Retail Terminology

Markdown - A reduction in selling price. Most common it is a planned reduction in the

selling price of an item, usually to take effect either within a certain number of days after
seasonal merchandise is received or at a specific date.
Point of Sale (POS) taken at register ticket is not hard marked
Permanent Markdowns ticket on item is marked.
Gross Margin (GM) is the profit before deducting operating expenses
GM $= Net sales-cost of goods sold
GM% =Net sales-cost of goods sold / net sales *100
Net sales - sales minus markdowns and adjustments (this varies by company)
Inventory - Merchandise owned. Can be recorded at cost or retail.
Store Inventory - All merchandise located in stores available for sale.
Warehouse Inventory All merchandise located in warehouse
In Transit Inventory Merchandise that is neither in stores or in Warehouse
Total Inventory = Store + Warehouse +In transit
EOM Month ending Inventory
BOM Beginning Month Inventory
BOY Beginning Year Inventory
EOY Ending Year Inventory
EOW Ending Week Inventory
BOW Beginning of Week Inventory
Average inventory the sum BOM or EOM of a specified number of months
divided by that number of months.
Weeks of Supply (WOS) - number of weeks worth of inventory owned based on current
week sales or average weeks sales.
Can be calculated in units or dollars.
Calculation: Inventory/ Sales
Ex) Inventory 200 Sales 20 WOS is 200/20=10 WOS.
Receipts Addition to inventory. This is merchandise that arrives in warehouse or stores
during a specified time. Not considered part of store or warehouse inventory until
accepted into system by store or warehouse then it becomes part of their inventory.

Open To Buy (OTB) Merchandise budgeted for purchase during a certain time period
that has not yet been ordered. It is also the process of planning merchandise sales and
purchases.
Calculation:
Planned Sales
+ Planned Markdowns
+ Planned End of Month Inventory
- Planned Beginning of Month Inventory
Open-To-Buy
On Order (OO) Merchandise placed with vendors but not received in warehouse.
Once orders are placed those orders are deducted from OTB
Ex)
Sales 100 MD 20 BOM 300 EOM 400 OO 50
300 EOM
-(100+20) Sales and MDs
180

400 BOM
-180
220 OTB
-50 OO
Revised OTB =170

Mark Up (MU) A percentage added to the merchandise cost to get the retail selling price.
Retail price cost = Mark up
Retail price selling price consumer pays for product
Merchandise Cost (cost) - is the amount paid to obtain an item from a supplier. It is the
wholesale price that a retailer pays.
Cost of goods sold - direct expenses incurred in producing a particular good for sale,
including the actual cost of materials that comprise the good, and direct labor expense in
putting the good in salable condition (ticketing, prepping for store). Cost of goods sold
does not include indirect expenses such as office expenses, accounting, shipping
department, advertising, and other expenses that can not be attributed to a particular item
for sale. This can be higher then merchandise cost because of ticketing and prep charges.
Stock Turn Annual Sales divided by Average Inventory . Different companies
calculate different ways.
Take beginning of the Year inventory and the end of each month and divide b 13.
Take the ending inventory first fiscal month through last fiscal month and divide
by 12

Sales to Stock Ratio A ratio that compares average inventory to sales can be computed
uses dollars or units.
Current inventory/sales is the simplest. Some retailers also use averages
inventory.
Exit Strategy - plan to be out of a product by a certain date. This plan can included
markdowns, transfers or out of stocks. Exit strategies are used for novelty, seasonal and
discontinued core items.
Out of Stock - the marking to zero of undesirable merchandise.
Allocation process of moving product from Distribution to stores
Push Allocation - a bulk allocation of multi sizes and multi stores
Pull Allocation - Replenishment allocations that pull from a pre defined set-up
There must be sales in order for pull allocation to happen.