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Chapter 3

by: luke koppa

Chapter 3 AM 270

luke koppa
GPA 4.0

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Merchandising Systems
Merchandising processes
Ruoh-Nan Yan
Class Notes
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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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