Tag Archives: Retail Math Resources

Gross Profit vs. Gross Margin vs. Gross Profit Margin

meadow-680607_640Some time ago Mame asked me the difference between gross profit and gross margin. As this is a question that crops up regularly in my classes, I thought it might be a good idea to tackle it here.

The truth is, there really isn’t a difference. Some retailers prefer to say gross margin, other retailers prefer to say gross profit. (Although some will use the term gross margin when referring to gross profit as a percentage of net sales.) Both terms refer to the difference between net sales and total cost of goods sold.

Much like the term gross margin, a few use gross profit margin to refer to gross profit dollars as a percentage of sales.

5 best retail math articles from Summer 2012

Over the past few months there have been several good articles written concerning both retailing and retail math analysis.  What follows are 5 of my favorites.  Enjoy.

  • Basics of managing Retail Business Performance”  by applythinking.  This post provides an insightful analysis of how retailers must use both turn and gmroi to analyze their overall performance.
  • How Much Does Your Beer Really Cost?” by Scott Metzger.  This cost analysis article was originally posted in The New Brewer back in February, but I didn’t see it until it hit C-Store News in June – so I’m counting it as a summer article.  The cost analysis is thoughtful, and provides helpful explanations of the various methods as well as recommendations on how best to use the information (even if you sell something other than beer.)
  • 6 Tips to Drive Inventory Turnover” by Ted Hurlbut at the “All Things Retail” blog.  While this isn’t exactly an article on mathematical analysis, it is an excellent explanation of how a retailer can improve their inventory turnover.  You will also find a short Youtube video giving highlights from the article.
  • The Mathematics of Bookselling” parts one and two by Dave Sheets at Lessons from the Saddle.  Dave takes the reader through a thoughtful analysis of gross margin percentage and inventory turnover in the bookselling industry.  His examples are clear and easy to follow, and could be applied to any retail sector.  He also has a 5 minute video covering some of the same material.
  • Sales, Stock, and Inventory, Oh My! How to Use POS Data to Improve Retail Operations” by Scott Kreisberg at The Point of Sale News.  This article is a helpful explanation of the 5 key retail math measurements that should be used when assessing the performance of your inventory.

There you have it.  The top 5 articles of the summer – in my humble opinion.  Please leave a comment if you feel there are others that should have been added to the list.

photo credit: <a href=”http://www.flickr.com/photos/simax/3390895249/”>Michael | Ruiz</a> via <a href=”http://photopin.com”>photo pin</a> <a href=”http://creativecommons.org/licenses/by/2.0/”>cc</a>

Retail Math Books

Over the years I have had to do some real digging to come up with good retail math books.  There are several out there, and I thought I’d list a few of my favorites.  Some of them are out of print now, but the mathematical information in them is as good as ever.   This is by no means a comprehensive list, rather it is a listing of those books I tend to use for reference purposes in teaching my classes.  (The below are in no particular order.)

1.  Retail Merchandise Management by Wingate, Schaller & Miller – This is my all-time favorite.  The version I use was given to me by one of my professors (thank you Dr. Ashton!)  It never wanders too far from my desk.  While many parts of the book are dated, the math concepts are as solid as ever.  And, the many examples it offers are extremely valuable.  The best part of this book is the extreme breadth and depth of coverage it gives to retail math concepts and formulas.   (Note:  this book is out of print, but can be found on www.amazon.com.)    Wingate, J.W., Schaller, E.O., & Miller, F.L.  (1972).  Retail Merchandise Management.  Englewood Cliffs, N.J.:  Prentice-Hall, Inc.

2.  Problems in Retail Merchandising, 6th edition by Wingate, Schaller & Bell – Dr. Ashton gave this workbook to me also.  It was written as a compliment to Retail Merchandise Management, covering the same concepts but giving many more examples and homework problems.  I have found these problems and examples to be very helpful when I need to go deeper into retail math for my graduate level classes.  (Note:  this book is out of print, but can be found on www.amazon.com)    Wingate, J.W., Schaller, E.O., & Bell, R.W.  (1973).  Problems in Retail Merchandising, 6th Edition.  Englewood Cliffs, NJ:  Prentice-Hall, Inc.

3.  The Buyer’s Manual by the Merchandising Division of the National Retail Merchants Association – There are many versions of this particular book.  The one I use is from 1965.  I have tried some of the later versions and have not found them to be as helpful in their coverage of math concepts.   Much like Retail Merchandise Management, this book is dated concerning other concepts, but I have found many parts of it to be helpful in understanding how math principles and formulas apply to analyzing a retail operation.    National Retail Merchants Association.  (1965).  The Buyer’s Manual, Revised Edition.  New York, NY:  The Merchandising Division of the National Retail Merchants Association.

4.  Math for Merchandising by Moore – I really like the way Moore takes a section of each chapter to explain industry jargon to students.  This is something that I often overlook doing in class.  This text also does a very nice job explaining profit measures.  However, I feel it lacks in the areas of asset efficiency.    Moore, E.  (2005).  Math for Merchandising, Third Edition.  Upper Saddle River, NJ:  Pearson Education, Inc.

5.  Merchandising Math by Kincade, Gibson & Woodard – Like most books about retail math, this one has a distinct fashion orientation.  The book includes an interesting chapter on fashion forecasting where it looks at some of the more qualitative aspects of this task.  From a math perspective, I found the book to have good coverage of pricing and P&L statements.    Kincade, D.H., Gibson, F.Y., Woodard, G.A.  (2004).  Merchandising Math:  a managerial approach.  Upper Saddle River, NJ:  Pearson Education, Inc.

6.  Mathematics for Retail Buying by Tepper – This book has been around for some time and has gone through many editions.  It is a favorite in many apparel studies programs.  I appreciate the author’s simple explanations and many examples throughout the book.    Tepper, B.K.  (2008).  Mathematics for Retail Buying, 6th Edition.  New York, NY:  Fairchild Books, Inc.

7. & 8.  I really can’t end up this post without mentioning Retailing Management by Levy & Weitz  and Retail Management by Berman & Evans.  Both of these books are good general retailing texts and have begun to include more and more retail math with each edition.  I have used each as the main retail textbook for my classes at different points in time.

**Please note that I have cited the edition of each book that I have on my shelves, newer editions may be available in several cases.

8 Retail Math Blogs & Websites I Love

I love doing research on the internet.  For someone who started off doing research in the library stacks, the idea that I can do all my research at home in my PJ’s is extremely appealing.  Not to mention how easy search engines like Google have made research. But, despite all that I’ve found it tough to find online information related to retail math. Below I’ve shared a few of the blogs and websites I use when preparing for my retail math classes.  None of these sites are dedicated solely to retail math, but all contain good retail math related content.

1.  NRF Stores – I love this website’s Annual Lists section.  Both the lists and the accompanying analysis are valuable for obtaining a better understanding of the retail industry, its past performance, largest players, and what to expect in the future.  I share the Top 100 RetailersHot 100 Retailers, and Global Powers of Retailing Top 250 during the first week of class to acquaint students with the biggest players in the industry.  The lists also allow me to introduce some basic sales concepts early in the semester.

2.  C-Store News recently created a Retail Formulas section on their blog.  It does a nice job explaining what each formula is, how it is used, and how to calculate it.

3.  Retail Perspectives “All Things Retail” – I enjoy Ted Hurlbut’s approach to writing about retail.  He regularly discusses ways that retail math concepts can help solve problems retailers face, and often provides real-world examples.  Putting that real-world framework around math formulas tends to make them a little less dry and boring.  You might also want to check out his article “Measuring Inventory Productivity” at Inc. It’s a great explanation of why you don’t have to have stellar sales to have a good GMROI.

4.  RetailSails – This website contains a lot of helpful information and financial analysis.  I highly recommend the Financial Capsules found on their StoreIntel page, the industry sales analysis and tracking on the DataCenter page, and their Blog.

5.  RetailWire – retailwire is an online board that publishes three thought-provoking retail oriented discussions daily.  I find these invaluable for sparking discussions in my classrooms.  And, many times there is a retail math angle to their discussions and articles.  For example, the discussion titled “Fashion Scalpers Hit Jackpot Reselling Missoni for Target on Ebay” was very relevant to classroom discussions about markup and pricing.

6.  Kantar Retail iQ – I appreciate Kantar’s monthly analysis of retail sales, and their comments on various retailer’s financials.  (For example, David Marcotte’s analysis of Family Dollar’s performance.)

7.  DMS Retail – over the years, DMS Retail has had several good entries on retail math.  I particularly like their article on GMROF.

8.  Apply Thinking – this blog is fairly new, but the first few articles show a lot of promise.  I really like how the author lays out examples using multiple products and then takes the reader through them step-by-step

 

If you have suggestions for websites and blogs that contain useful retail math information, please share them.  I’m sure there are many good ones I’ve missed.

Retail Math Apps???

I think it must be a sign of my age that I was truly surprised when I came across a retail math app for my Droid phone.  My first thought was “why?”

Don’t get me wrong, I love my smartphone and it has many apps that I use on a regular basis.  I just didn’t see how a retail math app would be helpful.  After all, isn’t the hard part of retail math knowing when to use the formula and how to apply the results?  Then again, it would probably be a lot simpler to use one of these apps than to have to constantly refer to my cheatsheet to remember all of the formulas.

A brief search for retail math apps on Droid gave me the three results listed below.  If I missed any, please let me know and I’ll add them to the listing.  Or, if you have an iPhone and know of any apps for that device, please let me know and I’ll start a listing for iPhone.

Also, if you have used a retail math app, I would love to hear your opinion of it.

(Please note that I am not endorsing any of these apps.  I have not used any of them and do not know how thorough their coverage is, or how well they work, or basically anything about them.)

Retail Math by Gary Loyd  
Quick Retail Pro by Deft Systems Inc(There is both a paid and a free version of this particular app.)
Mark Up & Margins by Relativity

 

Helpful Links

Several of these links are math related, but some are just great general retail industry information.  At the bottom you will find teaching related blogs that I enjoy. View each by selecting ‘here’ next to the desired article/site.

Retail related:

Teaching related:

  • Joe Hoyle: Teaching – Getting the Most from Your Students: here

  • Teaching College English – the glory and the challenges: here

  • James M. Lang – Occasional reflections on higher education, religion, literature, and music. View here

  • Busynessgirl – What are you learning?: here