Selling at the price Flashcards
The most basic formula in retail is:
Selling price = cost + mark-up
The manager is not always involved in determining the selling price, but has to know:
The manager has to know the sales per square meter in his or her department or store. Space
costs money and it needs to be utilised optimally
Sales per square meter
Space costs money, that’s why retailers need to utilise the space optimally.
Space includes:
Rent
Electricity
Insurance
Cleaning
Explain what every square meter is paying for itself means:
Certain areas should not have to pay for areas where the merchandise is not selling.
What does the total selling area include?
Only includes the area retailer use to sell merchandise.
How do you calculate the sales per square meter?
Sales per square meter = Net annual sales/total selling area in square meters
Mark-downs
It can happen that a retailer buys too much merchandise. Mark-downs can then be used
to sell excessive merchandise. The mark-downs must be used effectively to be profitable.
The merchandise can then be sold at a clearance sale, consolidated within a group, sold at outlet stores or can be carried over to the next season.
What happens if a retailer marks down to often?
A retailer should guard against building up a reputation of eventually marking down
all stock. If a retailer marks down merchandise often, customers will wait for the
mark-downs and not buy the full- price stock.
Definition of a Mark down
A mark down is the downward adjustment in the original selling price of an item of merchandise.
Why do retailers use markdowns?
All retailers make mistakes.
A retailer might choose the wrong product, , colour, size or have too many products.
The retailer can balance the risk by mark downs.
Markdowns can be effective of beneficial for business when:
Reacting t o the actions of the competitor who have slashed prices.
A special promotion where the items can be used as loss leaders.
Damaged Goods
Display items that have become redundant
Where original price was set too high
Define Discounts
Discounts are reductions in the original retail price of the merchandise.
The may be in the form of fringe benefits for employees or special allowance to selected groups of people.
Inventory Reductions
Can be in the form of allowances, regular mark downs, promotional markdowns, employee discounts and shrinkages.
Allowances Definition
Allowances are reductions you make to ensure the sale.
