Page 84 - DMGT553_RETAIL_STORE_MANAGEMENT

Unit 5: Retail Arithmetic

Once you reach a certain volume, however, you may be able to bring in your own private label Notes
products at considerably lower cost. In addition to saving money, here are some reasons to look
into importing:
1. No middle man. If you are dealing with an importer directly or eventually importing your
own products, you have eliminated the wholesaler or distributor from whom you were
buying the goods. Thus, you have added their margin to your own.
2. Control. Once you establish a personal relationship with the overseas manufacturer, you
may better control the quality, quantity, and timeliness of the merchandise you are buying.
3. Exclusivity. By importing a product featuring your name (and, possibly, your
specifications), you can display an item that no competitor carries. That means you can sell
it for whatever the market will bear without having to worry too much about what your
competitors are doing.

4. Competitive Retail. You can bring in a high quality, private label item to compete
effectively with a higher-priced, branded product carried by your competitors. In this
way, you may be able to enhance your low price reputation while still maintaining a
comfortable margin.

Cash Discounts

Vendors are generally forced to extend credit. However, because cash is king to them, they often
encourage you to pay before the due date by offering you a cash discount for early payment or
a payment in advance of a specific date. Among the more common cash discounts are:
1. 3/10 EOM. A discount of 3% if the invoice is paid within ten days from the end of the
month.
2. 2/10 Net 30. A discount of 2% if the invoice is paid within ten days from the date it is
issued. Ten is the number of days the rate is available.
Thirty is the number of days within which the invoice must be paid.
3. 3/10 ROG: A discount of 3% if the invoice is paid within ten days of receipt of goods.

Delivery Terms

Delivery terms indicate when and where the title of the merchandise passes from the seller to
the buyer. That is the time and place at which your risk of ownership begins. From that time and
place, you own the goods and you pay for insurance and transportation. Therefore, you can save
money by delaying the point at which you actually take possession of the merchandise.
Two common delivery terms are:
1. FOB Factory. Your store owns the goods as soon as the carrier picks the shipment up at the
factory. That means you pay the freight from there.
2. FOB Warehouse or Store. In this case, because the seller owns the goods until they arrive
at your location, the seller pays freight, insurance, etc.

Dating

Dating extends the time by which you have to pay for merchandise. As the saying goes, “Time
is money.” Dating is valuable for two reasons. The first reason is the interest you save on the
money that you keep under your control for longer. This value depends on the prevailing rate

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