Retail Operations Exam 3 - Langston 2020

The women's department had planned sales of $41,400 and actual sales were $36,960, what was the % of decrease?

% Decrease: 12%

If spring break sales were $65,550 and last year sales were $57,000, what is the % increase?

% Increase: 15%

Why does a retailer take markdowns?

-Move older products -Clear inventory for a move to a new location or a remodel -Drive traffic

Why would you add an additional markup to your merchandise?

-Trendy or fad items -Items with demand -Holiday season item

One of the most difficult aspects of financial management is?

Forecasting Sales Volumes and Profits

What is an advantage of selling a private label brand over a national brand?

Higher profit margin

Operations managers deal with:

Involves implementation of store policies, tactics, and procedures

What does LY and TY stand for?

Last Year Sales and This Year Planned

The buyer is marking down slow selling suits from $249 to $198.99, calculate the markdown dollars. What is the % markdown?

Markdown $: $50.01 Markdown %: 20%

It is time to clear out all sale merchandise and the buyer is doing a 25% off promotion on anything priced at $110. Calculate the markdown dollars. What is the new selling price?

Markdown Dollars: $27.50 New Selling Price: $82.50

Pricing flexibility is defined as

Maximum price: Competition and customer demand. Minimum price: The retailers variable and fixed costs.

What does PVM stand for?

Percentage Variation Method - stable inventory turnover or with annual inventory turns greater than 6 times.

Due to the coronavirus, last year's sales of $3,000 are planned for a 25% decrease. What are planned sales?

Planned Sales (decrease): $2,250

If last year's sales were $150,000 and you are planning an increase of 15%, what are the planned sales for this year?

Planned Sales (increase): $172,500

Why would you use promotional pricing?

Pricing becomes integrated with IMC and tied to promotions (leader pricing, specials events)

What are the three objectives for developing a financial plan?

Profitability - To generate profits for the retailer Liquidity - To manage cash (satisfy obligations) Manage Growth - growth should not outpace the company's ability to obtain the cash necessary to maintain current operations

A new purse costs the retailer $30.00. If the retailer wants to generate a keystone markup, at what retail price should the retailer set the purse?

Retail Price: $60.00

If the women's buyer purchases jeans at a cost of $42 and has a markup of $45, what will be the price for each pair of jeans?

Retail Price: $87.00

How is markup defined?

Retail price (R) - Cost (C)

What is VMI?

Vendor Managed Inventory - is a business model where the buyer of a product provides information to a vendor of that product and the vendor takes full responsibility for maintaining an agreed inventory of the material, usually at the buyer's consumption location.

Define price inelasticity.

When the retailer increases price, a relative increase in total revenue occurs. Conversely, when the retailer decreases price, a relative decrease in total revenue results

Define the importance of inventory turnover?

a measure of how many times a store sells its average investment in inventory during a year The faster the merchandise turns over - the more money is generated, but it can also indicate a shortage or inadequate inventory levels

If the price is said to be elastic, it means......

a measure of the consumer's sensitivity to price -Measures the responsiveness of quantity demanded to a change in price, with all other factors held constant

What are store brands?

created and owned by a reseller of a product or service; the products that carry the retailer's name or private brands.

Give an example of a product whose price is inelastic

insulin

Define open-to-buy ?

is the amount the buyer has left to spend for a given time period, typically a month

What is a buyer's goal?

make the best possible purchases for the retailer

Pricing objectives should be.....

measurable and realistic

The formula for calculating gross margin is...

net sales-cost of goods sold (COGS)

Define Shrinkage

the loss of product or inventory that occurs from theft, fraud, or errors in receiving, accounting, or tracking

Net sales is defined as....

total revue received by a retailer that are related to selling merchandise during a given period of time minus the returns and discounts.

What is the relationship between volume and fixed/variable costs?

•Fixed costs - total costs that do not change with changes in sales volume (activity). •Variable costs - total costs that increase when sales volume increases and decrease when sales volume decreases

Name the three main financial statements?

•Income Statement •Balance Sheet •Statement of Cash Flows

What is the difference between the definition of Merchandise and Merchandising ?

•Merchandise - the products or services the retailer currently offers, or plans to offer •Merchandising - refers to activities involved in organizing the display of products or services

Why is it important for retailers to understand financial statements?

-net sales: total revue received by a retailer that are related to selling merchandise during a given period of time minus the returns and discounts. -cost of goods sold (COGS): amount the retailer pays to vendors for merchandise they sell -gross margin (profit): = net sales-cost of goods sold (COGS), the amount the retailer has left over to cover expenses related to running the business -operating expenses: costs associated with doing business, not including the costs of the merchandise (SG&A: selling expenses, general expenses, administrative expenses)

What is the cost of a watch that retails for $300 and has a mark-up of $180? What is the % mark-up?

Cost Price: $120.00 Markup %: 60%

What does COGS stand for and how is it defined?

Cost of goods sold: amount the retailer pays to vendors for merchandise they sell

What is EDI?

Electronic Data Interchange - is simply the electronic exchange of documents between suppliers and retailers. The process is broken down into two parts: translation and communication

What is a retailer's most effective tool against shoplifters?

Employees

Define the statement of cash flows

•Provides information on the retailer's cash receipts and cash payments during a given period of time •Operating activities •Investing activities •Financing activities

Why is inventory so important to retailer's?

•Too little inventory and the retailer ends up losing sales due to stockouts (running out of products •Too much inventory and the retailer ends up with a warehouse of unsold products.

What happens when you plan too much inventory or don't plan for enough?

•Too much stock ties up capital •Too little cause stock outs and lost sales and customers

What is the difference between the top down approach and the bottom up approach when it comes to merchandise planning?

•Top-down approach - upper management personnel prepare a budget and pass it down to their various departments •Bottom-up approach - each retail department manager supplies budget data; these budgets are passed on to the next level, until the budgets for all departments get aggregated to form the store's budget

What five main things contribute to the merchandise mix......

•Variety •Assortment •Private vs National Brands •Quality Price Points