MERCHANDISING

NOUN OR VERB?

MERCHANDISNG

Introduction:How Does Merchandise

Get In Your Store?What Questions Should I

Ask Myself When Ordering?

OBJECTIVE

•Be able to define merchandising

MERCHANDISING

•Merchandising is being able to:

– get the right merchandise (color, size, style,quality,etc.)– at the right time– at the right price– at the right place– in the right amount

MERCHANDISNG•Where does it

come from?•Who ordered

the merch-andise?

•Does it sell?• Is it good

quality stuff?

MERCHANDISNG•How many

should we stock?

•What sizes should we have?

•What does the competition have?

MERCHANDISNG•Is it a fad or

a trend?•What kind of

price are people willing to pay?

•Etc. etc. etc.

THE JEANS ACTIVITY• With two partners,

spend $10,000 to stock a jean store. – Have 5 brands– Cost is $20 each– Identify sizes to be

carried– Identify the # of

jeans to be stocked in each size

THE JEANS ACTIVITY

• With a partner, spend $10,000 on stocking a jean store. (Cont.)– Calculate the total

dollars spent per style/brand

– Present your plan to the class & turn in to me

OBJECTIVE

•Be able to outline the buying process used by most marketing businesses

The Buying Process (OVERVIEW)

•Prepare a merchandise plan (Monthly plan of buys for year)

•Choose the assortment (color, type, size, variety, etc.)

•Find the best supplier (quality vs. price)

• Negotiate the order

OBJECTIVE

•Be able to describe the factors that effect a business’ merchandise assortment

Merchandise Assortment Considerations

• Image• Brand Policy• Pricing

Policy• Merch. Plan• Customers• “Experts”

How do Buyers Know What to Buy?

•Marketing Research

•Customer Contact

•Want Slips

OBJECTIVE

•Be able to define & complete a purchase order

Purchase Orders

•A business form used to tell a vendor that you want to buy merchandise

Purchase Orders•P.O. TERMS:

–To–Date–Shipping Date–Via–FOB

•(Shipping Point vs. Destination)

–Terms

Purchase Orders•P.O. TERMS:

–Order #–Items #–Description–Quantity–Unit Cost–Total Cost–Total Order

OBJECTIVE

•Be able to calculate Purchase order terms

Why do vendors offer terms?

•For Paying Cash•For Paying Early•For Buying in Volume•For Buying Regularly•For Buying Out of Season

Sample Terms

2/10 NET 30–The 2 is the amount of discount available

–The 10 is the number of days available to get the discount

–The 30 is the total number of days available to pay the bill

Sample Terms

2/10 NET 30–EOM–ROG–Advance Dating

Sample Problems

Assume a $1,000 purchase dated on 4/1/01 w/ the following terms Due Date

Discount = ________1.) 5/10 Net 30 _____2.) 5/10 Net 30 EOM _____3.) 5/10 Net 30 6/1/01 _____

Sample Problems

Assume a $1,000 purchase dated on 4/1/01 w/ the following terms Due Date

Discount = ________1.) 5/10 Net 30 5/ 1/012.) 5/10 Net 30 EOM 5/30/013.) 5/10 Net 30 6/1/01 6/30/01

ACTIVITY

OBJECTIVE

•Be able to complete an invoice

INVOICE TERMS•Pieces•Weight•Invoice #•Backordered

(B/O)•Unit Cost•Shipping Cost•Tax

ACTIVITY

OBJECTIVE

•Be able to define & complete the following forms:–Bill of Lading–Waybill–Freight Bill–Delivery Receipt–Packing Slip

Physical Distribution Forms

•Bill of Lading–Also called a shipping order. –Used to request that a transport company come pick up & deliver merchandise.

–Serves as a contract–Consignor vs. Consignee

Physical Distribution Forms

•Waybill–Used to keep track of merchandise as it moves through the “Channel of Distribution” (ex. Fed Ex Ad)

Physical Distribution Forms

•Freight Bill–An invoice (bill) for the shipping charge

–Tells who should be paying for the shipping charge

Physical Distribution Forms

•Delivery Receipt

–Form used to verify that merchandise has arrived

–Signed by the buyer

Physical Distribution Forms

•Packing Slip–Used to compare merchandise delivered w/ what was supposed to be in the carton

–Condition, number of items, correctness of order

ACTIVITY

.MERCHANDISNG

Retail Pricing

OBJECTIVE

•Be able to Define “Retail Pricing”

–Assigning a Dollar Value to Goods & Services

The Importance of Proper Pricing

•Attracts Customers•Determines Sales•Determines Profit•Keeps Up With the

Competition

OBJECTIVE

•Be able to Define the Terms Associated with Retail Pricing:

Retail Price: The amount that customers pay for a product or service

OBJECTIVE

•Be able to Define the Terms Associated with Retail Pricing:

Cost: The amount that a business pays to

purchase products to resell

OBJECTIVE

•Be able to Define the Terms Associated with Retail Pricing:

Markup: The additional amount that a

business adds to cost to cover its expenses ANDAND make a profit

OBJECTIVE

•Be able to Define the Terms Associated with Retail Pricing:

Markdown: A Reduction in

the amount of Retail Price

FORMULA

RP$ = C$ + M$

FORMULA

RP% = C% + M%

FORMULA (Variations)

C$ = RP$ - M$

M$ = RP$ - C$

C% = RP% - M%

M% = RP% - C%

ILLUSTRATION

But What do Business People Generally Know?

• Retail Price = 100 %

• Cost of Goods (C$)• Markup % (M%)• The Formulas

PROBLEM: You’ve Got Apples & Oranges

Set - UpRP$ =

RP% = 100%

C$ =

C% =

M$ =

M% =

EXAMPLEWhat can you

Calculate?RP$ =

RP% = 100%

C$ = $6.00$6.00

C% =

M$ =

M% = 40%40%

EXAMPLE

RP$ =

RP% = 100%

C$ = $6.00

C% = 60%60%

M$ =

M% = 40%

EXAMPLE

RP$ = C$ / C%

X = $6.00 / 60%

EXAMPLE

RP$ = $10.00$10.00

RP% = 100%

C$ = $6.00

C% = 60%

M$ =

M% = 40%

RP$ = $6.00 / 60%

EXAMPLE

RP$ = $10.00$10.00

RP% = 100%

C$ = $6.00

C% = 60%

M$ =

M% = 40%

M$ = RP$ - C$

EXAMPLE

RP$ = $10.00$10.00

RP% = 100%

C$ = $6.00

C% = 60%

M$ = $4.00

M% = 40%

M$ = RP$ - C$

DO SAMPLE PROBLEMS #S 7, 9, 10

OBJECTIVE

Be Able to Calculate Markdowns

MARKDOWNS

MD$ = RP$ x MD%MD$ = $10.00 x 40%

MD$ = $4.00New RP$ = Old RP$ - MD$

RP$ = $6.00

DO SAMPLE PROBLEM # 12

OBJECTIVE

•Be Able to Calculate a Store’s Markup Policy

Markup Policy

Consider a store that has business expenses of $125,000 (Heat, Electric, Salaries, etc.) and spends $200,000 on merchandise. The owner wants to take home a modest $50,000 income. – How much merchandise must

he/she sell this year? Per month?

– What must be the store’s markup policy?

Set - Up: What Do You Know?

RP$ =

RP% = 100%

C$ = $200,000

C% =

M$ =

M% =

Cost of Goods:

$200,000

Overhead:

$125,000

Desired Profit:

$50,000

Set - Up: What Do You Know?

RP$ =

RP% = 100%

C$ = $200,000

C% =

M$ = $125,000 +

$50,000

M% =

Cost of Goods:

$200,000

Overhead:

$125,000

Desired Profit:

$50,000

Cost of Goods:

$200,000

Overhead:

$125,000

Desired Profit:

$50,000

Set - Up: What Do You Know?

RP$ =

RP% = 100%

C$ = $200,000

C% =

M$ = $175,000

M% =

Cost of Goods:

$200,000

Overhead:

$125,000

Desired Profit:

$50,000

What is the Business’ Sales Goal?

RP$ =

RP% = 100%

C$ = $200,000

C% =

M$ = $175,000

M% =

Cost of Goods:

$200,000

Overhead:

$125,000

Desired Profit:

$50,000

What is the Business’ Sales Goal for the Year?

RP$ = $375,000

RP% = 100%

C$ = $200,000

C% =

M$ = $175,000

M% =

Cost of Goods:

$200,000

Overhead:

$125,000

Desired Profit:

$50,000

What is the Business’ Sales Goal for the Month?

RP$ = $375,000

RP% = 100%

C$ = $200,000

C% =

M$ = $175,000

M% =

Cost of Goods:

$200,000

Overhead:

$125,000

Desired Profit:

$50,000

What is the Business’ Sales Goal for the Month?

RP$ = $375,000

RP% = 100%

C$ = $200,000

C% =

M$ = $175,000

M% =

$375,000 / 12 =

$31,250

What is the Business’ Markup Policy?

RP$ = $375,000

RP% = 100%

C$ = $200,000

C% =

M$ = $175,000

M% =

Cost of Goods:

$200,000

Overhead:

$125,000

Desired Profit:

$50,000

OBJECTIVE

M% = M$ / RP$

M% = $175,000 /$375,000

M% = 46.67%

What is the Business’ Markup Policy?

RP$ = $375,000

RP% = 100%

C$ = $200,000

C% =

M$ = $175,000

M% = 46.67%

Cost of Goods:

$200,000

Overhead:

$125,000

Desired Profit:

$50,000

MARKUP POLICY

EVERY ITEM BOUGHT FOR THE STORE MUST BE

MARKED UP 46.67% IF THE STORE IS TO PAY FOR ITS

MERCHANDISE, ALL OF ITS EXPENSES, & MAKE THE

DESIRED PROFIT!!!

.MERCHANDISNG

Stock Turnover

OBJECTIVE

Be able to define stock turnover

and its importance

Stock Turnover

The number of times the average inventory of a

product is sold and reordered in a given

period of time

The Importance of Stock Turnover

Stock Turnover is the most often quoted

business ratio

&

is an indication of a business’ profitability.

The Importance of Stock Turnover

• The Retail Price of each product sold represents the company’s cost of goods, total expenses, & desired net profit.

The Importance of Stock Turnover

• If you multiply the number of items sold by the $ value of profit it represents, you can calculate how much profit a company has earned

The Importance of Stock Turnover

• Therefore, the faster you sell your product, the more profit your company can make. Plus, every additional product sold results in more profit for the business

The Importance of Stock Turnover

• Obviously, however, if you are selling out your merchandise to fast, the expense of ordering & shipping merchandise will eat into your net profit, so you can’t order to little merchandise

The Importance of Stock Turnover

• Calculating a business’ stock turnover ratio, therefore, is an art as well as a science

Stock Turnover (ST) Ratio

S T = Sales / Average

Inventory

Stock Turnover (ST) Ratio

Sales:The total amountof merchandise sold during a specific period of

time

Stock Turnover (ST) Ratio

Average Inventory:

The approximate amount of merchandise in the store at any given point in time

Average Inventory

Average Inventory =

BOM Inv. + Inv.2 + Inv.3 + Inv. 4 + . . .

Divided By

# of Inventories Taken

Stock Turnover (ST) Ratio “Story Time”

A small business has sales of $400,000 in a year. They took inventory 12 times. The average inventory was $50,000. What was their stock turnover ration?

Stock Turnover (ST) Ratio

S T = Sales / Average Inventory

X = $400K / $50K

X = __?__

Stock Turnover (ST) Ratio

S T = Sales / Average Inventory

X = $400K / $50K

X = __8__

Stock Turnover (ST) Ratio “Story Time”

A small business has sales of $400,000 in a year. They want a stock turnover of 10 because a 10 ST ratio will make them the profit they want and need. What should their average inventory be?

Stock Turnover (ST) Ratio

S T = Sales / Average Inventory

10 = $400K /__?__

X = __?__

Stock Turnover (ST) Ratio

S T = Sales / Average Inventory

10 = $400K /__?__

X = __$40,000__

The Importance of Stock Turnover

Stock Turnover is an important indication of

a business’ profitability.

OBJECTIVE

Be able to describe methods to increase a

product’s stock turnover ratio

The Importance of Stock Turnover

Increasing Stock Turnover:

•Increases profits

•Uses your capital efficiently

•Decreases your expenses

•Results in fewer markdowns

Increasing Stock Turnover

•Better Buying: Get merchandise that people want

•Better Pricing: Charge what people are willing to spend

Increasing Stock Turnover

•Better Stock Control: Get rid of the “slackers”

•Proper Stock Care: Make it look good

Increasing Stock Turnover

•Better Promotion: Sell the product better

Sample Quiz

Complete the sample quiz on pricing, markup goals, and stock turnover

OBJECTIVE

Be able to define terms and describe

procedures for the proper stocking of

merchandise

Stocking Terms

• Face• Salvage• Floats• Rotation• Code Dated• Mass Stacking• Signage

• Broken Down• Blocking• Back Stock• End-cap• Vertical vs

Horizontal• “Damaged”

Stocking Terms

• Face - Bringing merchandise forward

• Salvage - Material used in stock- ing that can be used again

• Floats - Carts used to haul merchadise around the store

Stocking Terms

• Rotation - “F I F O” Bringing old merchandise to the front

• Code Dated - Expiration dates• Mass Stacking - Using one

product to form large display

• Signage - Informational signs

Stocking Terms

•Broken Down - to collapse boxes for ease of storage

•Blocking - Creating space on a

shelf for products•Back Stock - Merchandise that

doesn’t fit on a shelf and must go back to storage

Stocking Terms

•End-cap - A display built at the end of an aisle

•Vertical vs. Horizontal - How products are placed on shelves

•“Damaged” - Merchandise that can be fixed and sold

Stocking Procedures

•Customer Service

•Safety•Efficiency•Appearance•Increased

Sales

Stocking Procedures

•Customer Service:–Customers come first. Help whenever possible

–Wear your uniform–Take customers to product vs. pointing in general direction

Stocking Procedures

• Safety:–Keep aisles clear–Don’t overstock shelves or floats–Be able to see when pushing floats

–Remove out of date merchandise

–Lift properly!!!!

Stocking Procedures

• Efficiency:–Stock using two hands–Use teamwork–Use your product knowledge!!!–Properly stocked merchandise uses less space allowing more profitable products to be stocked and sold

Stocking Procedures

• Appearance:–Shelves should always look full and orderly

–Keep shelves neat & clean–Repair damaged fixtures and products

–Keep yourself looking neat & clean

Stocking Procedures

• Increased Sales:–Signage is critical. It is the salesperson!!!

–Rotate products on the endcaps–Place your most profitable merchandise at eye level

–Being neat, clean, & orderly helps to sell also!!!

On the Job safety

Film:“Stocker Interactive

Program”

OBJECTIVE

Be able to define terms and describe

procedures for the proper inventory of

merchandise

Inventory Control Terms

•Unit Control•Dollar Control

•Basic Stock List•Model Stock

Plan

Inventory Control Systems

•Book Inventory

(Perpetual)

•Physical Inventory

Inventory Control

•Book Inventory–A paper record–Subtract Sales–Add purchases–Doesn’t allow for Shrinkage–Information is collected by POS systems or paper records

Inventory Control

•Physical Inventory–Simply counting the products–Tedious & costly–Accurate

OBJECTIVE

Be able to calculate the amount of profit earned

per square foot of selling space allocated

Profit Calculation Terms

•Gross Profit•Net Profit

– Item–Stock Turn–Month–Year–Per Sq. Foot

•Floor Plan•Square Feet of

Selling Space

Profit Calculation Terms

• Store Owners are faced w/ a limited amount of space

• He/She wants as much profit as possible (Mgrs. Job may depend on it!) from that space

• Products take up space!!!

Profit Calculation Terms

• Products that make profit stay

• Products that do not make profit leave

• Most profitable products get the best space

Profit Calculation Formula

Profit Per Square Foot of = Selling Space

Total __Net Profit__ Square Ft. of Selling Space

Profit Calculation Formula

SAMPLE PROBLEMS