computer that you have completed your formula.

4. Your results will appear in the cell where you entered the formula if data were in the other cells. Functions, abbreviated formulas that perform a specific operation on a group of values, can also be used to save time. For example, the SUM function is a shortcut for entering a formula that adds numbers. SUM automatically adds numbers in a range. For example, if you wanted to add the numbers in cells A1 through A3, you could simply type =SUM (A1:A3).

INPUT DATA AND INTERPRET COMPUTER OUTPUT Retail buyers and managers must be able to input data on spreadsheet programs and interpret the output they receive. You should now be ready to observe exactly what computerized spreadsheets can do. On the screen you are viewing, you should see that some text has already been entered. In addition, one formula has also been entered.

Practice Activities The activities that follow allow you to become comfortable entering data, performing mathematical calculations, and interpreting output. These activities begin with a quick review of decimals and percentages.

Activity 1: Review Decimals and Percentages When working with spreadsheets, many students have difficulty with percentages and decimals. In most word-problem situations, many numbers are stated as percentages.

Before you can enter them onto a spreadsheet, they must be expressed as a decimal. In addition, many of the figures that you read on a computer screen will be displayed as a decimal. You need to express them as percentages or dollars and cents. Here is a quick review of this concept.

The term percent means “per hundred�; thus, 11 percent means 11 per hundred, or 0.11. 11% = 11/100 = 0.11 When expressing a percentage as a decimal, move the decimal two places to the left and drop the percent sign. For example, 5 percent would be entered as 0.05, 0.5 percent would be entered as 0.005, and 55.5 percent would be entered as 0.555.

Percentages, similar to the ones presented in the second column of the table, appear in various problems throughout this text. When entering them into spreadsheets, you must be able to express them in decimal form. Express each of the percentages as a decimal in the right-hand column.

When the spreadsheet makes calculations for you, the numbers will be expressed as decimals just as they are when you use your calculator. Usually, you will need to round these numbers for the situation within which you are working. For example, 1.643456 would be expressed as $1.64 if your answer should be in dollars and cents, or as 164.3% if your answer should be a percentage. You can also use the Format menu command to change how data are displayed.

With dollars, you will need to express your answer to two decimal places, and, with most percentages, you will need to express them to one decimal place, or tenths of a percent.

(Note: Rounding rules vary, but “rounding off� is the most common method. Round up if the number to the right of the one you are rounding is 5 or more; round down if it is less than 5.) When expressing percentages as decimals, express them to the nearest tenth of a percent as shown in the preceding example.

When you are solving problems presented in this text, numbers similar to the ones that follow could be displayed on your computer screen. In the right-hand column, express each of them as dollars and cents, rounding to the nearest cent.

11 12 13 14 15

64.3214987 8.238765 581.234567 0.89543453 45677.2376 5

$64.32 $8.24 $581.23 $0.90 $45677.24

In the right-hand column, express each of these decimals as a percentage rounded to the nearest tenth of a percent.

16 17 18 19 20

6.44453 33.3333 67.7777 0.056742 0.002876

644.5% 3333.3% 6777.8% 5.7% 0.3%

Activity 2: Enter Data and Calculate 1. Move to cell B3 on the spreadsheet found on Spreadsheet A that requires sales data for Quarter 1 of Year 1.

2. Input $35,000 and press Enter.

3. Use your mouse to move to cell B4, input $37,000, and press Enter.

4. Move to cell B5 and enter $36,000. Enter $21,000 in cell B6.

5. The formula to calculate total sales for Year 1 has already been entered in cell B7, and you made recalculations with each number that you input.

Activity 3: Revise Data and Recalculate After calculating total sales for Year 1, you realize that the sales figure you entered for Quarter 4 was incorrect.

1. Move to cell B6 and erase the data already in the cell. Highlight the value in the cell, and press the Delete key.

2. Input $38,000. Press Enter.

3. Total sales have been recalculated.

Activity 4: Create a Formula to Add Numbers Now you need to set up a formula to calculate total sales for Year 2. Because you want to calculate the total of the quarterly sales figures, there are two different ways you can express the formula. First, type = in the cell; then type C3+C4+C5+C6. Or, you could type SUM (C3:C6) after typing the = sign. The second formula directs the computer to add (SUM) all the numbers in the cells between C3 and C6. The : designates all the numbers between the two numbers listed. Also, you could click the cell that you wish to be a part of your formula. For example, after typing =, click the mouse on cell C3, type the + sign, click the mouse on cell C4, type the + sign, click the mouse on cell C5, type the + sign, and click the mouse on cell C6.

1. Move to cell C7. Type either formula described above. Press Enter.

2. Enter the following sales data for Year 2: Quarter 1 $40,000 Quarter 2 $46,000 Quarter 3 $45,000 Quarter 4 $50,000 Activity 5: Create a Formula to Calculate Percentage of Change between Two Numbers After examining the data, you want to determine by what percentage quarterly sales changed from Year 1 to Year 2. Mathematically, this requires finding the difference in sales for each quarter and dividing by quarterly sales for the first year, as the following formula indicates: For the first quarter, this calculation would be as follows: (40,000 – 35,000) / 35,000 = 0.14285 Spreadsheets can be used to quickly perform calculations such as these. Just substitute the cell addresses for the values you wish to calculate. For the first quarter, the spreadsheet formula would be as follows: (C3 – B3) / B3

Closely examine this formula. The parentheses indicate that mathematical calculations inside the parentheses would be performed first; otherwise, the data in C3 would be divided by B3, which is not what you want. The formula specifies that the data in cell B3 will be subtracted from the data in cell C3. Then this difference will be divided by the data in cell B3.

Now you are ready to label the column and enter the formulas to calculate the quarterly percentage changes.

1. Move to cell D2. The percentage changes will be displayed in column D for each quarter.

2. Type % Change. Press Enter. Now you are ready to enter the formulas to perform the required calculations. You will need to establish five formulas—one for each of the quarters, as well as one for the Totals row.

3. Move to cell D3 for the first quarter. Type (C3-B3)/B3. Press Enter. You will notice that your answer is expressed as a decimal. Use the Format menu command to display your data with one decimal place.

4. Now, set up formulas that will calculate the percentage changes for Quarters 2, 3, and 4, and for the yearly totals.

5. Your screen should resemble the table that follows.

Sales Year 1 Quarter 1 $35,000.00 Quarter 2 $37,000.00 Quarter 3 $36,000.00 Quarter 4 $38,000.00 TOTALS $146,000.00

Sales Year $40,000.00 2 $46,000.00 $45,000.00 $50,000.00 $181,000.0 0

% 14.3% Change 24.3% 25.0% 31.6% 24.0%

Activity 6: Revise Data and Recalculate To illustrate the speed with which recalculations can be made, replace the sales data that you have entered for Year 1.

1. Erase the sales data in cells B3 through B6 and replace them with the

Quarter 1 Quarter 2 Quarter 3 Quarter 4

following data: Year 1 $30,000 $31,000 $32,000 $30,000

2. You now have sales totals as well as percentages, which are based on your

new sales figures, as shown in the table that follows.

Quarter 1 Quarter 2 Quarter 3 Quarter 4 TOTALS

Sales Year 1 $30,000.00 $31,000.00 $32,000.00 $30,000.00 $123,000.0 0

Sales Year 2 $40,000.00 $46,000.00 $45,000.00 $50,000.00 $181,000.0 0

% Change 33.3% 48.4% 40.6% 66.7% 47.2%

ADDITIONAL COMPUTER OPERATIONS This spreadsheet contains other commands that can be used later as you create your own spreadsheets with problems in the textbook. These commands involve editing and saving your work, printing, and quitting. Steps to perform these computer operations are described next.

Using Edit Commands What happens when you find you need a column between two that you have already created? Do you have to start over? What happens when you need to erase all the input in a specific column? Do you have to go to each cell and use the Backspace key? What should you do when you need the same heading on two rows? Do you have to type the heading twice? “No� is the answer to all these questions if you learn some of the other special commands on the spreadsheet.

Using the Insert menu command allows you to add empty rows or columns to any spreadsheet that you have already created. To insert a row or column: Highlight the column to the right of where the new column is to be added to add a blank column. To add a blank row, highlight the row below where the new row is to be located.

To erase data in several cells, highlight all the cells that contain data to be deleted.

Press the Delete key. If you make a mistake, click the Undo command.

The Copy command (under the Edit menu command) allows you to copy the content of a cell, column, or row and place it in another location on the spreadsheet. To copy a cell, row, or column, highlight the values to be copied. Select Copy. Move the cursor to the location (cell, row, or column) where you want the information copied.

Highlight that area and select Paste.

You may want to practice these operations using the file on which you are working.

However, you should save the file under a different name, as explained in the next section.

Saving Your Work Periodically, while working with all assignments, save your work under a different file name so that you will always have the original lesson file for reference. Simply add an A (for answer) to the lesson file name when you save.

To save your Assignment A file as a separate answer file: 1. Choose Save As from the File menu.

2. Rename the file name to SPREADSHEET A_COPY and select the drive to which you will be saving the file. Press Enter. Note that the open document keeps its original file name.

Printing In each assignment, you will find forms on which to record your answers for specific problems. Record information from your computer screen on these forms, or your instructor may require that you print each screen.

To print the file you have been working on: 1. Check to ensure that a printer is connected to your computer.

2. Choose Print from the File menu.

3. Press Enter. The file will be sent to your printer.

Quitting When you want to stop working, first save your work. Then close the file and quit the spreadsheet: 1. Choose Close from the File menu.

2. If you have not already saved your document, a message will appear asking if the current document needs to be saved

SPREEDSHEET A

DSMR 232 Retail Merchandise Planning Retail Math

1. A retailer buys a sweater for $45 and sells it for $79.95. What is the retailer’s dollar markup?

79.99-45

$34.99

2. A florist sells roses for $25 per dozen that cost the store $9 per dozen. What dollar markup does the flower shop make on a dozen roses?

$16

3. An appliance store sells one brand of lap top computers for $399 each. Each computer cost the store $280. a) What is the dollar markup? b) What is the markup percentage?

a. $119 b. (399-280)/399 30%

4. A shoe store purchased 12 dozen pairs of sandals for $2,880. The sandals retail for $29.95 per pair. What is the markup percentage?

(29.95-20)/29.95 33.2%

5. What is the cumulative markup percentage to date for the department whose figures are listed below? (143,156-71,051)/143156 50.37%

Cost Retail Beginning Inventory $36,834 $78,373 Purchases from Supplier 1 $12,000 $23,950 Purchases from Supplier 2 $ 6,770 $12,500 Purchases from Supplier 3 $15,445 $28,333 Total 71,051 143156

DSMR 232 Retail Merchandise Planning Retail Math

6. The buyer for the shoe department has a cumulative markup percentage goal of 42.0%. At the start of the season the inventory consisted of shoes with a retail value that totaled $16,200.

The cost of these shoes was $9,680. During the first quarter, the store received the following purchases: from Acme Shoes shipments with a total cost of $4,440 that were priced for a total of $7,800 at retail; from K&M Shoe Company shipments with a total cost of $1,864 that were priced to sell for a total of $3,000 at retail; and from Richard’s Footwear shipments with a total cost of $3,588 that were priced to sell for a total $6,175 at retail. a) What is the store’s cumulative markup percentage at the end of the first quarter? b) Evaluate this cumulative markup percentage against the goal established for the shoe department.

Retail Cost Beginning Inventory $16,200 $9,680 Purchases from Acme Shoes $7,800 $4,440 Purchases from Acme $3,000 $1,864 Purchases from K&M Shoes $15,445 $28,333 Purchases from Richard’s $6,175 $3,588 Footwear TOTALS $33,175 $19,572

a. (33,175-19,572)/33,175 41% b. The goal was cumulative percentage of 42% but at the end of the quarter it was 41% meaning that it was only 1% lower than their goal.

Drexel University • Westphal College of Media Arts and Design • Design and Merchandising DSMR 232 -002 4.0 credit • Retail Merchandising Planning (Spring 18)

Assignment B: Calculating Individual and Cumulative Markups When working with spreadsheets in previous chapters, you have simply input data onto spreadsheets that had been previously prepared. Once a spreadsheet has been constructed, it can be used over and over to perform repetitive mathematical calculations.

Your task for this assignment is to construct a spreadsheet following specific instructions.

In later chapters of the textbook, you will be asked to design spreadsheets without detailed instructions being presented, so be sure you understand each step.

INDIVIDUAL MARKUP PERCENTAGES Creating and Using Your Own Spreadsheet 1. Download and Open file SPREADSHEET B. 2. As indicated below, type all your titles first. Press Enter after typing each word.

• In cell A1, type Calculating Markup Percentage. Adjust the width of the column as needed.

• In cell A3, type Cost.

• In cell A4, type Markup %.

• In cell A5, type Retail.

3. Now, you are ready to enter the formula that will perform the calculation to find the markup percentage. Move to cell B4 and type the = sign. Then, type (B5 B3)/B5, which corresponds to the formula for calculating markup percentage.

Format the cell to show only two decimal places. Now, enter a cost of $6.00 and a retail price of $12.50. Your screen should look similar to the table that follows.

Calculating Markup Percentage Cost Markup % Retail

$6.00 52.0% $12.50

4. Use this spreadsheet to calculate the markup percentages for the cost and retail

figures presented in the problems that follow. Before entering any information in a cell, make sure that any previous entries have been erased. Record all your answers on the table.

5. When you have completed the assignment, save the file under the file name SPREADSHEET B_COPY, and then close the file.

Problem 1: Calculating Individual Markup Percentages Using the spreadsheet within which you have been working, calculate the individual markup percentages for the following items and record them on the appropriate table at the end of this assignment.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Unit Cost $6.00 $19.55 $25.00 $15.50 $17.50 $28.00 $10.90 $6.75 $4.00 $4.50 $15.00 $16.50 $39.73 $40.00 $6.00

Unit Retail $12.50 $38.79 $55.00 $38.00 $48.00 $48.00 $21.50 $13.00 $8.00 $9.75 $35.00 $21.75 $68.50 $58.00 $7.80

CUMULATIVE MARKUP PERCENTAGES Creating and Using Your Own Spreadsheet 1. Now move to the other part of the spreadsheet presented on file SPREADSHEET B. 2. A sample problem from the text is presented below. On your spreadsheet, use these numbers to calculate the cumulative markup percentage.

At the start of a season, a buyer’s inventory of scarves had the following values: Total cost $3,000 Total retail $5,800 During the month, the following purchases were added to the inventory: 50 scarves, costing $20 each, to retail at $40 each 100 scarves, costing $10 each, to retail at $19 each 3. Because a formula has already been entered, the computer has calculated total cost, total retail, and the cumulative markup percentage. You can now determine cumulative markup percentage by using this spreadsheet for any situation involving a beginning inventory and one or two purchases.

4. Use the spreadsheet to calculate the cumulative markup percent for the problems presented below. Record your answers on the table provided.

Problem 2: Calculating Cumulative Markup Percentage 1. The buyer of scarves in the sample problem wants to calculate the cumulative markup percentage at the time the first purchases were added to the beginning inventory. Calculate the cumulative markup percentage at that point.

2. Beginning inventory was $52,932 at cost and $106,342 at retail. Purchases for the period were $11,764 at cost and $24,916 at retail. What was the cumulative markup percentage for the period?

3. A specialty store had a beginning inventory at cost of $196,853. At retail, the inventory was valued at $395,422. Two purchases were added to the inventory.

At cost, they had a value of $82,700 and $244,058, respectively. At retail, purchase 1 was valued at $137,282 and purchase 2 was valued at $398,682. What was the cumulative markup percentage for the period?

4. A buyer for sporting goods has an inventory at the beginning of the month of $30,000 at cost and $45,000 at retail. New purchases during the month amounted to $20,000 at cost and $41,250 at retail. What is the cumulative markup percentage?

Assignment B: Calculating Individual and Cumulative Markups Name and Date Problem 1 1 2 3 4 5 6 7 8 9 1 0 1 1 2 1 3 1 4 1 5

Unit Cost $6.00 $19.55 $25.00 $15.50 $17.50 $28.00 $10.90 $6.75 $4.00 $4.50 $15.00 $16.50 $39.73 $40.00 $6.00

Unit Retail $12.50 $38.79 $55.00 $38.00 $48.00 $48.00 $21.50 $13.00 $8.00 $9.75 $35.00 $21.75 $68.50 $58.00 $7.80

Problem 2 Question #1

Cost

Beginning Inventory 3,000 Purchases 1,000 Totals 4,000 Question #2 Beginning Inventory Purchases Totals

Individual Markup Percentage 52.0% 49.6% 54.5% 60.5% 63.5% 41.7% 49.3% 48.1% 50.00% 53.8% 57.1% 24.1% 42.0% 31.0% 60.5%

Retail 5,800 2,000 7,800

Cost 52,932 11,764 64,696

Question #3

Beginning Inventory 30,000 Purchases 20,000 Totals 50,000

106,342 24,916 131,258

Cost

Beginning Inventory 196853 Purchase 1 82,700 $196,853 Purchase 2 244,058 Totals 523,611 Question #4

Retail

Retail 395,422 137,282 398682 931,386

Cost

Retail 45,000 41,250 86,250

Cumulative Markup Percentage 48.28% 50% 48.72% Cumulative Markup 50.22% Percentage 52.79% 50.71% Cumulative Markup Percentage 50.22 39.76 38.78% 43.78 Cumulative Markup 33.33%Percentage 51.52% 42.03%

SPREEDSHEET B

Chapter 3

BUYING FOR DIFFERENT TYPES OF RETAIL FORMATS & PRODUCTS Retail Formats:

•Department stores •Specialty stores •discount retailers

Catagory Killers:

•Large specialty stores driven by promotional strategy

•Big Box or Superstore Model •Good customer service •Convenience

Examples -Home Depot -Staples -Dicks

DIFFERENT TYPES OF PRODUCTS **Soft lines -Apparel -Accessory products for the home (towels, sheets, bedspreads, etc.)

**Hard lines -Sporting goods -Appliances -Furniture -Toys -Lawn and garden products

+-=+-=+-=

INCOME STATMENT Gross Sales -Returns Net Sales -Cost of Goods Sold =Gross Margin -Operating Expenses = Net Profit/Loss (Before Taxes)

Mass

--Category killers --Off-price --Club retailers

Off-Priced

•High volume with lower mark up •Pricing – 30%-70% off retail •Fast turns – 12-13 times per year

Examples -Marhalls -Ross -Nordstrom Rack

DIFFERENT TYPES OF FASHION PRODUCT Fashion** High Demand over short selling period Most Apparel Always on the “hunt” for new and innovative products

**Basic Items customers buy year in and year out Socks, underwear, tee shirts Forecasting/ Planning very important

How to Improve PROFIT

DSMR 232 Retail Merchandise Planning Retail Math

1. During the year, net sales for a t-shirt shop were $182,000. Cost of goods sold was $103,740, and operating expenses totaled $53,400. Complete an income statement showing both dollar amounts and percentages for this business.

Net sales: 182,000 100% COGS: 103,740 57% Gross Margin: 70,740 43% Operating Expenses: 53,400 29.3% Profit/Loss: 24,860 13.7%

2. A store with operating expenses of $57,000 had a loss of $3,000. What was the store’s gross margin?

Gross Margin-57,000=-3,0000

$54,000

3. After examining the profit/loss statement that follows, identify three strategies that could be used (involving these elements) to make this business more profitable.

Net Sales $100,000 -Cost of Goods Sold =Gross Margin -Operating Expenses = Profit/Loss (Before Taxes)

$55,000 $45,000 $50,000 ($5,000)

The operating Expenses are too high of ratio, they should cut expenses

DSMR 232 Retail Merchandise Planning Retail Math

4. Examine the profit/loss statement that follows. Evaluate the profit earned for this t-shirt shop (i.e., was it good or bad?)

Net Sales -Cost of Goods Sold =Gross Margin -Operating Expenses = Profit/Loss (Before Taxes)

$ $100,000 $55,000 $45,000 $35,000 $10,000

% 100% 55% 45% 35% 10%

It is not great because they have small gross margin with a high expense ratio.

5. Last month Customer Returns for a small clothing store amounted to $10,000. Printouts indicate that Gross Sales were $110,000. Calculate Net Sales.

110,000-10,000 = 100,000 $100,000

6. A department had a Beginning Inventory of $88,000 and an Ending Inventory of $82,000. Total Purchases for the period were $102,000. Calculate Cost of Goods Sold.

88,000+102,000-82,000+ 108,000

DSMR 232 Retail Merchandise Planning Retail Math

7. From the data that follows, develop a profit/loss statement. Profit was $2,000, operating expenses were $18,000, purchases totaled $36,000, gross sales were $52,000, ending inventory was $34,000, customer returns were $2,000, and beginning inventory was $28,000.

Net Sales:50,000 Cost of Goods sold=BOM+Purchases-EOM COGS: 20,000 Expenses: 18,000 Profit/loss: 12,000

8. Prepare a profit/loss statement from the data that follows. Expenses were $142,000, ending inventory was $190,000, gross sales were $482,000, purchases were $260,000, beginning inventory was $220,000, and customer returns were $8,000.

Netsales: 474,000 COGS: 290,000 Gross Margin: 184,000 Operating Expenses: 142,000 Net Profit= 42,000

Drexel University • Westphal College of Media Arts and Design • Design and Merchandising DSMR 232 -001/002 4.0 credit • Retail Merchandising Planning (Spring18) Mon. & Weds. 12:00PM-1:50PM & 2:00PM-3:50PM, URBN 120

Assignment C: Calculating Components of Operating Statements Creating and Using Your Own Spreadsheet 1. Download and Open file SPREADSHEET C. 2. Set up formulas in the appropriate cells to calculate the dollar value of gross margin and profit/loss.

3. Now set up formulas in the appropriate cells to calculate percentages for net sales, cost of goods sold, gross margin, operating expenses, and profit/loss.

4. Use this completed spreadsheet to make calculations for the problems that follow.

Record your answers on the tables at the end of this assignment.

5. When you have completed the activity, save the file as SPREADSHEET C_COPY and then close the file.

PROBLEMS Using the spreadsheet that you have prepared, enter the components of the operating statement that you have available in each problem. Then calculate the dollar value of gross margin and profit/loss. Finally, calculate the percentage value of each component of the operating statement.

1. The swimwear department has the following figures available: sales were $135,000, cost of goods sold was $120,000, and operating expenses were $11,500.

2. ABC department has the following figures available: sales were $110,000, cost of goods sold was $80,000, and operating expenses were $35,000.

3. A department had sales of $300,000. Cost of goods sold was $180,000 and operating expenses were $90,500.

4. A store has the following figures available: sales were $278,000, cost of goods sold was $190,000, and operating expenses were $78,500.

5. A convenience store had net sales of $495,000 with cost of goods sold at $250,000.

Operating expenses totaled $198,568.

Assignment C: Calculating Components of Operating Statements Problem 1 Net Sales Cost of Goods Sold Gross Margin Operating Expenses Profit/Loss

$ (Dollars) 135,000 120,000 15,000 11500 3,500

% (Percentages) 100% 88.9% 0 8.5 0

Problem 2 Net Sales Cost of Goods Sold Gross Margin Operating Expenses Profit/Loss

$ (Dollars) 110,000 80,000 30,000 35,000 (5,000)

% (Percentages) 100 72.7 0 31.8 0

Problem 3 Net Sales Cost of Goods Sold Gross Margin Operating Expenses Profit/Loss

$ (Dollars) 300,000 180,000 120,000 90,500 29,500

% (Percentages) 100 60 0 30.2 0

Problem 4 Net Sales

$ (Dollars) 278,000

% (Percentages) 100

Cost of Goods Sold Gross Margin Operating Expenses Profit/Loss

190,000 88,000 78,500 9,500

68.3 0 28.2 0

Problem 5 Net Sales Cost of Goods Sold Gross Margin Operating Expenses Profit/Loss

$ (Dollars) 495000 250,000 245,00 198,568 46,432

% (Percentages) 100 50.5 0 40.1 0

Chapter 4

RESEARCH AND ANALYTICS – BUYING DECISIONS Marketing Research: Systematic process of gathering, recording, and analyzing information about problems related to marketing.

SOURCES OF DATA:

Trend Forecasting: the practice of COLLECTING INFORMATION and attempting to SPOT A PATTERN or trend in the information. Trend analysis refers to the science of studying the change in social patterns, including fashion, technology and consumer behavior.

Internal Store management sales

1.Facts/consumer indicators - housing sales, politics, big news makers, elections, Olympics

External Customers Magazines and trade publications Vendors Trade associations Comparison shoppers Fashion forecasters Reporting services The Internet Buying offices

2. Observational methods - on the streets, shopping, going to events – art, music, street style, travel 3. Theoretical research online - keep ongoing and updated bookmarks of sites for science, politics, fashion etc 4.Publications 5.Trade shows, fashion shows

+-=+-=+-= RETAIL MATH

This Year (T.Y.) versus Last Year (L.Y.) Percent Change % change = (This Year - Last Year) / Last Year

+-=+-=+-=

SELL THROUGH

Weeks of supply = (on hand inventory) / (average weekly sales)

Victoria Costa NRF Retail Trends

As reported on by NRF there are many significant changes happening in the retail industry that will have an impact on buyers and merchandisers including brick-and-mortar makeovers, curated collections and customer controlled delivery.

Brick-and-mortar makeovers are an interesting and notable changing in the industry because it seemed for a while people only focused on the ecommerce but now, many are coming to realize that, that does not lessen the importance of brick-and-mortar stores.This has the potential to be a positive change in the retail industry especially because many brands already physical locations and can also be an opportunity for brands that exist online exclusively. The traditional stores of the past are becoming boring and uninspiring to the modern consumer and as long as store try to reinvent their spaces to create a holistic experience for their customers, it should make a positive impact on their business. This will also have an impact on the roles of buyers.

Because of the growing importance of brick-and-mortar buyers will have to consider how product will look on the floor and how consumers should interact with it. An example of how brand are taking this trend seriously is Glossier and their brick-and-mortar showroom in New York. Glossier is a beauty brand that founded as an ecommerce only site but in 2016 they opened their first permanent location. The store is located in a penthouse in Soho and is the ultimate brand experience. The interior decorating and design is thoughtful and current as well as consistent with the strong aesthetic as their online site. The store allows an inspiring set for consumers to learn about and interact with the Glossier product. Glossier has grown 300% since 2016 and their brick-and-mortar has played a part in that.

A second trend that is brand new to the industry is curated collections and services. This trend is due to consumers demanding more personalized products and services to fit their specifics needs and wants. Because of the constant feedback from customers this allows buyers to better understand their need/wants. This also allows for the opportunity of brand discovery for a brand which a consumer might have not otherwise tried.This affects the role of a buyer because they now need to keep into account the changing needs of individual consumers as well as the different personalities that exist under their more general target market when they are buying for their brand. An example of a brand that embodies this new trend is Birchbox. Birchbox is a brand that sends customers a box filled with product from emerging beauty companies. Each box is tailored to each customer based off their own interests and preferences.

A third trend is customer controlled delivery. This trend is due to the growing expectations by consumers of instant gratification. Customers now demand speed and don’t want to wait for their online purchases to arrive after two weeks. This means that buyers now have to think about what customers will want in the future much earlier so that they will be able to make that product available to them. Walmart is a store that is trying to satisfy this new customer need. Walmart now is offering 2-day shipping in an effort to compete with Amazon. Along with 2-day shipping, Walmart also has same day in-store pick-up that way their customers can get their purchases as soon as they order it online. Walmart’s 2-day shipping service and in store pick-up is a way for them to give their customers the gratification that they are searching for. According to Walmart’s CEO these new services has lead to rapid growth.

Chapter 5

UNDERSTANDING THE CUSTOMER

Trends

TAILOR METHOD

>> As consumers across the globe become more connected to one another via constant access to the internet, trends move even faster >>Staying on top of habits, preferences, and attitudes enables brands and retailers to stay ahead of these shifting trends.

Lifestyle Changes -Generation Gaps -Shopping Reinvented -Multi-Cultural -Hyper connected -Premiumsation -Time as currency -Health -Experience

1.Get inside the minds of key consumer segments before entering a market 2.Assess the potential uptake of a new product 3.Find ways to reach new consumers within an existing territory or beyond

RESEARCH * Trend landscape *Decode consumer

preferences *Learn about local consumers *Fill knowlage gaps *Track changing habits and values

STRATEGY *Identify key consumers *Broaden customer base *Target dominant proďŹ les *Adapt product and

strategy *Expand to new consumers

VALS- values and lifestyle Database Marketing

One –to one marketing Relationship Marketing Info starts with purchase data, additional marketing research, product warranty cards,

Chapter 7

PLANNING & FORECASTING Sales forcasting-Prediction of future sales

SEASONAL Top- Down Budgets built on Corporate Initiatives Allocated based on Division’s size Bottoms – Up Sales built from the “bottom” functioning units Forecast based on current trend, marketplace opportunity Rolled up by door, by product category, by channel Process Work with vendors, brands planning and sales teams Ongoing negotiation in upfront seasonal planning Constant renegotiation in season based on performance to “plan”

STEPS #1 Review Sales History Pattern for sales trend?

#2 Economic Changes #3 Product Sales Analysis

Class, Color, Price, Size, Door, Silhouette #4 Marketing #5 Sales Forecast Needs to be achievable, “realistic” Inventory Investment Overhead, expenses -> PROFIT

METODS TO SALES FORECASTING LAST YEAR TIME SERIES METHOD REGRESSION ANYLISIS

STOCK-TO-SALES

Philosophy to managing certain level of inventory at a specific ratio to salesplanned upfront

Forecasting 1. Last year, sales in the luggage department were $1,410,800. This year’s sales were

$1,500,600. What was the percentage change in sales for the luggage department?

% Increase in Sales = Difference in sales from last year to this year / Previous year’s sales Increase in Sales = $89,800 / $1,410,800 $89,800 which represented a 6.4% increase

2. After reviewing the information below, answer the questions which follow.

Q2 Sales TY Luggage Dept. $140,844

Q2 Sales LY $130,619

Entire Store $2,364,380

$2,229,800

(a) Calculate the percentage change in net sales for the luggage department. (b) Calculate the percentage change in net sales for the entire store. (c) Based on sales during Q2 this year, what percentage of the entire store’s sales did

the luggage department represent? a.) 7.8% from last year ($10,225/$130,619 = .0782) b.) 6.0% from last year ($134,580/$2,229,800 = .0603) c.) 6.0% of sale for the entire store ($140,844/$2,364,380 = .0596)

3. BOM inventory last year was $11,500 for July. Sales for that month were $4,100.

What was the stock-sales ratio?

Stock‐Sales Ratio = Value of Stock / Actual Sales Stock‐Sales Ratio = $11,500 / $4,100 Stock‐sales Ratio = 2.8

4. The stock-sales ratio for June is 3.2. Planned sales for June are $7,300. Calculate the

planned BOM inventory for June.

BOM inventory = Stock‐to‐Sales Ratio x Planned Sales Planned BOM inventory = 3.2 x $7,300 $23,360

5. Based on the sales and BOM inventory data that follows, calculate the stock-sales ratio

for each month. Then calculate the planned BOM inventory for this year.

February March April

Sales Last Year $18,500 $12,200 $11,700

BOM Inventory Last Year $27,600 $26,800 $38,600

Planned Sales $19,600 $13,500 $12,400

Stock‐sales ratio for February is 1.5 ($27,600/$18,500). Stock‐sales ratio for March is 2.2 ($26,800/$12,200). Stock‐sales ratio for April is 3.3 ($38,600/$11,700).

BOM inventory for February is $29,400 (1.5 x $19,600) Planned BOM inventory for March is $29,700 (2.2 x $13,500). Planned BOM inventory for April is $40,920 (3.3 x $12,400)

6. Calculate the stock turnover rate for a retailer with the following monthly figures: (a) Sales were$188,000 (b) BOM (Beginning of the Month) inventory was $62,500 (c) EOM (End of Month) inventory was $59,250

a.) ($62,500 + $59,250)/2 Average Inventory = $60,875 Stock Turnover Rate = Sales / Average Inventory Stock Turnover Rate = $188,000 / $60,875

Stock Turnover Rate = 3.1

7. Sales for the quarter were $100,000. EOM inventories for each month of the quarter

are shown below. Calculate the stock turnover rate.

January $27,000 February $25,000 March $31,500

Stock Turnover = Sales/ Average Inventory Stock Turnover= $100,000 / $27,833 Stock Turnover = 3.6

8. You are responsible for buying three classifications of merchandise for a sporting

goods store. From the information in the table that follows, calculate the stock turnover rate for each classification.

Sales for the Period

Baseball Bats

Baseballs

Tank Tops

$240,000

$180,000

$78,000

EOM Inventories July August September October November December January

$16,000 $18,000 $15,000 $14,000 $12,000 $14,500 $16,000

$11,000 $12,500 $14,700 $16,600 $19,300 $22,000 $19,700

Stock Turnover for baseball bats = Sales / Average Inventory Stock Turnover for baseball bats = $240,000 / $15,071 = 15.9 Stock Turnover for baseballs == $180,000 / $16,543 = 10.9 Stock Turnover for tank tops = $78,000 / $9,371 = 8.3

$3,800 $5,400 $9,900 $13,900 $14,800 $9,700 $8,100

9. Last year the stock turnover for your department was 3.2, but this year it

increased to 3.7. Evaluate the impact this change probably had on the performance of your department.

Increasing the stock turnover rate probably had a positive impact on the department.

Merchandise was moving in and out of the department at a faster rate. A faster turnover rate would also likely result in fewer markdowns in the department

10. Last year, the stock turnover rate for your department was 3.2. At the beginning of the

season, your manager gave you the goal of increasing your stock turnover rate to 3.4. Based on the formulas for calculating stock turnover, what two strategies would you suggest for achieving this goal? a) Increasing sales (b) Decreasing average inventories

Drexel University • Westphal College of Media Arts and Design • Design and Merchandising DSMR 232 -002 4.0 credit • Retail Merchandising Planning (Spring 18)

Assignment E: Calculating Stock Turnover and Stock-Sales Ratio CREATING AND USING YOUR OWN SPREADSHEET 1. Download and Open file SPREADSHEET E. Input formulas that will allow you to calculate total sales for the year, total retail stock for the year, annual stock turnover rate, and stock-sales ratio for each month.

2. Make the calculations requested for each problem presented below and record your answers on the tables provided.

3. When you have completed the activity, save the file as SPREADSHEET E_COPY.

PROBLEMS 1. Calculate the annual stock turnover rate based on the following monthly sales and inventory figures. Calculate the stock-sales ratio for each month.

Month Sales Retail Stock 1 $10,00 $30,000 0 2 $11,00 $32,000 0 3 $13,00 $36,000 0 4 $16,00 $37,000 0 5 $19,00 $34,000 0 6 $9,000 $22,000 7 $11,00 $32,000 0 8 $13,00 $31,000 0 9 $16,00 $37,000 0 10 $19,00 $31,000 0 11 $21,00 $29,000 0 12 $25,00 $34,000 0 EOM $19,500 2. Calculate the annual stock turnover rate based on the following monthly sales and inventory figures. Calculate the stock-sales ratio for each month.

Month 1 2 3 4 5 6 7 8 9 10 11 12 EOM

Sales $11,68 6 $12,53 5 $14,88 9 $15,75 6 $14,34 2 $13,67 6 $15,88 9 $16,75 6 $15,34 2 $14,67 6 $16,88 9 $17,75 6

Retail Stock $18,979 $19,226 $22,678 $21,991 $20,698 $17,834 $22,793 $23,545 $21,698 $17,438 $24,678 $24,545 $22,756

Assignment E: Calculating Stock Turnover and Stock-Sales Ratio

Problem 1 Annual Stock Turnover Rate Monthly Stock-Sales Ratio Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12

3 2.91 2.77 3.31 1.79 0.24 2.91 2.38 2.31 1.63 1.38 1.36

Problem 2 Annual Stock Turnover Rate

Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7

Monthly Stock-Sales Ratio 1.62 1.53 1.52 1.4 1.44 1.3 1.44

Month 8 Month 9 Month 10 Month 11 Month 12

1.41 1.41 1.19 1.46 1.38

Chapter 8

BUY/MERCHANDISE PLANS

+-=+-=+-=

+-=+-=+-= The EOM stock: for any month is the planned BOM stock for the following month

/-Reductions include:

Markdowns Employee discounts Shrinkage (shoplifting or employee theft) /Estimates are based on past

experience and are presented as a percent of planned sales Total reductions in dollars

Open-to-buy: is the amount the buyer has left to spend for a period, and it is reduced each time a purchase is made

BeneďŹ ts of OTB:

*Limit overbuying and underbuying *Prevent loss of sales due to inadequate amount of stock *Maintain purchases within budgeted limits

Preparing Buying Plans

1. Last year, sales for a department were $500,600. This year sales were $550,000. (a) By what percentage did sales increase? (b) If a 10% increase in sales is planned for next year, calculate planned sales in dollars for that year.

49400/500600= 9.9% TY-550000/550000 =0.1

TY= $605,000

2. Last season (February –July), sales for a department were $500,000. When the buyer prepared the six-month buying plan, an increase in sales of 5% was projected. After examining sales records from last year, monthly sales distributions for each month of the season were planned as follows: February (10%), March (20%), April (20%), May (30%), June (10%), and July (10%).

Calculate the sales in dollars that are planned for each month this season.

TY= $525,000 FEB: = 525000 x .1= $52,500 MARCH: =525000 x .2= $105,000 APRIL: = 525000 x .2=$105,000 MAY= 525000 x .3= $157,500 JUNE: 525000 x 0.1= $52,500 JULY: : 525000 x 0.1= $52,500

3. From the information presented in the table below, calculate the planned purchases at retail for each month.

Month

Planned BOM Stock

Planned Sales

Planned Reductions

February

$19,250

$9,625

$192

Planned EOM Stock $38,500

March

$38,500

$19,250

$770

$19,250

April

$19,250

$9,625

$962

$10,000

FEB: 9625 + 38500 + 192 – 19250= $29,067 MARCH: 19250 + 19250 +770 – 38500 =$770 APRIL: 9625 +10000 +962 – 19250 = $1337

4. Calculate the planned purchases at cost for each department listed below.

Planned Purchases at Retail

Initial Markup Percentage

Department A

$30,500

47.2%

Department B

$61,000

48.0%

A= (100-47.2)x30500= $16,104 B= (100- 48) x 61000= $31,720

5. Your department has planned purchases at cost of $105,000. You have ordered the merchandise listed below but have not received shipment yet. Calculate your open-to-buy.

Acme Shoes Broadway Shoes Shoes Galore

$500 $10,500 $15,000

105000-(500 + 10500 + 15000) = $79,000

Drexel University • Westphal College of Media Arts and Design • Design and Merchandising DSMR 232 -001/002 4.0 credit • Retail Merchandising Planning (Winter 18) Mon. & Weds. 12:00 PM -1:50 PM, 2:00 PM-3:50PM URBN 120

Assignment F: Preparing Buying Plans

CREATING AND USING YOUR OWN SPREADSHEET 1. Download and Open file SPREADSHEET F. 2. Input formulas to calculate (1) planned monthly sales, (2) planned monthly BOM, (3) planned monthly EOM, (4) planned monthly reductions, (5) planned purchases at retail, and (6) planned purchases at cost. Make calculations for the problems found below and record all your answers on the tables provided at the end of this assignment.

3. When you have completed the lesson, save the file as SPREADSHEET F_COPY, and close the file.

PROBLEMS 1. Last year’s sales for the 6-month period of February to July were $589,345. A 5 percent increase in sales is anticipated this year. Total reductions for the period are planned at 8 percent. The initial markup is planned at 53.9 percent. The buyer desires an ending inventory of $190,000 for the period. Based on an analysis of past sales records and current market trends, the buyer has also made plans for the period in relation to (1) monthly distribution of sales, (2) monthly stock- to-sales ratios, and (3) monthly distribution of planned reductions. These three planning estimates for each month are as follows: Month Feb Mar Apr May June July

Sales Distribution 10% 10% 35% 20% 15% 10%

Stock-to-Sales Ratio 2.4 2.4 2.1 2.0 2.0 2.0

Reductions Distribution 5% 5% 10% 20% 30% 30%

Calculate (1) planned monthly sales, (2) planned monthly BOM, (3) planned monthly EOM, (4) planned monthly reductions, (5) planned purchases at retail, and (6) planned purchases at cost.

2. For the information presented in Problem 1, you have decided that changes must be made in only the sales distribution estimates. Recalculate your answers based on the following changes in sales distribution: Feb 12% Mar 13% Apr 30% May 22% June 13% July 10%

3. Using all the original estimates presented in Problem 1 except the stock-to-sales ratios, make recalculations based on the following changes in planned stock-to-sales ratios: Feb 2.3 Mar 2.3 Apr 2.0 May 2.0 June 2.0 July 2.0 4. Using all the original estimates presented in Problem 1 except the planned distribution of reductions, make recalculations based on the following changes in planned distribution of reductions: Feb 0% Mar 0% Apr 15% May 25% June 30% July 30% 5. Using all the original estimates presented in Problem 1 except the figure for total planned reductions, recalculate your planned monthly figures if total planned reductions are increased to 13 percent.

Assignment F: Preparing Buying Plans

Chapter 9&10

ASSORTMENT PLANS

Determine the specific quantities and characteristics of each product in relation to: *Brands * Color *Size *Fabric/Material *Price

1-BRANDS Fashion or Basic Merchandise Fashion – quick turn, best sellers, Basics – year round, seasonal, planning model forecasts

2-PRICE & QUALITY

Customer needs to see the VALUE!

3-VARIETY OF MERCHANDISE BREADTH & DEPTH Balanced assortment: When the breadth and depth meet the demands of your customers

4- BY DOOR -Flag Ship, A, B, C -Regional Needs -Customer Influence -Micro Merchandising

Chapter 9&10 cont

CONTROLLING INVENTORIES

Perpetual Control Recording business transactions (sales, purchases, returns, transfers) on continuous basis Stock levels can be calculated at ANY time Physical count NOT required

Computerized Perpetual Inventory Control *Unit control – UPC’s Each item is coded by department, classification, vendor, style, color, size, or price

Periodic Control Retailers who take physical inventory on regular basis Reasons – financial reporting (year end), shrinkage

*Some retailers are experimenting with radio frequency identification (RFID) to replace UPC bar codes

Quick Response Retailers forecast today to have in store to sell tomorrow “QUICK” Collaborative Partnership between Wholesaler/ Retailer Requires inventory $ investment, shipping standards Model Stocks - minimum units per style/color/ program/door Fluctuate Bar Coding/Scanning – track sales, reduces stock outs EDI Compatible

+-=+-=+-= GROSS MARGIN

Formula: GM% = (MU%-((1-MU%) X MD%)

Developing Assortment Plans 1. As the buyer for men’s shirts, you have a budget of $25,000. Based on past customer sales, you

want 40% of your budget to purchase Gant shirts and 60% to purchase Izod shirts. You find that both shirts will cost your store $15 each. How many units and retail $’ of shirts of each brand can you purchase?

25000 x 0.4= $10,000 10000/15 = 666.67 667 x 15 = $10,005

25000x 0.6= $15,000 15000/15= 1,000 units

2. You have the budget to purchase 1,000 units of Izod shirts. You want to only purchase solid-colored shirts of this brand. Based on the plan that follows for distribution of colors, how many units of each color will be purchased?

Yellow 15% White

45%

Blue

30%

Tan

5%

Green

5%

Yellow= 1000 x .15= 150

White= 1000 x .45= 450

Blue= 1000 x .3 =300

Tan= 1000 x .5 = 50

Green = 1000 x .5 = 50

3. As the buyer for men’s shirts, you have the budget to purchase 300units of blue Izod shirts.

Based on the plan that follows for distribution of sizes, how many blue shirts of each size will be purchased?

Small

15%

Medium

30%

Large

30%

X-Large

25%

Small: 300 x .15 = 45 Medium= 300 x .3 = 90 Large = 300 x .3 =90 x-Large= 300 x 2.5 = 75

4. As the buyer for men’s shirts, you have the budget to purchase 50 units of green Izod shirts.

Based on the plan that follows for distribution of sizes, how many green shirts of each size will be purchased?

Small 15% Medium

30%

Large

30%

X-Large

25%

Small: 50 x .15 = 7.5 =8 Medium= 50 x .3 = 15 Large = 50 x .3 = 15 x-Large= 50 x .25= 12.5 = 13

5. In problem 4, the buyer is considering purchasing 75% of the green shirts in all-cotton and 25%

of the green shirts in a poly blend. Would it be feasible to offer both cotton and poly blend shirts?

Yes, because the x-large takes up 13 and the other take up 38 units.

50 x .75= 37.5 50 x .25 = 13

Drexel University • Westphal College of Media Arts and Design • Design and Merchandising DSMR 232 -002, 4.0 credit • Retail Merchandising Planning (Spring 18) Tuesday and Thursday 3:30PM -5:20 PM- URBN 120

Assignment G: Calculating Assortment Plans Assortment planning will result in establishing a model stock, which is the desired assortment of stock broken down according to selection factors important to your target market, such as brand, price, material, color, and size. The objective of establishing a model stock is to maximize the sales and profits from your inventory investment. After you have determined the budget for merchandise purchases and examined store records, trends, and external factors affecting sales, you are ready to prepare an assortment plan.

SAMPLE PROBLEM Assume that your department is selling sweatshirts. Your research of past sales records indicates that sweatshirts have typically composed 5 percent of total sales for the department. This year total sales are planned at $100,000. From your research, you realize that most of your customers for this product are not brand loyal. They will substitute one brand for another if you have the size, color, and style for which they are looking. Past sales records indicate that Russell has been the most popular brand with your customers.

You decide to stock only Russell sweatshirts costing $10 each. Because sweatshirts represent 5 percent of your total planned sales ($100,000), you will have $5,000 to spend on sweatshirts ($100,000 x 0.05 = $5,000). Because each sweatshirt costs your store $10, you will be able to purchase 500 sweatshirts ($5,000 / $10 = 500).

The next step in developing an assortment plan will be to calculate the specific unit breakdowns of these sweatshirts based on the selection factors you have chosen—size and color. Russell has these sweatshirts in sizes from extra small to extra-extra large in 20 different colors. By examining past sales records, you determine that the size distribution has been: Medium Large X-Large

20% 50% 30%

Basic colors of white and gray have been your best-sellers in the past, each one accounting for 40 percent of sales. Black has been a good seller too, with 20 percent of sales.

Based on your plan, you are ready to calculate the number of sweatshirts that you will purchase for each of the sizes and colors selected.

SAMPLE SOLUTION Size Medium

Number 100 (.20 x 500)

Color White Gray Black

Number 40 (100 x .40) 40 (100 x .40) 20 (100 x .20)

Large

250 (.50 x 500)

White Gray Black

100 (250 x .40) 100 (250 x .40) 50 (250 x .20)

X-Large

150 (.30 x 500)

White Gray Black

60 (150 x .40) 60 (150 x .40) 30 (150 x .20)

CREATING AND USING YOUR OWN SPREADSHEET You can develop assortment plans very quickly using a computerized spreadsheet which provides you the opportunity to easily make changes in your plan.

1. Download and Open SPREADSHEET G. Using Spreadsheet #1 on the file, enter the dollar budget that is presented in the sample problem above. Your calculations should be the same as in the sample problem.

2. Now develop assortment plans for the problems that follow. Record all your answers on the tables provided.

3. When you have completed the lesson, save the file as SPREADSHEET G_COPY, and then close the file.

PROBLEMS 1. Determine the assortment plan for the sample problem if you just learned that your budget has been reduced to $4,000.

2. For the original illustrative problem (budget at $5,000), determine the assortment plan if the unit cost of each sweatshirt was increased to $13.00 each.

3. For the original illustrative problem (unit cost at $10), determine the assortment plan if you decided to change the size distribution as follows: medium (15 percent), large (45 percent), and extra large (40 percent).

4. If the size distribution was the same as presented in the original illustrative problem, determine the assortment plan if you decided to change the color distribution as follows: white (35 percent), gray (65 percent), and black (0 percent).

Assignment G (Part 1): Calculating Assortment Plans Name and Date VICTORIA COSTA 1.

Size/Color Medium Large X-Large

32 80 48

White

Size/Color Medium Large X-Large

31 77 46

Gray 32 80 48

Black 16 40 24

TOTALS 80 200 120

2.

White

Gray 31 77 46

Black 15 38 23

TOTALS 77 192 115

3.

Size/Color Medium Large X-Large

White 30 90 80

Size/Color Medium Large X-Large

35 88 53

Gray 30 90 80

Black 15 45 40

TOTALS 75 225 200

4.

White

Gray 65 163 98

Black 0 0 0

TOTALS 100 250 150

CREATING AND USING YOUR OWN SPREADSHEET 1. Open SPREADSHEET G and locate Spreadsheet #2.

2. Input formulas in the appropriate cells that will calculate Units Needed, Number of each size and color needed, Total Number of each size needed, and Total Number of each color needed.

3. When you have completed the lesson, save the file as SPREADSHEET G_COPY, and close the file.

PROBLEMS 1. You have a $1,000 budget to purchase sweatshirts for your store. All the sweatshirts will be purchased from Hanes for $10 each. The distribution of sizes will be as follows: Small Medium Large X-Large

20% 32% 28% 20%

Four colors will be represented in the assortment as follows: Red Blue White Black

25% 25% 25% 25%

2. Recalculate the assortment plan for the information presented in Problem 1 if the distribution in sizes were changed as follows: Small Medium Large X-Large

20% 32% 32% 16%

3. Recalculate the assortment plan for the information presented in Problem 1 if the distribution in colors were changed as follows: Red Blue White Black

20% 20% 30% 30%

4. Recalculate the assortment plan for the information presented in Problem 1 if the distribution in colors were changed as follows: Red Blue White Black

50% 20% 30% 0%

5. Recalculate the assortment plan for the information presented in Problem 1 if the distribution in sizes were changed as follows: Small Medium Large X-Large

28% 32% 28% 12%

Assignment G (Part 2): Calculating Assortment Plans Name and Date VICTORIA COSTA 1.

Size/Color Small Medium Large X-Large TOTALS

Red 5 8 7 5 25

Size/Color Small Medium Large X-Large TOTALS

5 8 8 4 25

Size/Color Small Medium Large X-Large TOTALS

4 6 6 4 20

Size/Color Small Medium Large X-Large TOTALS

10 16 14 10 50

Size/Color Small Medium Large X-Large TOTALS

7 8 7 3 25

Blue 5 8 7 5 25

White 5 8 7 5 25

Black 5 8 7 5 25

TOTALS 20 32 28 20 100

2.

Red

Blue 5 8 8 4 25

White 5 8 8 4 25

Black 5 8 8 4 25

TOTALS 20 32 32 16 100

3.

Red

Blue 4 6 6 4 20

White 6 10 8 6 30

Black 6 10 8 6 30

TOTALS 20 32 28 20 100

4.

Red

Blue 4 6 6 4 20

White 6 10 8 6 30

Black 0 0 0 0 0

TOTALS 20 32 28 20 100

5.

Red

Blue 7 8 7 3 25

White 7 8 7 3 25

Black 7 8 7 3 25

TOTALS 28 32 28 12 100

Chapter 11 SELECTING VENDORS AND BUILDING PARTNERSHIPS CRITERIA

TYPES OF VENDORS

*Manufacturers – private label *Wholesalers – Branded segment *Manufacturers’ brokers –Agent

Merchandise and prices offered Vendors’ distribution policies Vendors’ reputation and reliability Terms offered Services offered

ANALYZING PREFORMACE

Sales and Margin Performance Financial Support of the Business “Giveback” Margin support, Mark Up, Discounts, RTV’s , Coop, In-store programs Operations – ticketing, shipping report, quality of merchandise, floor ready merchandise – “Reliability”

MARKETS

A central market is a city where a large number of key suppliers are located Apparel - New York, LA Furniture - High Point, North Carolina Trade Shows – NYC, Las Vegas, LA

NEGOTIATION Good negotiators consider both their needs and those of the other party Characteristics of good negotiators include: Analytical Strong financial acumen Creativity Active listening skills Excellent organizational skills Self-confidence

***The objective is for both sides to win—to develop understanding, acceptance, respect, trust, and a lasting business relationship ***

GUEST SPEAKER

Chole- Urban Outfitters

● ● ● ● ● ● ● ● ● ●

Worked with Urban for 4 years Works as a men’s buyer and has never worked in women’s Started at Topshop men’s Urban’s males consumer is stylish and eccentric Being a buyer can be restrictive, difficult to get things approved from higher ups There is more reach with a larger company There is more variety with Urban Outfitters because the lifestyle segment The major principles of buying are the same in the UK and the U.S. Urban Outfitters is a very creative environment for a Buyer.

IMU is high because of small purchases 70%

GUEST SPEAKER

05/24/18 Jeni Hutchins & Danielle Brief- 5Below ● ● ● ● ● ●

She started out as an assistant at Urban Started selling bikes, another company managed it as a micro site Sold deadstock from lisa frank Charity for cats Created a collection of friendsgiving and made it marketing concept There is a lot of competitiveness at the entry level

● ● ● ● ● ●

Worked as an assistant buyer at Barney’s Joined assistant buyer at Burlington Product development,Purchase order, sample management Had some input in marketing because she offers to help Trend analysis through Pinterest, insta,nyfw, lifestyle blogs Advice: be a team player, stay engaged, stay relevant

● It is about the company not your taste ● WOW- loss leader, the business takes a loss on profit of a product to attract people to come into the store ● If you can’t sell your strategy, you can’t run a business ● Change is inevitable, be highly adaptive is key to success

X

Kristin Bethea-Dinkins, Tristan Chonko, Victoria Costa, Anna Henkel, Taylor Johnson

COMPANY PROFILE- BOMBAS “One pair purchased = One pair donated”

● ● ●

Online retail only Carries Men’s, Women’s and Children’s socks Value Proposition: High Quality, Variety of Design and philanthropy

COMPANY PROFILE- URBAN OUTFITTERS ●

●

●

Lifestyle retailer dedicated to inspiring customers through a unique combination of product, creativity and cultural understanding.

Founded in 1970 in a small space across the street from the University of Pennsylvania, by Dick Hayne and Scott Belair.

Operates over 200 stores in the United States, Canada and Europe, offering experiential retail environments and a well-curated mix of women’s, men’s, accessories and home product assortments.”

COMPANY PROFILE- URBN Philanthropic efforts:

●

● ● ●

“The company retails women's and men's fashion apparel, intimates, footwear, beauty and accessories, home goods, activewear, and electronics for young adults aged 18 to 28 under the Urban Outfitters brand.

Serves customers directly through retail stores, websites, mobile applications, catalogs, and customer contact centers.

URBN operates both retail and warehouse divisions Other brands: Anthropologie, Bhldn, Free People, and Terrain brand

● ● ● ● ● ● ●

Big brother, Big Sister Alex Lemonade ACHIEVEability Vetri Community Partnership MS Ride To The Shore Operation Brotherly Love Children’s Scholarship

CONSUMER PROFILE- BOMBAS ●

Why Bombas would be a good fit for Urban Outfitters? ○ It’s assortment and innovation

Target Customer - Female with 50% including customers buying men’s socks. 90% are over 35 years old and 75% are over 45 VALS Profile Characteristics: Achievers - they are family and goal oriented, professional, anchors of the status quo and believe money is the source of authority ● ● ●

Average Age of Purchaser: 38 Mean Family Income: around $50K Median Household Income: $104K ○ Comparisons between Bombas and Urban Outfitters: more female driven ○ Bombas socks are creative in design and color and should appeal more to a younger consumer

CONSUMER PROFILE- BOMBAS ●

Key fashion brands worn by this consumer include: ○ ○ ○ ○ ○ ○ ○

●

Macy’s Nordstrom Target Kohls J Crew LL Bean Lululemon

Why these consumers buy from Bombas: ○

Gifts, to replace existing worn out socks, an upgrade, to help the cause and for the various colors and styles that Bombas offers

CONSUMER PROFILE- BOMBAS

CONSUMER PROFILE- URBAN OUTFITTERS VALS Profile Characteristics: Experiencers They’re assertive, energetic, impulsive, irreverent, and physical. ● ● ● ●

They buy products that increase sociability and entertainment.

They seek fast access, options, mobility, and customization.

They tend to shop for entertainment and are impulsive shoppers.

Some of the brands worn by this consumer would be TopShop, American Eagle and H&M.

CONSUMER PROFILE- URBAN OUTFITTERS

CONSUMER PROFILE- URBAN OUTFITTERS Consumers of both brands are socially conscious. One of the reasons that people buy socks from Bombas is to participate in their mission. While Urban Outfitters target market have been shown to have a growing preference to doing business with brands with prosocial messages aka brands that do good work.

Bombas would be targeting a new consumer by being sold in Urban Outfitters. One that would find their designs and mission appealing even if the price of the product is a little higher than normal. ($8 to $12)

INVENTORY ANALYSIS

MEN

WOMEN

INVENTORY ANALYSIS- MEN Class

ATHLETIC

URBAN

CREW

*PRICE: All $8

JARRITOS

RICHIE RICH

RICK&MORTY

INVENTORY ANALYSIS- MEN

Graphic Print-Color Print-Neutral Logo

INVENTORY ANALYSIS- WOMEN Ankle Hose Out from Under (URBN)

Crew Pair of Thieves

Athletic

No Show

INVENTORY ANALYSIS- WOMEN Price Price

Color

Black

Pink

Blue

White

Green

Print

$20

$12

$14

$16

$10

COMPETITIVE RESEARCH Net Revenue for Fiscal Year Ending January, 2017: 3,609,865,000

COMPETITIVE RESEARCH Annual Fiscal ending in January 2018: 2,425,462,000

COMPETITIVE RESEARCH Fiscal Year Ending in January 2017: 3,492,690,000

COMPETITIVE RESEARCH Fiscal Year Ending in January 2017: 15,855,000,000

In-Store Visuals

In-Store events/promotions

ASSORTMENT PLAN FALL 2018

SALES PLAN ● ● ● ●

Increase 4% from 2017 URBN company has increased an average of 4% over the years 2017, 2016, 2015.

Retail industry will grow 3.6 to 4 percent next holiday season.

Socks grew 1.4% in 2017 and is expected to continue to grow in 2019

RECOMMENDED ASSORTMENTMEN

RECOMMENDED ASSORTMENTMEN

RECOMMENDED ASSORTMENTWOMEN

RECOMMENDED ASSORTMENTWOMEN

RECOMMENDATIONS ●

More prints ○ ○ ○

● ● ●

Patterns Expressive colors Tailored to Urban Outfitters

One size fits all Better price options Customize your own sock idea

●

Going organic in fiber contents

REFERENCES http://www.strategicbusinessinsights.com/cfd/newsletter/2018 /2018-04.shtml https://revenuesandprofits.com/urban-outfitters/ https://www.forbes.com/sites/sarahlandrum/2017/03/17/millenn ials-driving-brands-to-practice-socially-responsible-marketi ng/#79fdda294990

Competition

INDEX REATIL MATH-SUMMARY GLOSSARY EQUATION SHEET

Retail Math- Summary of Concepts and Equations

Gross Margin The amount of each dollar earned by a store that can be used to pay operational or general expenses Sales - Cost of Goods Sold Gross Margin (%) = (Sales - Cost of Goods Sold) / Sales

Stock Turnover The number of times in a particular period that the average inventory on-hand has been sold and replaced. Can be calculated in both dollars and units number of units sold__ average inventory in units

Sell Through Percent The percentage of store received merchandise that has been sold unit sold STD_ unit receipts STD

Weeks of Supply The number of weeks of inventory in the stores to sustain average weekly sales. on hand inventory_ average weekly sales

Markup The difference between the retail price and the cost of an item. Markup can be expressed in dollar amount or as a percentage retail – cost Markup (%) = retail – cost retail

Sales Index The number representing the relationship of a store’s sales performance to the chain’s average store sales performance a single store’s unit sales______ total company average store unit sales

Stock Index The number representing the relationship of a store’s inventory to the chain’s average store inventory a single store’s inventory______ total company average store inventory

Stock to Sales Ratio Expressed as a percentage, this is the ratio of the stock index to the sales index stock index sales index

Average Break Average units per item that a store receives total units_________ number of styles and colors

T.Y vs. L.Y Percent Change Calculation used to evaluate the current business performance against the previous year T.Y = this year L.Y. = last year T.Y – L.Y L.Y

RETAIL GLOSSARY OF TERMS Average is the result obtained by adding together several quantities and then dividing this total by the number of quantities. Average indicates the usual or standard level of something.

For example, the average of the following 4 numbers is 51.25.

Average inventory AVG INV is average inventory. It is also referred to as "average stock".

Definition: The typical amount of stock that is held in inventory for a specific period of time. Most commonly considered for a full season (six months) or a year.

AVG INV = (SUM OF ALL BOM'S + THE LAST MONTH'S EOM) / TOTAL INVENTORY COUNTS Average retail The average retail figure is calculated taking into account a pre-season (or regular-price) retails. It is often used as a benchmark figure in the industry: • • •

Brand managers to communicate their positioning in the marketplace Sourcing and design professionals, to indicate what the end retail of a garment should be Buyers to determine if their order/assortment is in-line with the retailer's strategy

Benchmarking To evaluate of compare something against a standard. Common ways to benchmark a business include, but are not limited to: • • • • •

versus last year versus plan versus total business versus industry versus another comparable business

BOM The stock-value on hand, in dollars, at the start of each month.

BOM = PREVIOUS MONTH'S EOM Broken sizes A size range is considered "broken" when a retailer is out of stock in key sizes, and no longer has a complete range to satisfy most of their customers.

EOM EOM is end-of-month-stock or inventory.

Definition: The stock value on hand, in dollars, at the end of each month. Generally, the formula is below.

EOM = BOM - SALES - MARKDOWNS + RECEIPTS

Ex-Factory Point The ex-factory point is the point at which the title to the goods passes to the buyer. Once the buyer is in "possession" of the goods, they are responsible for any loss or damage, expenses and operations associated with getting the merchandise to their destination.

For example: ex-factory Shanghai indicates the buyer is responsible for picking the merchandise up at the port of Shanghai.

Another example: ex-factory Montreal distribution center indicates goods will be delivered, and you will take possession at your Montreal distribution center.

Gross margin (GM) GM is "gross margin".

Definition: The measure of profitability on an item or classification of goods. It considers the cost of selling the goods. It is the first measure of profitability.

GM = NET SALES - COGS Gross margin rate (GM%) GM% refers to "gross margin rate". This is a measure of gross margin $ against the total sales $ for a specified time period. It is the margin performance of the business.

GM% = GM$ / SALES$ Gross Markdowns Actual physical markdowns taken at the store – can be “permanent markdown” and or “POS markdown” Gross Markdowns = (# units x MD$) Permanent Markdown – physically reduced price on item in the store; whether it sells or not. Will reduce inventory immediately with our without a sale.

POS Markdown – Point of Sale, at register when customer is purchasing the item will be charged the markdown. (only with a sale) Gross sales The total sales achieved before any customer returns or adjustments are accounted for; total company sales before any returns and merchandise credits are calculated.

IMU IMU refers to "initial mark-up". IMU considers the cost and retail of an item before it reaches the sales floor. It is the initial profit amount.

IMU $ = INITIAL RETAIL $ - INITIAL COG IMU = (RETAIL - COST) / RETAIL Markdown Allowances Vendor supported $ given to Retailer to help offset markdowns and improve overall profit of the department.

• •

Reduces Gross Markdowns.

Usually given at the end of each quarter and needs to be negotiated.

Markdown rate (MD%) Markdown rate, or MD%, is the measure of markdown dollars taken against sales dollars for a specified period of time.

The markdown rate indicates the markdown performance.

MD % = MD$ / SALES$ Mark-up (MU) MU is "markup". Markup is the difference between the retail price of an item (or category), and its cost.

MU = (RETAIL - COST) / RETAIL RETAIL = COST / (1 - MU%) COST = RETAIL X (1 - MU%) Merchandise Classification Sorts product by distinctive features and provide structure and organization for collection of items.

MMU MMU is "maintained mark-up". This is the profit dollars or rate in-season. It takes into account any markdowns and adjustments to either the cost or retail prices.

Net Markdown The amount of markdown was actually used, less any markdown cancellations.

Net Markdown = Gross Markdown $- Markdown Cancellation $ Net sales Net sales are the sales achieved after all customer returns and adjustments are deducted.

OTB or Open to Buy The amount of $’s at retail a buyer has to spend for a specific time period.

• •

Overbought: when sales plans are overestimated and the stock purchases are too high.

Underbought: when sales plans are underestimated and the stock purchases are too low.

Perceived value The perceived value of an item is what the customer has valued the item at. It is your customer's evaluation of the benefits and costs of an item. Different customers place different weight on various benefits.

Rate of return (return %) The rate of return is the value of goods that have been returned by the customer. It is measured against total sales for the same time period.

RETURN % = RETURN $ / SALES $ Sell-thru (ST) ST is sell-thru. How much inventory you sold to purchases. It is often measured at regular price, and in units.

ST = UNIT SALES / UNITS RECEIVED

Shrink Shrink rate is the difference between a retailer's physical inventory and book inventory, when the physical count is lower than the book-recorded inventory. It is often also referred to as an inventory shortage.

To calculate the shrink rate: SHRINK = SHORTAGE $ / SALES $ Stock-to-sales STS is stock-to-sales ratio, a measure of BOM stock to the sales achieved. It is monitored to determine whether or not additional inventory needs to be purchased to support sales within a given month.

STS = BOM / SALES Turn TURN refers to turnover, the number of times you buy and sell through an average amount of stock. Usually measured over a period of six months or year.

TURN = SALES / AVG INV WOS WOS is "weeks of supply" or "weeks of stock", the number of weeks of inventory left in a particular style based on the current rate of sale.

WOS = (OH + OO) / LW SALES

Retail Math Reference and Glossary of Terms Name

Description

Formula

Example

Age (Weeks Active)

The amount of weeks an item is on the selling floor.

(Weeks Active implies the quantity of weeks an item has been selling, or available for selling, starting from the first week it sells until it is sold out).

n/a

n/a

All Comp Store Sales

A comparison of stores that have been open for more than one year (new stores less than a year old are not included in the comparison).

n/a

n/a

Asset Efficiency Measures

These formulas determine a company’s efficiency in generating sales and profit. There can be large volume with no profitability, or little volume with great profitability, et cetera.

Turns = Ann Retail Sls / Avg. Retail Inv Ann Retail Sls = Avg. Retail Inv * Turns Avg. Retail Inv = Ann Sls / Turns Turns = 52 / W.O.H. W.O.H. = 52 / Turns R.O.I.I. = Ann GP$ / Avg. Cost Inv Ann GP$ = Avg. Cost Inv * R.O.I.I. Avg. Cost Inv = Ann GP$ / R.O.I.I. R.O.I.I. = (MM% / CC%) * Turns MM% = (R.O.I.I. / Turns) / (1 + (R.O.I.I. / Turns)) Turns = R.O.I.I. / (MM% / CC%)

Average Cost (AC), or Avg Cost

An average cost can be determined when the Retail and MU% are known.

Average Lead Time (calendar days)

The number of calendar days between the time the order is placed and received.

Average Retail (AR)

Average Retail Stock (ARS)

Average Stock (AS) or Average Inventory or Average On-Hand (Avg. OH)

AC when Retail and MU% are known: AC = R x (100% - MU%)

AC = $12,500 x (100% 52%)

An average retail can be determined when the Cost and MU% are known.

AR when Cost and MU% are known:

AR = $2,383.75 / (100% 49%)

See Average Stock. The term “Retail” is the total retail dollar amount for which the product is owned (hard marked).

ARS = (BOM + EOM) / 2

May BOM $10,000

or ARS = (BOM + EOM + EOM) / 3

May EOM $9,400

The quantity obtained by adding the beginning inventory to the ending inventory and dividing that sum by the number of its parts. Formula can be applied to units and dollars.

AR = Cost / (100% - MU%)

June EOM $8,200

AS = (BOM + EOM) / 2

sum is $27,600 / 3 = $9,200 May BOM 250 units

or AS = (BOM + EOM + EOM) / 3

May EOM 759 units June EOM 538

Average Unit Retail (AUR)

Total dollars (gross or net) for a specified period divided by the total units (gross or net) for the same period (always expressed in dollars).

Basic Stock Method

Deduct planned average monthly sales by the planed average inventory (the total planned sales divided by desired turn). The result is the minimum stock needed at the beginning of each month.

AUR = Dollars / Units

sum is 1547 / 3 = 516 units (rounded up) AUR = $4564.63 / 101 = $45.19

Planned Avg. Inventory

($540,000 / 2) = $270,000 ($90,000)

- Planned Avg. Monthly Sales = Basic Stock

= $180,000

Billed Cost

The vendor’s price to the retailer. This is different from Cost of Goods Sold.

n/a

n/a

BOM stock

The inventory at the beginning of the month. This can be expressed in dollars or units.

n/a

n/a

Name

Description

Formula

Example

Chargeback

The quantity charged for incorrectly shipped items or damaged items as defined in written agreement between the vendor and the retailer.

n/a

n/a

Closing InventoryOr Ending Inventory

The amount of inventory remaining at the end of the fiscal year. Can be expressed in units, cost dollars and retail dollars.

n/a

n/a

Closing Physical Stock

A physical count of remaining merchandise, expressed in retail dollars. Most retailers do a physical count twice a year.

n/a

n/a

Complement

A percentage deducted from 100.

Complement = (100% – 65%) = 35%, or (1 - .65) = .35

Cost

The price the retailer pays for merchandise.

n/a

n/a

Cost of Goods Sold (COGS) and Total COGS

The price of the merchandise. The Total COGS is the total amount the retailer pays for the merchandise plus or minus any additional fees to make the goods sellable.

n/a

n/a

Cost On Hand

The cost value of the merchandise on hand.

n/a

n/a

Cost On Order

The cost value of merchandise on order.

Cumulative Markup

The markup at the beginning of a period plus the markup for all receipts received during the period.

n/a

n/a

Customer Allowances

A reduction in price that is given to the customer after the purchase.

n/a

n/a

Customer Returns (the retailer's customer)

Merchandise returned to the retailer by the customer in exchange for store credit or cash.

n/a

n/a

Department

A category used to group specific merchandise.

n/a

n/a

Dollar Merchandise Plan

This is a document projecting sales, inventory, markdowns, markups, and receipts for a given period

n/a

n/a

Door

Door implies a physical location made of "bricks and mortar" for a given retailer (e.g., Kohl's will open 40doors).

n/a

n/a

EOM

End of month

n/a

n/a

GMROI (gross margin return on investment)

Measures capital turnover.

GMROI = Gross Margin $ / Average Inventory at Cost

n/a

Gross Margin (GM) and

The difference between Net Sales and Total-COGS is the gross margin. When forecasting, use the difference between the product of the markup percent complement and the markdown percent.

GM = Net sales - Total cost of goods sold

GM = $18.56 - $10.51 = $8.05

GM% = GM / Net Sales

GM% = $8.05 / $18.56 = 0.43372844828

GM% = (MU% - ((1-MU%) * MD%)

Expressed: 0.43372844828 * 100 = 43.4%

Gross Margin Percent (GM%)

Gross Markdown

The initial price reduction

n/a

n/a

Gross Profit

See Gross Margin

n/a

n/a

Gross Sales

The retail value prior to returns and discounts

n/a

n/a

Initial Markup or Initial Margin (IM) and IM%

The difference between the COGS and the original retail price is the initial markup. The initial markup percent is the initial markup divided by the original retail price and then multiplied by 100.

IM = ((Original Retail - Cost) / Original Retail) * 100

n/a

Name

Description

Formula

Example

Inventory

Synonymous with the term "stock." (a.k.a. on hand). This is quantity of goods owned at the end of a specific period of time. This represents potential profit and is used as a gauge when comparing to actual profit.

n/a

n/a

Invoice Match Rate

The percent of invoices that match the orders.

n/a

n/a

LY

Last Year

n/a

n/a

Maintained Markup or Maintained Margin (MM) and Maintained Markup Percent (MM%)

The difference between the cost of goods and Net Sales (see below).

MM$ = Net Sales - Cost of Goods Sold

Margin

See Gross Margin, Initial Markup or Maintained Markup.

n/a

n/a

Markdown

The difference between the original retail and the new retail is the markdown price. Divided the markdown by the original retail and then multiply by 100 to get the markdown percent.

MD$ = Original Retail – New Retail

Original Retail $24.00, New Retail $18.87

MD% = (MD$ / Original Retail) * 100

MD$ = $24.00 - $18.87 = $5.03

MD$, and

MM% = MM$ / Net Sales MM% = MU% -MD%Cost MD%Cost = MD%Rtl * CC% CC% = 1.00 -MU%

MD% Markup (MU)

MD% = ($5.03 / $18.87) * 100 = 26.7% See Initial Markup and Initial Markup Percent

n/a

n/a

Net Cost

Net Cost is the final cost of the merchandise after all discounts are applied.

n/a

n/a

Net Loss

A net loss happens when the gross margin is less the operating expenses.

n/a

n/a

Net Markdown

Net Markdown is the difference between the original retail price and net retail price.

n/a

n/a

Net Profit

There is a net profit when the gross margin is greater than the operating expenses.

n/a

n/a

Net Sales

Gross sales minus allowances and customer returns

Net Sales = Gross Sales – Allowances - Returns

Number of Weeks of Supply

Determines inventory needs

Weeks / Desired Turnover

LW

Last Week

n/a

n/a

On Hand (OH)

Inventory. Stock. This can be expressed in units or dollars.

OH = LW Stock - TW Net Sales + TW Shipments

n/a

On Order

On Order refers to orders that have not been receipted.

n/a

n/a

Open-to-buy (OTB)

Open-to-buy determines the amount money available to purchase goods for specific period of time in the future.

OTB = Planned Sales + Planned Markdowns + Planned EOM OH - Planned BOM OH

n/a

Opening Book Inventory

The retail or cost value of owned merchandise at the beginning of the fiscal period.

n/a

n/a

Opening Inventory

The retail value of owned merchandise at the beginning of a given period.

n/a

n/a

Operating Expenses

Direct and Indirect expenses associated with running an organization.

n/a

n/a

Operating Income

Retailers sometimes refer to their net sales as operating income.

n/a

n/a

Markup % (MU%)

Name

Description

Formula

Example

Out-the-Door (OTD)

Out-the-Door is an item's final retail price.

Ticketed price – discount = OTD

n/a

Order Fill Rate %

Percent of orders receipted vs. ordered

n/a

n/a

Physical Inventory

The retail dollar value of all goods physically present in a periodic stock count.

n/a

n/a

Planned Purchases

See Planned Receipts.

n/a

n/a

Planned Receipts

Merchandise the retailer plans to receive for given period of time.

n/a

n/a

POS

Point-of-sale

n/a

n/a

Profitability Measures

Formulas used to determine a company’s health. A healthy company is a profitable company. (e.g.

Initial Margin, Cost, Retail, Markdown%, Markdown $, Markdown %, POS Sales, Maintained Margin)

MU% = (Retail -Cost) / Retail Cost = Retail * (1.00 -MU%) Retail = Cost / (1.00 -MU%) MD% = MD$ / POS Sales MD$ = POS Sales * MD% POS = MD$ / MD% MM% = MU% -MD%Cost MD%Cost = MD%Rtl * CC% CC% = 1.00 -MU% MM% = MU% -(MD% * (1.00 -MU%)) MM% = MU% + (MD% * MU%) -MD% MU% = (MM% + MD%) / (1.00 + MD%) MD% = (MM% -MU%) / (MU% -1.00)

Reductions

Reductions are the sum of all markdowns, employee discounts, customer discounts, and shortages.

n/a

n/a

Retail

The price at which the retailer sell its merchandise.

n/a

n/a

Retail Reductions

The sum of markdowns, stock shortages and employee discounts.

n/a

n/a

ROI

Return on Investment. This is the annual gross profit divided by the average inventory at cost.

Increase Maintained Margin, Turns or both to improve ROI.

R.O.I.I. = Ann GP$ / Avg. Cost Inv

The amount sold vs. the inventory.

ST = Sales / (Sales + On Hand)

ST = 5 / (5 + 100) = 0.04761904762

ST% = ST * 100

ST% = 0.04761904762 * 100 = 4.8%

Sell Thru (ST), and ST%

R.O.I.I. = (MM% / CC%) * Turns

Shortage

The difference between what’s recorded and what’s physically counted. (e.g. shrinkage can cause a shortage)

n/a

n/a

Shrinkage

Damaged or pilfered merchandise is shrinkage.

n/a

n/a

Sls

Sales

n/a

n/a

Stock-Sales Ratio

BOM Stock divided by Sales for the same month.

Stock to Sales = BOM Stock / Sales for the Month

Store Weeks on Hand

The average number of weeks the store will last

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n/a

STD

Season-to-Date

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n/a

Total Cost of Goods Sold

See Cost of Goods Sold

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n/a

Transfers

See Merchandise Transfers

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n/a

Name

Description

Formula

Example

Turnover, or Turn

Net Sales divided by Average Inventory. This can be expressed in both dollars and units.

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TW

This Week

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U

Unit or Units

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Volume Measures

Formulas used to determine a company’s size and growth rate. (e.g. Sales Increase %, LY Sales, TY Sales, Average Price, POS Sales, POS Qty)

Sls Inc% = (TY Sls -LY Sls) / LY Sls LY Sls = TY Sls / (Sls Inc % + 1.00) TY Sls = LY Sls * (Sls Inc % + 1.00) Avg. Px = POS Sales / POS Qty Sls = POS Qty * Avg. Px Qty = POS Sales / Avg. Px n/a

Weeks On Hand (W.O.H.)

This determines how many weeks of inventory that remain based on current selling trends.

W.O.H. =

current inventory / avg. sls (for desired period)

WTD

Week-to-Date

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YTD

Year-to-Date

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