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 merchandise?
• 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
• For
• For
• For
• For
Paying Cash
Paying Early
Buying in Volume
Buying Regularly
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/ 1/01
2.) 5/10 Net 30 EOM 5/30/01
3.) 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
AND 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$)
• Markup %
(M%)
• The Formulas
PROBLEM: You’ve Got Apples & Oranges
Set - Up
RP$ =
RP% = 100%
C$ =
C% =
M$ =
M% =
EXAMPLE
What can you Calculate?
RP$ =
RP% = 100%
C$ = $6.00
C% =
M$ =
M% = 40%
EXAMPLE
RP$ =
RP% = 100%
C$ = $6.00
C% = 60%
M$ =
M% = 40%
EXAMPLE
RP$ =
C$ / C%
X = $6.00 / 60%
EXAMPLE
RP$ = $10.00
RP% = 100%
RP$ = $6.00 / 60%
C$ = $6.00
C% = 60%
M$ =
M% = 40%
EXAMPLE
RP$ = $10.00
RP% = 100%
M$ = RP$ - C$
C$ = $6.00
C% = 60%
M$ =
M% = 40%
EXAMPLE
RP$ = $10.00
RP% = 100%
M$ = RP$ - C$
C$ = $6.00
C% = 60%
M$ = $4.00
M% = 40%
DO SAMPLE PROBLEMS
#S 7, 9, 10
OBJECTIVE
Be Able to Calculate
Markdowns
MARKDOWNS
MD$ = RP$ x MD%
MD$ = $10.00 x 40%
MD$ = $4.00
New RP$ = 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 $50,000
income.
– How much merchandise must
he/she sell this year? Per month?
– What must be the store’s markup
policy?
Set - Up: What Do You Know?
RP$ =
Cost of Goods:
$200,000
Overhead:
$125,000
Desired Profit:
$50,000
RP% = 100%
C$ = $200,000
C% =
M$ =
M% =
Set - Up: What Do You Know?
RP$ =
Cost of Goods:
$200,000
Overhead:
$125,000
Desired Profit:
RP% = 100%
C$
= $200,000
C% =
M$ = $125,000 +
$50,000
$50,000
M% =
Set - Up: What Do You Know?
Cost of Goods:
$200,000
Overhead:
$125,000
Desired Profit:
$50,000
RP$ =
RP% = 100%
C$
= $200,000
C% =
M$ = $175,000
M% =
What is the Business’ Sales Goal?
Cost of Goods:
$200,000
Overhead:
$125,000
Desired Profit:
$50,000
RP$ =
RP% = 100%
C$
= $200,000
C% =
M$ = $175,000
M% =
What is the Business’ Sales
Goal for the Year?
Cost of Goods:
$200,000
Overhead:
$125,000
Desired Profit:
$50,000
RP$ = $375,000
RP% = 100%
C$
= $200,000
C% =
M$ = $175,000
M% =
What is the Business’ Sales
Goal for the Month?
Cost of Goods:
$200,000
Overhead:
$125,000
Desired Profit:
$50,000
RP$ = $375,000
RP% = 100%
C$
= $200,000
C% =
M$ = $175,000
M% =
What is the Business’ Sales
Goal for the Month?
RP$ = $375,000
RP% = 100%
$375,000 / 12 =
$31,250
C$
= $200,000
C% =
M$ = $175,000
M% =
What is the Business’
Markup Policy?
Cost of Goods:
$200,000
Overhead:
$125,000
Desired Profit:
$50,000
RP$ = $375,000
RP% = 100%
C$
= $200,000
C% =
M$ = $175,000
M% =
OBJECTIVE
M% = M$ / RP$
M% =
$175,000 /
$375,000
M% = 46.67%
What is the Business’
Markup Policy?
Cost of Goods:
$200,000
Overhead:
$125,000
Desired Profit:
$50,000
RP$ = $375,000
RP% = 100%
C$
= $200,000
C% =
M$ = $175,000
M% = 46.67%
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 amount
of 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 stocking 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
• Basic Stock
• Dollar Control 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
Total
Square
__Net
Profit__
Foot of =
Square Ft. of
Selling
Selling Space
Space
Profit Calculation Formula
SAMPLE PROBLEMS