Page 85 - DMGT553_RETAIL_STORE_MANAGEMENT

Retail Store Management

Notes at which you can borrow money. For instance, if interest rates are 12% per annum (as they were
some years ago), then adding an additional month before you have to pay is worth 1% of the
money you owe. If interest rates are 6%, that translates into a half percent gain each month.
Always ask for additional dating.
The second reason, and often the more determinant one, is that you are likely to find that, like
most retailers, you are chronically short of cash. This is not necessarily unhealthy (although it is
uncomfortable) because there is a good reason for it.
If your business is growing (as you hope and intend that it will), you will need more inventory.
Even if your turn is a very impressive six times a year, in the short run you are still putting out
more cash than you are collecting—six times a year turn means you have to buy two months of
extra inventory to service your growth. Typically, you have to pay for the extra inventory in one
month. Of course, you’ll get your money back in time, plus the profit on the extra volume, but
you’ll be strapped until then. Dating helps overcome this problem. Fortunately, it also helps
your supplier because you can buy, display, and sell more of his merchandise.
Dating is always helpful, but there are occasion when you have a particularly strong argument
to ask for it. Two such occasions are:
1. Opening a new store. The goods will be sitting in a store with no chance of selling or
turning until the store opens, usually for thirty days.

2. Shipping to a warehouse instead of a store. The store loses the turnaround time it takes to
get goods out of the warehouse. Goods could sit in a warehouse for thirty days or more
before moving to the store.

Notes Markdowns: As the name implies, to mark something down means to reduce the
original retail price. Markdowns are taken for three rather different sets of reasons:
1. To speed the sale of slow moving products; to clear your inventory of odd sizes,
colours, and styles, and to encourage the sale of soiled or damaged goods
2. To maintain price competition with other stores
3. To create the excitement of a special sale (the “happiest” of the three reasons because,
while you’ll still lower your margins, you’ll boost your sales)

Other Retail Practices used to Change Prices

Since the price you charge your customers will always affect your bottom line, you can never
overestimate or underestimate the importance of price. Here are some other retail practices
sometimes used to change prices:
Additional Mark-Up. As the name implies, this practice changes the price upward. It is
mostly used in one of the following occasions:

A special sale is run at a marked down price, then the price is marked up to its
previous level after the sale.

A vendor increases the price on the next shipment of a certain item. Because the
competition will be forced to increase their prices, those items already in your store
are marked up.
Mark Up Cancellation. When you introduce a new item into your store, you may initially
mark it up in order to establish a high price. Then, once that value is established, you may
cancel the additional mark up and reduce the merchandise for a special sale. To some

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