Defining markdowns and their causes


  1. Define and discuss initial individual markup.

Initial individual markup is the average markup required for all products. This markup helps in incidental expenses, covering the cost of items and obtaining reasonable profits. The initial individual markup is equal to ‘operating expenses’ plus ‘price reductions’ plus ‘profit’ divided the sum of forecasted net sales and price reductions.

  1. Define cumulative markup and discuss how it is used.

Cumulative markup is the total retail cost minus total cost divided by the total retail cost. It is expressed as a percentage and is often used cost method of accounting. It is used in finding the average percentage markup for the trading period.

  1. Define average markup and discuss how is it used?

An average markup gives the summary of the markup prices for a grouping of items. It does not focus on for single items. It is used when it is added to one or more percent of the total cost of the sale of a particular product.

  1. Define markdowns and discuss the causes of them.

Markdown is the reduction of price or the particular price by which a product’s market price is reduced. To markdown is to change price in order to raise its demand.

  1. What does “The first markdown is the cheapest” mean? Give an example.

It means that a businessman should be able to identify the type of merchandise that fit testing, incoming, pre-peaking, post-peaking and outgoing. For example if all the fists are represented, a particular store will have a head-up on the competition in order to provide customers with the reason of doing business in a win-win situation.

  1. This question deals with the “role of the buyer”. (5 Points)
  2. Define “Buyer” as it pertains to this course.

This is a person who is responsible for selecting and planning a range of products in order to sell in trade outlets. This person should consider customer demands, market trends, store policy and financial budgets.

  1. Discuss the “Buyer-Seller” relationship

There are three levels of buyer-seller relationship. The first one is adversarial which entails the traditional win-relinquish relationship. The buyer here will squeeze the supplier for even a slight discount. In the barometric relationship, the buyer and the seller engage in cover your asset basis because they are still monitoring the relationship between them. The final relationship is complementary. This level is where true and integral partners meet. Their visions and values overlap with each other. They straggle to work hard in order to help their partner get what they need in business.

  1. Discuss the basic forms of negotiation as it pertains to the “Buyer-Seller” relationship.

Integrative Negotiations

This entails negotiation where buyer and the seller join forces to achieve something. It involves a higher degree of trust.

Distributive Negotiations

This involves a negotiation between people who have never had an interactive relationship or between people who are not likely to meet in future. It involves the everyday negotiation when buying and selling commodities.

  1. How does the traditional chain organization differ from those that belong to the category that employs “The Store is the Brand” retail strategy?

The difference is in the unified organizational structure. Traditional chain organization is under one single leader and it encompasses the traditional supply chain functions.

  1. This question deals with terminology as it pertains to this course. (10 Points)

Please define the following and include an example of each:

  1. Store within a Store

This is an agreement in which a shop lets part of the building to be used by a different company to run another outlet. This type is often seen in supermarkets and filling stations.

  1. Store is the Brand

These are line products sold by retailers who function under a single market identity but are spread in different location i.e. Richelieu Foods and The McDonald’s

  1. Special Event

This is an event that focuses on a single purpose. It entails ground breaking ceremonies and grand opening.

  1. “Keystone Plus” marking

Are private companies categorized under professional organizations i.e. Keystone Plus Marketing Inc.

  1. Reorder

This is ordering the same good again.

  1. Special Order

Is a discussion of whether to accept a particular order or not at the offered price it is normally offered bellow the normal selling price.

  1. “Price Points”

Price pint is the retail price of a product that is usually viewed as a serious competitive product price

  1. Classifications

Classification is a general organization of items into mutually exclusive and related classes

  1. EDI

This is Electronic Data Interchange

  1. Rack Jobber

This is a person who arranges products on the shelves of stores

  1. This question also deals with Private Label.

Discuss how a retailer might introduce a new Private Label Program. Give at least 5 ideas and explain why each idea would be effective. (5Points)

  1. Discuss the growth of social media as it pertains to retailing.(5 Points)
  2. A vendor offers an item costing $9.00 to a buyer with a 50% seasonal markup plan.

The buyer determines that at $18.00 retail she can sell 1000 units during the month.

The vendor tells her that if she marks it $10.00 retail, she could sell 1,000,000 units in 2 weeks. He further guarantees her that if she does not sell the 1,000,000 items in 2 weeks; he will buy the remaining inventory at $10’s retail per piece. Would you accept the deal? Justify your answer carefully. (10 Points)

In the first sale, the cost is $9000 and the revenue would be $1000 × $18 = $18000 the revenue is $9000 after one month.

The second option we have 9 × 1000000 = 9000000

Revenue is 10 × 1000000 = $ 10000000

Subtraction we’ll get $1000000 after two weeks

He should accept to sell at the vendor price that is $ 10 because he would make a profit of $ 1000000 within two weeks. The other option of selling at $18 will only earn him $9000 after one month. This is because the vendor has agreed to by the remaining inventory and thus he will not have to hold the stock for a long time

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