Tuesday, January 16, 2018

Key Performance Statistics

Average Daily Inventory:

Average Daily Inventory is the average quantity on hand in inventory at the end of each day, after
adjustment for all the day’s transactional activities. By averaging inventory quantities over an
entire period, retailers get a truer picture of inventory than from a single snapshot, such as onhand quantities at the end of the period.

Knowing the average daily inventory helps retailers:

  • Determine correct min/max levels
  • Decide how often reorders will be necessary
  • Calculate Turn and other performance statistics

TurnTurn (also called Turnover) is a measure of how fast you are moving items through the door to
customers. The advantages of having a high Turn rate include:

  1.  Increased sales volume Fresh merchandise sells better and faster than old, shopworn merchandise.
  2. Less risk of obsolete stock and markdowns When inventory is selling quickly,merchandise isn't in the store long enough to become obsolete. As a result, markdowns are reduced and gross margins increase.
  3. More money for market opportunities When Turn is high, money previously tied up in inventory is freed to buy more merchandise.
  4. Decreased operating expenses An increase in Turn may mean that a lower level of inventory is supporting the same level of sales, which translates to lower inventory carrying costs. \
However, an excessively high Turn rate can hurt retailers in the following ways:

  1. Lowered sales volume If customers can’t find the size or color they seekor even
    worse, if they can’t find the product line at all
    a sale is lost.
  2. Increased cost of goods sold By buying smaller quantities, the buyer can’t take
    advantage of quantity and freight discounts.
  3.  Increased operating expenses A buyer spends about the same amount of time meeting
    with vendors and writing orders whether the order is large or small. It also takes about the
    same amount of time, for both large and small orders, to print invoices, receive
    merchandise, and pay invoices.

Saturday, February 6, 2010

Some Interesting Stuffs

•Biggest Mall in the world ??
South China Mall Dongguan, China

•Second biggest mall ??
Cevahir Istanbul, Turkey

•Third biggest mall??
West Edmonton Mall, Edmonton,Canada

•Biggest mall in US??
Mall Of America, Minneapolis, US

Merchandise Planning

Merchandise Planning is “A systematic approach which is aimed at maximizing return on investment,through planning, sales and inventory in order to increase profitability (GMROI). It does this by maximizing sales potential and minimizing losses from mark – downs and stock – outs.”

  • Formulation of objectives
  • Establishment of Policies
  • Implementation of Policies to carry out department and store objectives
  • Tuesday, February 2, 2010

    10 Things Retailers Won't Tell You

    By SmartMoney.com

    1. "Forget commissions. Our staff gets kickbacks."

    Next time a salesperson gets overly pushy when promoting a product to you, think twice about their motives. Sometimes clerks have hidden agendas you might not know about.

    Consider the "promotion incentive fee," which is a selling incentive that leads sales staff to heavily favor one brand over another. This is typically a direct commission from the retailer, and it rewards sales associates for selling certain products - usually those with the highest point margin, says Jeff Green, president of Jeff Green Partners, a Mill Valley, Calif.-based retail consulting firm. It is increasingly popular with retailers, especially in the home furnishing and consumer electronics sectors. Customers who are unaware of this fee just think the salesperson is focusing on the product they believe is best. "Consumers should beware if they're being oversold on a certain piece of merchandise," says Green. "They have to ask themselves why this is."

    How can you distinguish good advice from a commission-driven sales pitch? "When you're making a large purchase, make sure you're communicating to the salesperson what it is you need," says Daniel Butler, vice president of retail operations at the National Retail Federation (NRF). "If you feel they're steering you toward something that doesn't meet your needs, find someone else in the store to help you."

    2. "That salesman doesn't actually work here."

    In some cases, the salesperson helping you isn't always employed by that store.

    Companies such as Hewlett-Packard, for example, sometimes provide their own employees or hire marketing firms or sales-training firms to be present in stores to offer information about a specific brand or product. An HP spokeswoman says her company's reps "help customers identify the best solution for their needs" and wear shirts with identifying logos.

    Depending on the store and the companies involved, these people may or may not identify themselves as such, says Steve Frenda, managing director at the In-Store Marketing Institute, a retail marketing strategy association. While they're knowledgeable about a specific product line, they may be too aggressive about their employer's brand, he says. How to spot the company man? "If somebody seems too aggressive about one brand, ask him who he's working for," says Frenda.

    3. "If you knew our return policy, you might not shop here."

    Next time you try to make a return, don't be surprised if you can't get all your money back. Many retailers - particularly those in electronics - now charge "restocking fees" on returned or exchanged items, and oftentimes they downplay such policies, including them only in their fine print.

    Stores justify restocking fees by saying they deter customers who use products before returning them. With a restocking fee, a store keeps a percentage - often 10% but as high as 20% - of the item's cost, says Gail Cunningham, a spokeswoman for the National Foundation for Credit Counseling. Some stores enforce this fee when the packaging is opened while others charge it on all returns.

    Target, for example, sometimes charges 15% on items like camcorders, digital cameras, portable DVD players and portable electronics. Sonja Pothen, a Target spokeswoman, says that the store does not charge a restocking fee on 99% of its current electronic inventory.

    Consumers are best off asking about return policies and restocking fees before making a purchase. In some cases, "there might be a sign at the return counter," says Brad Ashwell, director of the Florida Public Interest Research Group. "Other stores print it on the back of your receipt, but by the time you see it, you've already paid."

    4. "Outlets are a front for cheaper goods."

    Discount clothing outlets used to be primarily a source where chain stores would unload lingering items, but they've become so popular that these days designers often create secondary lines - with, say, cheaper fabrics - specifically for the outlets.

    "This is a huge source of business for wholesalers," says Claudia Sagan, a San Francisco-based consultant and advisor to retailers and shopping center developers. In some cases, the designer will manufacture clothing specifically for the outlet, and they'll go straight there rather than to the designer's boutique or the department stores. This clothing will often have a slightly different label or name that's only meant for the outlets, she says.

    In other cases, designers will take excess fabric that's left over after creating their boutique clothing and use it to manufacture clothing for the outlets. "They're going to use a combination of factors, like lesser quality fabric or sewing, fewer fine details and leftover fabric," says Sagan. In this case, it's hard to tell the difference unless you're able to spot the lower-quality fabrics.

    Often times such clothing will get mixed with what consumers expect to find at outlets: last season's leftovers and pieces with slight defects.

    5. "We'll say anything to lure you inside."

    Nobody expects retailers' advertising to be completely straightforward, but sometimes they're just straight up deceitful.

    In September 2009, CVS/pharmacy paid nearly $2.8 million to settle FTC charges that it was making misleading claims that its "AirShield" product can prevent colds, fight germs and boost immune systems. Mike DeAngelis, a CVS/pharmacy spokesman, says the payment to the FTC was to cover the costs of a refund program for customers who purchased CVS's AirShield from July 2005 through Nov. 2008.

    How leery should consumers be when it comes to retail advertising? "Most retailers don't want to risk their good reputation with customers over an ad," says the NRF's Butler. "But if something looks too good to be true, do some research and comparative shopping."

    6. "Our gift cards take as much as they give."

    Whether you see them as stocking stuffers or the ultimate gift-giving copout, gift cards are everywhere, and retailers love them because they're a cash cow.

    For 2009, gift card volumes brought in $87 billion, which although high is a decrease from $91 billion in 2008, according to projections from the TowerGroup, a financial research and advisory services firm. What's even better - from a retailer's perspective - is the fact that about 6% of the total value of cards purchased in 2009 went unused, mainly due to expiration dates, service fees and good old forgetfulness.

    But in some cases, gift cards can lose their value even through no fault of the consumer. One common culprit is when a store files for bankruptcy. For example, in February 2008 Sharper Image announced it was suspending the acceptance of gift cards after it filed for Chapter 11 bankruptcy. The retailer backtracked a month later, saying it would continue to accept gift cards - but only as long as the total purchase was twice the value of the gift card. Sharper Image didn't return calls for comment.

    "People have to realize that gift cards were never intended to be savings vehicles; they're meant to be used," says Brian Riley, a senior analyst at TowerGroup. "The best thing you can do when you get a gift card is go spend it."

    7. "Luxury brands at discount stores aren't exactly high-end."

    With the sales of luxury goods on the skids, high-end designers are looking for ways to make up their margins, and they're moving to the discount stores where sales are on the rise. But it's not all good news for bargain hunters: Shoppers should watch for differences in quality, like lower-grade fabrics, which help keep the cost down, says Sagan. And, the best stuff often disappears from the racks within hours.

    In November, Jimmy Choo debuted a line of clothing, shoes and accessories at 10 H&M stores in the U.S. - most of which sold out in one weekend. A spokeswoman for H&M says that the company uses its own fabrics for the merchandise, it buys the fabrics in bulk, and it uses its own production offices for such collections. Also in November, Badgley Mischka, a label favored by Hollywood, premiered an affordable collection of apparel and accessories on the HSN. And Zac Posen is set to launch a line of clothing for Target in April.

    8. "Couture isn't exactly a surefire investment."

    Could a designer purse really have "growth potential"? That's what some salespeople would have you think. "I've heard retailers telling customers that an item might become collectible," says Cameron Silver, owner of Decades, a Los Angeles-based vintage-clothing boutique.

    While it's nearly impossible to play fashion's futures market, it can happen. After all, a handful of Louis Vuitton, Gucci and Chanel bags have risen in price during the past decade or so. Looking for the next hot issue? One decent bet today is an Hermès bag, particularly the "Kelly" bag, which averages $8,000 to $10,000 but can cost more, says Sagan. In part, this handbag appreciates over time because Hermès manufactures limited quantities and there's a waiting list for it. "Twenty years from now it will definitely be worth more," says Silver.

    In cases with handbag designers that comparatively mass produce, like Louis Vuitton or Gucci, they'll increase prices to see how high they can go and still sell, says Sagan. "They know it will sell at a higher price," she says.

    9. "Clothing designers often have no business making housewares."

    Just because a designer makes beautiful clothing, don't expect his skills to transfer to anything else he chooses to create. These days, fashion designers of every stripe are rolling out crossover goods trying to cash in on housewares and furniture. But not all these products are up to snuff, says Green.

    In particular, Evan Lobel, proprietor of New York City's Lobel Modern antiques shop, isn't impressed with designer-affiliated furniture. "Fashionistas send their people around to shops like mine so they can see how the proportions are done on mid-century furniture, and then they copy it," Lobel says. "That may be the way fashion is done" - knocking off garments made by competitors and predecessors - "but furniture is different." The originals, even as antiques, are better made and often less expensive than these new look-alikes, he says.

    10. "We can damage your credit score."

    It's tempting to open a store credit card and get a 10% discount on a cashmere sweater. But in most cases, the consumer is ending up with a bad deal. When a consumer applies for a credit card, an inquiry is made to the credit bureau that may slightly lower their credit score. Also, most store credit cards carry low credit limits, which can increase a consumer's credit utilization (that's a consumer's outstanding debt as a percentage of their total amount of credit). And they often carry high interest rates of 20% or more.

    Meanwhile, consumers shopping for furniture or big-ticket electronics or home appliances will hear salespeople touting 0% interest and no payments for months - or even years. Suddenly, that $2,000 sofa appears easier to stomach, but in most cases these "deals" are too good to be true. Consumers save on interest and don't have to pay for the entire purchase up front, but these deals can destroy your credit utilization. When a shopper buys furniture using a no interest, no payment financing deal, they often receive a line of credit that equals the amount of the purchase. The problem is now the buyer has a line of credit that is maxed out 100%. In the worst of cases, that line of credit will remain at a 100% utilization rate until the amount is paid is full.

    Wednesday, July 29, 2009

    Point of Sale in retail industry

    What is point of sale?

    Point of sale (POS)
    indicates a retail shop, a check out counter in a shop, exactly where the transaction occurs. It tracks down both the sales and the inventory of the SKU’s. POS is considered equivalent to an electronic cash register. POS can be any hardware or a software used for check outs. POS are almost used in all the retail establishments such as supermarkets, restaurants, hotels and more. The process of transaction and tendering cash is essential for an organization. Incase if there is lot of transaction happening a POS would help you to save money than the cash register. POS finds solution for many of the problem that happens in your retail business. In case you are starting a new retail business investing in POS would be a brilliant idea. Many retailers generate revenue and profit reports, ordering reports and product sales reports through their POS software which is considered to be so difficult in the other ways.

    POS for the retail world
    – all types of stores from apparel to convenience

    • Allows you to manage different prices for various products

    • Conduct sales, clearances, and special offerings seamlessly

    • Create matrixes to track the same merchandise by different aspects (size, style, color)

    • Prevents items from being oversold by detailing how much is in stock, when it’s time to reorder, and whether or not to continue selling the item based on sales and popularity

    • Compiles data of purchasing trends to offer items that appeal to your customers

    • Saves critical shelf space by stocking more of the items customers want

    • Manages profit margins by noting which items sell the best compared to the prices you pay for wholesale merchandise

    • POS are most commonly used in stores such as

      • Liquor and package stores

      • Convenience stores

      • Smoke (cigar) shops

      • Apparel

      • Sporting goods

      • Hardware

      • Automotive parts

      • Furniture

      • Race tracks

      • Casinos

    Benefits of using POS in your store

    Equivalent to cash register

    In an ordinary cash register you will be able to check only the days flow. It cannot give a detailed output on inventory, profit or selling products. But a POS can do all this. As a computerized cash register it can instantly tell you how much money is there, what are the items in stocks? What are the items that are running out of stock? It can act as reminder calendar too.

    Preventing theft

    By implementing POS in your system everyone be alert in their work. Even the employees would keep the track of inventory carefully because they know the stock is monitored. For instance in a small business POS can reduce the theft for about 2.5%.

    Managing inventory

    Managing inventory is by generating reports on the inventory and the sales that is happening. These reports help you to manage the flow of inventory and also it helps you to predict the needs in the future. Simply, it helps you to order more based on the reports not just by the prediction you have. It also helps you to understand which product needs more inventory? and why does it needs?

    Managing specials

    Discounts, coupons and offers are the most common phenomenon that happens in the retail world. But managing these discounts would be little difficult for the retailers As it runs in a short-term. By implementing POS it helps you to manage the current tracking and market down pricing too.

    Reducing shrinkage

    POS bring you the inventory report in a real time. So it helps you to understand the receiving and the inventory functions. Hence you are able to get accurate information on loss and out of stock materials. This makes you to improve your business easier.

    Margin watch

    Margin watch gives an account on materials what sells more and what sells less. By keep a keen watch on this the retailer can have more inventories on what sells more and inventory on what sells less.

    Customer satisfaction

    The barcode on the product will easily allow you to scan the material and it can speed up the check-out process. Even if you don’t use a scanner it can be made faster by entering the SKU number which is directly linked to pricing. Also it collects the customer’s data and helps you to reward them. Through the data collected by their transaction you can give more incentive programs too.

    List of customers

    POS software used in stores store the customer’s names and the address. This helps you to advertise by targeting on the particular sector of customers or also for promoting the products too.

    Efficiency & Accuracy

    POS software installation helps in improving the efficiency and accuracy. Improving efficiency means higher customer satisfaction, lower costs and higher sales. POS reduces the time spend on the paper work and also it reduces the time spend on doing double checking the inventory. Improving accuracy is effectiveness of pricing and advertising campaign. POS stores the price of the item and hence there is no need to cross verify every time how much it sells for. It gives the accurate results on the inventory of the item, revenue and sales. Hence it is easy to calculate daily gross revenue, cost and profit.

    Using remote options

    In a retail store access in remote is quite difficult. But by using POS packages it helps you to access from anywhere even where you are mobile or in an off. It gives access to different stores and able to take timely action when needed.

    Flexible expansion

    POS allows you to configure with many systems. It allows you to connect with various systems through the web or any connection method. This flexible option helps you to manage many stores from one location.

    Some of the leading point of sale softwares

    1. Retail Pro

    2. Raymark

    3. polaris

    4. Shoper

    Friday, July 17, 2009

    Key Performance Indicators (KPI) in retail industry

    Key Performance Indicator (KPI): Definition

    Key performance indicators are those financial and non-financial or metric that are used to evaluate the growth of the organization (i.e.) how successful it is. On most cases Key Performance Indicators (KPI) is used in a long term organizational goals. Key Performance Indicators (KPI) helps a retailer to analyst the mission, identify the stakeholders and define the goals. The Key Performance Indicators (KPI) is also known as Key Success Indicators (KSI).

    The Key Performance Indicators (KPI) is used in any fields such as schools (Graduation rate, Success in finding a job after graduation), Social service organization (Numbers of clients they are holding) and more. The Key Performance Indicators (KPI) for an organization would be Pre-tax profit, Share holder equity and more. The Key Performance Indicators (KPI) does not change often. It changes only when the goal is changes. They focus on what they are? and how they are measured?. The act of monitoring KPI is known as Business Activity Monitoring (BAM). KPI is basically associated with the organization strategy and concepts such as Business Scorecard.

    What are the basic KPI a retailer should adopt?

    Not all the retailers adopt the same kind of KPI to meet the organizational goals. But having certain KPI in an organization has become mandatory for a retailer. There are certain basic KPI to adopt by a retailer are such as,

    1. Sales – annual turnover, transaction made, basket spend, footfall - all against LFL and budget

    2. Loss prevention – Shrinkage loss, (stock loss or cash loss)

    3. Operational – availability, inventory integrity

    4. Salary

    5. Service – Complaints that are made

    6. HR development – training, coaching, staff turnover

    7. Variable costs – any expenses made at an additional cost are avoidable

    How does the KPI helps in increasing your sales?

    Once the KPI is defined it gives the clear idea about the goals and the measure and finally what to do with them? It gives a clear idea what is important in the organization and for what they have to work for to achieve. The KPI can be used as the performance measurement tool. It helps in managing the performance of the organization. Also make sure that everyone exceeds or meets the KPI. There are many KPI set by retailers in order to achieving in their business. Giving a vague KPI such as “Should have repeat customers” will not help you to meet the organizational goals. The best KPI would be “Employee Turnover” which you help you in calculating the performance of an employee.
    There are five top most KPI are set by the retailers such as,

    1. Sales per hour – Statically compares one sales person with the other and determines who is efficient in selling and attending the customers.

    2. Average Sale – Statically compares the average selling price of a sales person. The higher statistics shows that the person has a wide knowledge on the product and the less statistics reveals that he lacks in the product knowledge or effective description.

    3. Items Per Sale – determines the ability of a sales person compare to sale.

    4. Conversion Rate – shows how many customers they have made from the visitors of the store.

    5. Wage to Sales Ratio – gives a graph comparing the hourly wages of a sales person to hourly sales they have made. This KPI determine their performance level and how effective they are.

    Calculating KPI in retail industry

    Retail Customer KPIs

    1. Customer GROSS Profit = Customer Sales - Customer Cost of Goods Sold for a period

    2. Customer Lifetime Purchase Value - Monetary value of each customer's life time purchases from the retailer

    3. Customer Profitability = Customer Sales - (Customer Returns - Customer Cost of Goods Sold + Customer Promotion Expenses + Activity Based Cost of Servicing Customer) for a period

    4. Customer Purchase Freq Count - Count of customer purchases transactions over a period of time

    5. Customer Purchase Value - Monetary value of each customer purchase during a period with an average value for all purchases for the period

    6. Customer Reference question - A rating from 0 to 10 that indicates if the customer would recommend the store.

    7. Customer Sales by Segment - This formula is dependent upon defining customer segments (based on age, education, lifestyle, income and other factors) and associating individual customers to specific segments.

    8. Customer Service Staffing = Face to face customer service staff count / total staff count

    9. Visit to Buy Ratio = Sales Transaction Count per period / Visit Count Per Period

    Retail Financial KPIs

    1. Accounts Payable Turnover = Avg Accts Payable / (Cost of Sales / 365)

    2. Accounts Receivable Turnover Days = Avg Accts Rec / (Credit Sales/365)

    3. Acid Test Ratio = (Current Assets - Inventory)/Current Liabilities

    4. Admin Cost % = (Administration Costs / Sales )*100

    5. Average Inventory = (Beginning of Period Inventory + End of Period Inventory)/2

    6. Break-even ($) = Fixed Costs / Gross Margin Percentage

    7. Cash Conversion Cycle = (Days Inventory Outstanding + Days Sales Outstanding + Days Payable Outstanding)
    8. Contribution Margin = (Total Sales - Variable Costs)

    9. Cost of Goods = (Retail Price – Markup)

    10. Cost of Goods Sold = Beginning Inventory + Purchases - Ending Inventory

    11. Current Ratio = Current Assets / Current Liabilities

    12. Ending Inventory At Retail = Beginning Inventory - (Sales + Transfers out + Return to Vendor + Markdowns + Employee Discounts + Shrinkage) + (Purchases + returns from Customers + Transfers In + Markups)

    13. Gross Margin = Total Sales - Cost of Goods

    14. Gross Margin Return On Investment = Gross Margin $ / Average Inventory Cost

    15. Initial Markup = (Expenses + Reductions+Profit)/(Net Sales +Reductions)

    16. Interest Cost% = (Interest Costs / Sales)*100

    17. Inventory Turnover = Net Sales / Average Inventory

    18. Maintained Markup $ = (Original Retail - Reductions) - Cost of Goods Sold

    19. Margin % = (Retail Price - Cost) / Retail Price

    20. Markup % = Markup Amount / Retail Price

    21. Net Receipts = (Purchases + Transfers in + Returns from Customers + Overages) - (Transfers Out + Return to Vendors)

    22. Net Sales = Gross Sales - Returns and allowances

    23. Retail Price = Cost of Goods + Markup

    24. Return on Capital Invested = (Profit for the Year / Capital Employed)*100

    25. Sales per square foot = Total Net Sales / Squarefoot of selling Space

    26. Stock Turnover Days = Average Inventory / (Cost of Sales /365) number of days

    27. Total Asset Sales Ratio = Sales / Total Assets

    28. Turnover = Total $ Sales for season / Average $ Inventory for season

    Thursday, July 16, 2009

    Use of Inventory productivity in Retail Industry

    What is inventory productivity?
    Inventory is the amount of stocks (goods or materials) that is stored in a factory at any given time. The store owners need to know the amount of stock in the store or factory in order to place the order or to control losses. Thus inventory refers to both stocks in hold and the act of counting them. The success lies in for an investor when he turns the inventory into cash. An unwanted inventory in any product can decline profitability. While doing the analysis the investor has to be confident and clear in making five decision such as,

    1. Mark up
    2. Mark down
    3. Buy more
    4. Buy less
    5. Don’t do anything

    Thus, Inventory Productivity can be defined as the amount of sales and gross profit dollars an inventory investment generates over a given period of time, usually a year. And the most basic measures of inventory productivity are inventory turnover and gross margin return on investment (GMROI).

    Inventory turnover
    Inventory turnover help you to identify the turnover made from the inventory, and also buy more from that and turn that to into cash. Inventory turnover determines the stability of the store or factory and henceforth the profitability too.
    The formula for calculating inventory turnover is:

                Inventory turnover = Sale (at retail value) / Average Inventory Value (at retail value)

    Suppose if you have only inventory value at cost, you can calculate inventory turnover in the other way.

                Inventory turnover (At cost) = Cost of Goods Sold / Average Inventory Value (at cost)

    GMROI (Gross Margin Return on Investment)
    GMROI is a planning and decision making tool used by the retailers to calculate their profit from the investment made. GMROI measure inventory productivity that expresses the relationship between your total sales, the gross profit margin you earn on those sales, and the number of rupees you invest in inventory.

                GMROI = Gross Margin($) / Average Inventory at Cost = Gross Margin % x Inventory Turn