For those of you who maybe didn't know - math is everything.While you might be moaning and groaning (trust me you're not alone), it's simply something that we have to endure if we ever want to land a job in any field of the industry. Retail math is something that is used throughout the workforce from buyers to retail management. A series of equations and ratios, retail math is used to determine how fast inventory is selling, if the product you're selling produced a profit, and which products (or departments) have the greatest impact on sales.
Valerie Lipow so wonderfully outlines some of the principles of retail math:
- Calculating markup based on cost or selling
- Calculating retail sales, gross margin, and break-even points
- Planning and controlling price/stock reductions (markdowns)
- Forecasting cash flow budgets
Here are a few basic equations:
// NET SALESnet sales = gross sales - returns and allowances
// RETAIL PRICEretail price = cost of goods + markup
// MARKUPmarkup $ amount = retail price - cost
markup % amount = markup amount ÷ retail price
// INITIAL MARKUPinitial markup % = (expenses + reductions + profit) ÷ (net sales + reductions)
// BREAK EVEN ANALYSIS
break-even ($) = fixed cost gross ÷ margin percentage
average inventory = (beginning of month inventory + end of month inventory) ÷ 2
for more formula's head to maeok.
also check out Shari Waters for a quick guide in learning percents or -
head over to the Terminology page for a full look at retail math.
now bust out those calculators and get to work!