tm04-220

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Chapter 4 Inventory Management Retail Management for Spas The Art & Science of Retail (220T or 220)

Competencies for Inventory Management:

1 Competencies for Inventory Management Describe the purpose of inventory management in successful retail planning. Explain the benefits of an automated system for inventory management. Define turnover and stock-to-sale ratio and explain their purpose as part of an inventory management system. (continued)

Competencies for Inventory Management:

2 Competencies for Inventory Management Calculate min/max levels for retail inventory and demonstrate how to set correct inventory levels for a variety of retail situations. Apply the concepts of top sellers/slow movers and inventory aging to spa retail inventory to maximize profitability. Explain why the retail method is preferred over the cost method for the purposes of inventory management. (continued)

Competencies for Inventory Management:

3 Competencies for Inventory Management Describe the concept of open to buy and explain the formula for determining open-to-buy levels. Explain the purpose of a variety of inventory recordkeeping tasks, including markdowns and markups, merchandise received, chargebacks and transfers. Determine causes of shrinkage and list procedures that deter shrinkage. (continued)

Benefits of Retail Management Techniques:

4 Benefits of Retail Management Techniques Carry the right inventory Carry the right amounts of inventory Manage cash flow Earn a profit

Calculating Sell Through:

5 Calculating Sell Through Weekly Sales ÷ Beginning Inventory for the Week = Sell Through

Boosting Low Sellers:

6 Boosting Low Sellers Presentation Seasonal issues Merchandise quality Training product knowledge

Inventory Planning:

7 Inventory Planning Proper timing of merchandise deliveries Fresh saleable stock of merchandise at all times Cash resources available for restock orders

Pricing and Markdown Cycle:

8 Pricing and Markdown Cycle First markdown of 25 to 30 percent off regular price Second markdown of 40 to 50 percent off original price (30 days later) Third markdown of 60 to 75 percent off original price (30 days after second markdown)

Reasons for Markdowns:

9 Reasons for Markdowns Significant clearance involving permanent price reductions Point-of-sale reductions for damaged merchandise, employee/member discounts, professional use, donations, damaged merchandise

Receiving Merchandise:

10 Receiving Merchandise Check the merchandise to be sure it agrees with the order, as well as the invoice. Check the cost billed on the invoice against the quoted price on the order. Enter the retail selling price next to the cost price on the invoice. Price all merchandise showing the correct classification letters or numbers. Record the merchandise received on the correct category or classification page.

Causes of Shrinkage:

11 Causes of Shrinkage 47 percent internal/employee theft 34 percent shoplifting 14 percent paperwork errors 5 percent vendor fraud

Calculating Book Inventory:

12 Calculating Book Inventory Start with physical inventory at retail. Subtract sales. Subtract markdowns Subtract returns of merchandise to vendors (chargebacks) (continued)

Calculating Book Inventory:

13 Calculating Book Inventory Subtract merchandise transferred out of the spa to another location Add additional markups on merchandise Add merchandise received at retail Add merchandise transferred into the spa from another location (continued)

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