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This 3 page Class Notes was uploaded by luke koppa on Monday February 15, 2016. The Class Notes belongs to AM 270 at Colorado State University taught by Ruoh-Nan Yan in Winter 2016. Since its upload, it has received 36 views. For similar materials see Merchandising processes in General at Colorado State University.
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Date Created: 02/15/16
Chapter 3 Merchandising Systems Taxonomy of Apparel Merchandising Systems (TAMS) o Description of events/activities regarding planning, developing, and presenting product lines o Six assumptions related to TAMS Merchandising is a dynamic process of intense change Merchandising cycle is 1 year Beginning the first week of February and ending the last week of January Each merchandising cycle is made up of selling periods Selling seasons Weeks of sale Merchandisers commonly work on several selling periods at the same time Prioritizing the tasks is key (handout) A product line consists of a combination of styles that: Satisfy similar customer needs Sold within the targeted price range Are marketed within similar strategies Large firms may have several product lines for each selling period GAP: GAP, Old Navy, Banana Republic Measures of Merchandising Success o Balance Sheets: statement of an organizations assets, liabilities, and owners’ equity at a particular point in time Assets economic resources Cash, inventory, properties, etc Liabilities: financial obligation Taxes, mortgage, loans Owner’s equity: difference between total assets and total liabilities (net assets) Assets= Liabilities + Owner’s equity o Income Statements: a summary of an organization’s revenue and expenses for a specific period of time (year, quarter, month) Gross sales: total dollar revenue received from the sale of G/S Net sales: Actual amount of dollars received from sale of merchandise after all returns and allowances have been paid to customers Customer return rate (%)= customer returns($)/ Net Sales o High return rates = Customer allowances= additional price deduction o Price matching, defect discount Net Sales= Gross Sales – Returns – Customer Allowances Costs of goods sold Amount of money the firm has paid to acquire or produce the merchandise sold Costs of goods sold = billed cost of merchandise + shipping costs + alteration/workroom costs – returns to vendors – cash discounts o Cash discounts given for early payments, Costs of goods sold % = costs of goods sold $/ net sales Gross margin (gross profit) Amount of revenue available to cover operating expenses and still generating profit Gross Margin $= net sales – cost of goods sold Gross margin %= gross margin $/ net sales o Average 3045% Overhead/operating expenses Costs incurred in daily operations of a company to generate revenues (other than cost of goods sold) Salaries, rent, utilities, advertising, etc… Expenses %= total expenses $/ net sales Operating profit Measure of a firm’s efficiency in managing gross margin and expenses Operating profit $= gross margin – overhead/operating expenses Operating profit %= operating profit $/ net sales o 115% average Net profit (net income) Overall performance measure o Bottom line of income statements Net profit $= operating profit + other income – other expenses o Other income/expenses result from something other than sale of apparel (investing, real estate, other investments) Net profit margin %= net profit $/ net sales o Merchandising and Operating Ratios Commonly state as % of net sales May provide important information Past and present ratios can be compared to identify trends Comparison across product categories, departments, stores, organizations o Merchandisers play key roles in relation to a company’s income statement Cost of goods sold Net sales Gross margin o How to maximize gross margin Increase net sale Manage prices and merchandise selections Decrease costs of goods sold Negotiate favorable prices with vendors o How to increase operating profit Increase net sales, reduce costs of goods sold, reduce expenses Summary o Assumptions of TAMS o Balance sheet vs. income statements o How to maximize gross margin/operating profit
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