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Retail Math

Retail Math

Look at retail job postings. A good percentage of them mention retail math skills as a requirement. So what is retail math, and why is it so important in qualifying for a retail opening?

It's Not Rocket Science

Math is used at every level of retailing, from the part-time sales clerk to the executive suite.

At its simplest, retail math is basic arithmetic, such as counting money and making change. Computing the total amount of a sales transaction also involves calculating percentages to determine discounts, sales tax and shipping charges. Depending on the type of merchandise, a sales associate may need to determine costs by measurement -- like length or weight -- or by unit price.

More complex retail tasks require more advanced retail math skills. And the higher up in retailing you go, the more math skills you need.

Be Friendly with Numbers

Retailers forecast income and evaluate expenses on a daily, weekly, monthly, quarterly and annual basis. Obtaining, analyzing and reporting accurate financial information is performed by sales associates, stock clerks, store managers, inventory specialists, buyers, planners, marketing specialists, financial analysts and executives.

A thorough knowledge of fractions, decimals and percentages is needed to calculate such items as markups, markdowns, taxes and sales receipts, as well as commissions, payroll, sales and expense budgets.

Advanced retail math responsibilities include the following:

  • Calculating markup based on cost or selling price.
  • Calculating stock turnover.
  • Calculating retail sales, gross margin and break-even points.
  • Planning and controlling price/stock reductions (markdowns).
  • Developing seasonal budgets.
  • Developing inventory plans (determining stock needs in proportion to forecasted sales).
  • Interpreting profit and loss statements.
  • Evaluating balance sheets (composed of assets, liabilities and equity).
  • Performing ratio analysis. (Comparing items on the balance sheet or income statement with other items on these statements. Reviewing the past year's ratios will pinpoint trends, which can be used to forecast the future.)
  • Forecasting cash flow budgets. (Projecting cash receipts and cash expenses for a period of time into the future, usually done on a monthly basis.)

Performing these calculations often requires familiarity with retail formulas. But not all retailers use the same equations. Beth Thomas, a training manager for The Limited, notes: "New employees may bring to their positions assumptions about retail math that may not necessarily align with The Limited 's business processes."

What About Computers?

In many retail stores, computer systems and automated point-of-sale systems complete most of the calculations for you.

However, there will be times when retailers need to work through numerical problems manually. A warehouse worker might need to calculate the difference between what the computer said was sold, and what the stock levels indicate was sold. A sales associate may need to calculate a refund for a customer. Store managers must determine the payroll based on time sheets.

Still, computer programs, especially spreadsheet applications like Excel, are important tools. Buyers use them to create and evaluate inventory purchasing plans and classification planning budgets. Planners use them to analyze numbers, add on markup and apply markdown pricing to plan stocks, balance the flow of new merchandise and maintain balanced stocks.

Obtaining Skills

You probably have basic retail math skills; you learned them in school and use them every time you go shopping or fill out a catalog order form. Check your local colleges and universities to identify classes in more advanced skills; many are offered through business schools or programs in marketing and merchandising. If you're working in retail now, take advantage of in-house training opportunities.

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