Page 149 - DMGT554_RETAIL_BUYING

Retail Buying

Notes Table 10.3: Line 1

1. Sales % Distribution 100.00% 21.00% 12.00% 12.00% 19.00% 21.00% 15.00%
to Season

The starting point for determining the percent distribution of sales by month is historical
records. The percentage of total sales that occurs in a particular month doesn’t vary appreciably
from year to year. Even so, its helpful to examine each months percentage over a few years to
check for any significant changes. For instance, the buyer realizes that the autumn selling season
for mens tailored suits continued to be pushed further back into summer. Over time, this general
shift toward earlier purchasing will affect the percent distribution of sales by month. The
distribution may also vary due to changes made by the buyer or the competitors marketing
strategies. The buyer must include special sales that did not occur in the past, for instance, in the
percent distribution of sales by month in the same way that they’re built into the overall sales
forecast.
10.3.2 Monthly Sales (Line 2)

Monthly sales equal the forecast total sales for the six-month period (first column = $130,000)
multiplied by each sales percentage by month (line 1). In table given below, monthly sales for
April = $130,000  21% = $27,300.

Table 10.4: Line 2

2. Monthly Sales $130,000 $27,300 $15,600 $15,600 $27,700 $27,300 $19,500

10.3.3 Monthly Reductions Percent Distribution to Season (Line 3)

To have enough merchandise every month to support the monthly sales forecast, the buyer
must consider factors that reduce the inventory level. Although sales are the primary reduction,
the value of the inventory is also reduced by markdowns, shrinkage, and discounts to employees.
The merchandise budget planning process builds in these additional reductions into the planned
purchases. Otherwise, the retailer would always be understocked. Note that in Table 10.5, 40
percent of the seasons total reductions occur in April as a result of end-of-season sales.

Table 10.5: Line 3

3. Reduce % Distribution 100.00% 40.00% 14.00% 16.00% 12.00% 10.00% 8.00%
to Season

Markdowns can be forecast fairly accurately from historical records. Of course, changes in
markdown strategies – or changes in the environment, such as competition or general economic
activity – must be taken into consideration when forecasting markdowns.
Discounts to employees are like markdowns, except that they’re given to employees rather than
to customers. Cost of the employee discount is tied fairly closely to the sales level and number
of employees. Thus, its percentage of sales and dollar amount can be forecast fairly accurately
from historical records.

Shrinkage is an inventory reduction that is caused by shoplifting by employees or customers, by
merchandise being misplaced or damaged, or by poor bookkeeping. The buyer measures

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