20 The measures that matter and how to manage with them Flashcards
What is the primary focus of retail sales reports?
Sales figures broken down by geography, type of store, and comparisons to previous years
Retail executives expect daily updates on sales performance.
What percentage increase did Mums’ Stores experience in sales compared to the prior year?
12%
Mums’ Stores reported current year sales of $4,575,682.
What was the sales growth percentage for Dads’ Stores compared to the prior year?
20%
Dads’ Stores reported current year sales of $1,205,128.
How did the average store size of Mums’ Stores change by the end of the current year?
Fell to 96% of the previous year
Mums’ Stores operates a larger store format but opened smaller stores.
What is the growth rate of sales per store for Dads’ Stores?
7%
This exceeds the gain in average store size of 3%.
What is the term for sales of stores that have been opened for one year or more?
Same store sales or comparable store sales
Often referred to as ‘Comps’ sales.
What was the same store sales growth for Dads’ Stores?
17%
This indicates strong performance in established stores.
What does store density measure?
Stores per thousand population
Helps determine opportunities for opening more stores.
What is a typical retail season that drives promotional calendars?
Christmas/Holidays, Back to School, Vacations
Retailers use seasons to motivate customers and increase expenditure.
What is the difference between gross margin and mark-up?
Gross margin is the profit percentage after costs; mark-up is the percentage added to the cost price
Example: A product bought at $80 and sold at $160 has a 50% gross margin but a 100% mark-up.
What is the achieved margin?
The actual margin realized when a product is sold
It may differ from the buying margin based on various factors.
What can impact a retailer’s achieved margin?
- Competitor pricing
- Product popularity
- Demand and supply changes
- Markdowns for clearance
These factors can lead to a difference between expected and actual margins.
What is the purpose of tracking margins in retail?
To control pricing and manage profitability
Retailers aim to maintain or improve margins through strategic and tactical decisions.
What is a significant factor influencing gross margins in retail?
Key strategic decisions about the retailer’s core proposition
Tactical decisions made daily also affect margins.
What strategy might larger retailers use to enhance their margins?
Command exclusive models or brands from suppliers
This prevents price-matching across retailers.
What happens to margins when a retailer reduces the street price?
Margins typically decrease
A 1% price reduction can significantly impact gross margin.
How do retailers manage their net margins?
By controlling fixed costs and optimizing business volume
Investment commitments take time to change and require careful management.
What are the profitability levers for retailers?
Net margin
Retailers seek to manage various cost elements to improve profitability.
What is the purpose of piloting refurbishments in retail?
To reduce the risk of making expensive mistakes
Larger retailers pilot changes in different market areas before full implementation.
Define direct product cost (DPC).
Costs associated with product characteristics affecting profitability
Factors include size, weight, fragility, stock turn rate, and risk of shrinkage.
What does direct product profitability (DPP) measure?
The profitability of a product after accounting for direct product costs
DPP is calculated by deducting net direct product costs from gross profit.
How do physical characteristics of products affect DPP?
They can lead to different contributions to net profit despite similar gross margins
Examples include digital cameras versus personal computers.
What is the relationship between gross margin and DPP in product displays?
Retailers may display more products with better DPP than those with higher gross margins
This is evident in the greater number of laptops displayed compared to PCs.
What factors may influence vendor-loading in DPP?
Advertising, supply chain performance, credit days, and promotional allowances
Major brands may receive higher DPP due to greater visibility and traffic generation.
