Module 1

Module 2

Module 3

Module 4

Introduction to Retailing and Retail Formats

Store Location and Layouts Location Site Selection Store Layout

Merchandise Management Merchandise Plans Buying Merchandise Supply Chain Management

Understanding Retail Customers

Introduction to Retailing Indian Retail Environment Retail Formats

Customer Behavior at Retail Location

Pricing
Buying Systems Retail Management

Pricing in Retailing

Pricing Retail Management

Dr. Paromita Buying Goswami Systems Retail Management

Learning Objectives

Pricing strategy of retailers Markup and Markdowns

Pricing Retail Management

Dr. Paromita Buying Goswami Systems Retail Management

Price Strategy Concepts

Customary Pricing Everyday Low Pricing (EDLP) Hi-Low Pricing Variable Pricing Yield Management Pricing One-Price Policy

Flexible Pricing

Contingency Pricing

Odd Pricing Leader Pricing Multiple-Unit Pricing/Bundle Pricing Price Lining Bait-and-Switch Pricing
Dr. Paromita Buying Goswami Systems Retail Management

Pricing Retail Management

Price Adjustments

Adaptive mechanism Markdown Additional markup

Pricing Retail Management

Dr. Paromita Buying Goswami Systems Retail Management

Using Markups

Meaning of Markup Markup Methods Using Markup Formulas When Purchasing Merchandise Initial Versus Maintained Markup

Pricing Retail Management

Dr. Paromita Buying Goswami Systems Retail Management

Meaning of Markup

Markup: Is the selling price of the merchandise less its cost, which is equivalent to gross margin

Pricing Retail Management

Dr. Paromita Buying Goswami Systems Retail Management

Markup Methods
Markup % (at retail) =(Retail Selling Price-Merchandise Cost)/Retail Selling Price

Markup % (at cost) =(Retail Selling Price-Merchandise Cost)/Merchandise Cost

Pricing Retail Management

Dr. Paromita Buying Goswami Systems Retail Management

Markups Expressed on Selling Price and Cost

Pricing Retail Management

Dr. Paromita Buying Goswami Systems Retail Management

Markup Equivalents
Percentage of Retail 10.0 20.0 30.0 Percentage of Cost 11.1 25.0 42.9

40.0
50.0 60.0 70.0 80.0

66.7
100.0 150.0 233.3 400.0

90.0
Pricing Retail Management

900.0
Dr. Paromita Buying Goswami Systems Retail Management

Markups formulae
Retail = $10.00 and markup on retail= 30%

Retail = Cost + Markup

$ 10.00 = $7.00 + $ 3.00 % Markup on cost(when markup on retail is known)=(30%)/(100%-30%) =43% % Markup on retail (when markup on cost is known) =(43%)/(100%+43%)
Dr. Paromita Buying Goswami Systems Retail Management

Pricing Retail Management

Markup Formulae
Cost = $100 Planned Initial Markup on retail = 56.85%

So, Retail Price = $100 + (56.85% x Retail Price)

Solve for Retail Price Retail Price- (56.85% x Retail Price)=100 .4315 x Retail Price = 100 Retail Price=100/.4315, that is, 231.7
Initial Retail Price = Cost of Merchandise/ (1-markup percentage on retail)

Retail Price = $100/.4315 = 231.75

Pricing Retail Management
Dr. Paromita Buying Goswami Systems Retail Management

Basic Markup Formulas

Pricing Retail Management

Dr. Paromita Buying Goswami Systems Retail Management

Initial and Maintained Markups

Initial markup = retail selling price initially placed on the merchandise - cost of goods sold Maintained markup = Actual sales that you get for the merchandise - cost of goods sold

Pricing Retail Management

Dr. Paromita Buying Goswami Systems Retail Management

Initial Markup
Retail Price $1.00 Margin $.40

Markup as a Percent of Retail Price 40% =$.40/$1.00

Cost of Merchandise $.60

Pricing Retail Management

Dr. Paromita Buying Goswami Systems Retail Management

Maintained Markup
Reduction $.10
Maintained Markup $.30 Maintained Markup as a Percent of Retail Price 30% = $.30/$1.00
Note: Pricing Retail Management

Initial Retail Price $1.00

Cost of Merchandise $.60

See Levy Weitz Online Tutorial on Pricing

Dr. Paromita Buying Goswami Systems Retail Management

Markdown Management

Markdown: Is any reduction in the price of an item from its initially established price

Pricing Retail Management

Dr. Paromita Buying Goswami Systems Retail Management

Markdown Management

Buying Errors Pricing Errors Merchandising Errors Promotion Errors Markdown Policy

Pricing Retail Management

Dr. Paromita Buying Goswami Systems Retail Management

Markdown Policy
Advantages of Early Markdown Policy: Secure a more rapid or higher rate of inventory turnover Speed the movement of merchandise by making it more attractive; therefore, markdown percent will be lower Improve cash flow position by providing money for new merchandise and outstanding buy Provide space for merchandise Disadvantages of Early Markdown Policy: Possible damage to store image Possible loss in customer confidence in store (the customer could begin to think, if I wait a week, the merchandise will cost less)
Dr. Paromita Buying Goswami Systems Retail Management

Pricing Retail Management

Markdown Policy
Advantages of Late Markdown Policy: Avoids disrupting sales of regular merchandise (bargain hunters are in store only twice a year) Gives store a longer time to secure a higher markup Customers look forward to BIG SALES Customer confidence is retained Disadvantages of Late Markdown Policy: The retailer may need the space or money that a quicker markdown policy could provide It could make inventory turnover too low
Pricing Retail Management
Dr. Paromita Buying Goswami Systems Retail Management

Retailing Truism
Retailers dont take markdowns, they just adjust their prices to consumer demand

Pricing Retail Management

Dr. Paromita Buying Goswami Systems Retail Management

Promoting Markdowns

Pricing Retail Management

Dr. Paromita Buying Goswami Systems Retail Management

How To Reduce Markdowns

Use Markdown Optimization Models Improve Sales Forecasts and Merchandise Budget Plan Work with Vendors to Plan Deliveries

Pricing Retail Management

Dr. Paromita Buying Goswami Systems Retail Management

Liquidating Markdown Merchandise

Auction merchandise on Internet (eBay or liquidation exchange) Have special clearance location in store/on own website Job out the remaining merchandise to another retailer Consolidate the marked-down merchandise Give merchandise to charity Carry the merchandise over to the next season

Pricing Retail Management

Dr. Paromita Buying Goswami Systems Retail Management

Clearance Center Liquidates Markdowns

Pricing Retail Management

Dr. Paromita Buying Goswami Systems Retail Management