Many larger retailers negotiate co-op funding from the vendors. This funding traditionally covers advertising posts to market specific merchandise. These funds are restricted by the vendor and will only be paid if certain pricing and presentation rules have been met. Other vendor funding is negotiated in other segments. It’s quite common in grocery to negotiate […]
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Part of smarter financial management for many retailers is negotiating favorable payment terms. These terms can dramatically impact the cash fl ow for any size retailer. There are two main issues when negotiating payment terms with vendors. One issue is when payment falls HOW TO GET TO THE NUMBERS THAT MATTER IN RETAIL due, the
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Purchasing management is a key component of smarter financial management for any retailer, regardless of size. One of the most effective means of controlling purchases is to implement and enforce the use of an Open-To-Buy process. As stated above, OTB is a tool designed to direct and control spending by the buying and merchandising divisions.
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Financial budgeting results in setting a sales target for the company. Retailers then build merchandise plans that start to break out how those sales will be achieved. Often, the sales goal built into the merchandise plan will be higher than the sales budget. This gives some room to under achieve the merchandise plan (usually the
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As the previous section indicates, it is important to have a well thought out budget or plan for the current fiscal year. Most larger retailers have a series of financial plans. These include a five-year outlook, a three-year forecast, and annual and seasonal plans. Naturally, the forecast accuracy increases as the time horizon gets closer
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There are three major components to a retail Profit and Loss (P&L) statement. These are sales, cost of goods and expenses. Hence there are three major ways to improve profitability —grow sales, reduce cost of goods or reduce expenses. Reducing or containing expenses is vital. The calculation is: Total Non-Merchandise Expenses x 100 = Expenses
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Gross Margin (GM) is the lifeblood of a retailer. Simply defined, it is the difference between the net sales and the merchandise cost. Gross Margin Percent (GM%) is the further relationship of Gross Margin to Net Sales. The calculation is relatively straightforward: Gross Margin % = Gross Margin x 100 Net Sales While Gross Margin
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Inventory (Stock) Turn is the most usual measure of the efficiency of inventory control. It is the number of times within a period, usually one year, that the average inventory is sold. Normally, higher stock turn rates are associated with products that sell at a lower gross margin percentage,for example, groceries. Conversely, a higher turn