Although the upside far outweighs the downside, computerisation and retail software have dulled the wits. Even before the current level of sophistication, many retailers were not on top of their game with regard to simple retail arithmetic. It is true that by pure comparison one can make use of numbers without knowing how they are derived, but it sure helps if one understands the calculation behind the numbers. Many years ago I exposed buyers and planners to some really basic questions an
d many were not up to the task. They simply could not answer the questions or they got them wrong.
How good is your basic retail arithmetic?
See how many of these you can get right.
Answers will be posted as a comment after the article appears.
These are the 6 questions:
1. You purchase an item for $8.24 and you want to mark it up by 120 per cent. What is the retail price?
2. You purchase an item for $12.27 and you want a margin of 55 per cent. What is the retail price?
3. Your average monthly stock at selling for a 12 month period is $3567. Your sales for the same period ex GST are $11,123. What is your stock turn?
4. Your stock turn is 3.6. How many months stock are you carrying?
5. Your current stockholding is $11,123 at selling. Sales for the next few weeks are forecast as follows: $4,167, $5,426, $5,100, $4,958. How many weeks forward cover have you got to 1 decimal point?
6. Your average monthly stock at cost is $4,567 for a twelve month period. Your gross profit before reductions for the same period is $41,234, markdowns are $2,451 and discounts are $3,295. What is your GMROII for the 12 month period to 1 decimal point?
Applying a markup or margin to a cost price as per the first two questions is hardly desirable.
Good buyers will never do this but rather work backwards from what they believe they can sell the item for.Nevertheless, the retail maths is important to know even if one does work backwards.
The significance of this ostensibly trivial quiz is two fold.
To establish whether you as a professional retailer can remember the basics and secondly to propose that you give these questions to your graduate planners and see how they go.
If you/they can’t answer them or get them wrong, have you gone too far down the road of systemisation and computerisation? Is it time to take stock of where you are and consider some of the basics afresh?
Stuart Bennie is a retail consultant at Impact Retailing www.impactretailing.com.au and can be contacted at stuart@impactretailing.com.au or 0414 631 702
