Page 94 - DMGT553_RETAIL_STORE_MANAGEMENT

Unit 5: Retail Arithmetic

If you are dealing with an importer directly or eventually importing your own products, Notes
you have eliminated the wholesaler or distributor from whom you were buying the
goods.
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.

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.

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.

5.5 Keywords

Cost of Goods: Cost of Goods (COG) is what you pay the vendor for products.
Initial Margin: Initial Margin is the difference between retail and cost (Retail – Cost = IM$),
expressed as a percentage of retail.

Retailers: Retailers are part of an integrated system called the supply chain.
Retail Industry: The retail industry is at the centre of a dramatic shift in the way consumers shop
and interact with retailers.

Retail Selling Price: Retail Selling Price of Merchandise is what your customers pay the store for
these goods.
Secure store: A secure store is a store that is experiencing less shrinkage than its competitors.

Stock to sales ratio: It is the amount of merchandise in the store at the beginning of a given
month divided by the amount of sales of merchandise for the month.
Turnover of inventory, or turn: Turnover of inventory, or turn, is the calculation of how many
times you sell and replenish the merchandise in your store over the course of a year.

5.6 Review Questions

1. Define the term retail arithmetic.
2. Why retail arithmetic is needed?

3. What is the significance of retail arithmetic?
4. Define COGs.
5. What is retail selling price?

6. How will you calculate initial margin?
7. What is meant by turnover of inventory?
8. What is Stock to sales ratio?
9. What is secure store?
10. What are the characteristics of secure store?

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