New Year 2011

Salam All...

It is a great pleasure for me to wish all my students a Happy New Year 2011 and may all of you get all the best things in life.

As for me, a student myself in one of Malaysia's finest university in Malaysia, am great-full to Allah Subhanahu wataala for all the tremendous ventures in life that I've experienced last year. My ups and downs really opened my eyes wider to understand the world as it is now.

I hope all can benefit from this blog. Do use it as it is meant to be used. Please do comment if you need more information or updates. I would appreciate all comments and responds. Barokallahu lakuma...

Love

P4720- RETAIL OPERATION 2 FIFO vs. LIFO INVENTORY CONTROL

Notes from RETAILING 6th Edition by DUNNE & LUSCH

FIFO
Stands for First In, First Out and values inventory based on the assumption that the oldest merchandise is sold before the more recently purchased merchandise.

• merchandise on the shelf will reflect the most current replacement price

• During inflationary periods this method allows “inventory profits” (caused by selling the less expensive earlier inventory rather than the more expensive newer inventory) to be included as income.


LIFO
Stands for Last In First Out and values inventory based on the most recently purchased merchandise is sold first and the oldest merchandise is sold last.

• designed to cushion the impact of inflationary pressures by matching current costs against current revenues

• costs of goods sold are based on the cost of the most recently purchased inventory; older inventory is regarded as unsold inventory

• during inflationary period, LIFO method results in the application of a higher unit cost to the merchandise sold and lower unit cost to the inventory unsold

• In rapid inflation most retailers use the LIFO method, resulting in lower profits in income statement, thus lower income taxes

• most retailers prefer LIFO for planning purposes since it accurately reflects replacement cost


Sample Situation
You begin the year by a total inventory of 15 home theaters which you purchased on the last day of the preceding year for RM500 each. If these home theater packages were the only merchandise in stock, your beginning inventory was RM7,500 (15xRM500).
Suppose also that during the year you sold 12 packages for RM900 each, for total sales of RM10,800; that in June you purchased 8 new home theater packages (same make and model as the old ones) at RM525; and in November you bought 4 more at RM550.
Thus, your purchase were RM4,200 in June and RM2,200 in November for total of RM6,400 and you will still have 15 home theater packages in stock at the year end.

LIFO ACCOUNTING METHOD
• Ending inventory = beginning inventory = RM7,500
• We assume the 12 packages sold were the 12 purchased during the year

Calculation:
Net sales
RM10,800 (12xRM900)

Beginning inventory
RM7,500(RM15xR500)

Purchases
RM6,400 (RM4,200 in June+RM2,200 in November = RM6,400)

Goods available
RM13,900 (beginning inventory +purchases)

Ending inventory (end of the year)
RM7,500 (beginning inventory=ending inventory)

Cost of goods sold
RM6,400 [(Goods available - ending Inventory) OR
(RM4,200 in June+RM2,200 in November = RM6,400)]

Gross margin
RM 4,400 (Gross margin= Net sales- Cost of goods sold)


FIFO ACCOUNTING METHOD
• We assume we sold 12 of the original RM500 packages and had 3 left.
• These 3 home theater packages + June + November purchases result in ending inventory of RM7,900 [(3xRM500)+(8xRM525)+(4xRM550)]

Calculation:

Net sales

RM10,800 (12xRM900)

Beginning inventory

RM7,500 (15xRM500)

Purchases

6,400 (RM4,200 in June+RM2,200 in November = RM6,400)

Goods available

RM13,900 (beginning inventory +purchases)

Ending inventory (end of the year)

7,900 [(3xRM500)+(8xRM525)+(4xRM550)]

Cost of goods sold

6,000 (Goods available - ending Inventory)

Gross margin
RM 4,800 (Gross margin= Net sales- Cost of goods sold)

Note:
Retailers are permitted to change its method of accounting only once.




Exercise
Instruction: Fill in the blanks with the correct answers.
1. Read the problem question carefully!
2. Calculate and solve this problem using LIFO and FIFO accounting method. Show your work.
3. Send your work here by using the comment box.
4. Send your work before 12.00a.m tonight (27 August 2010).

You begin the year by a total inventory of 20 home theaters which you purchased on the last day of the preceding year for RM600 each. If these home theater packages were the only merchandise in stock, your beginning inventory was RM12,000 (20xRM600).
Suppose also that during the year you sold 13 packages for RM900 each, for total sales of RM11,700; that in June you purchased 8 new home theater packages (same make and model as the old ones) at RM500; and in November you bought 5 more at RM550.
Thus, your purchase were RM4,000 in June and RM2,200 in November for total of RM6,400 and you will still have 20 home theater packages in stock at the year end.

Retailers are permitted to change its method of accounting only ____________.

All the best ;)
Enjoy the long weekend!!!(After you finish this exercise o.k :P)

DRM5 - Negotiating with Vendors; Bargaining Tips for Retailers

Note: This is not an original post by the administrator but it is useful for P4720-Retail Operation 2 & P4723-Fashion Merchandising

Acknowledgment of primary source.
Shari's Retailing Blog
By Shari Waters, Retailing Guide (for further information please refer and be a member of this blog; http://retail.about.com/od/buyinginventory/tp/vendor_negotiations.htm)

Bargaining is an age-old practice that is still common in the marketplace in many countries today. In the United States, most consumers want to avoid the haggle and will simply accept the price on the tag. It is the successful retailer that has learned how to play the game of give and take with their suppliers. Learn how to negotiate with vendors to receive the best pricing and terms on products with these negotiation tips.

1. Be Prepared

Being prepared and informed is the greatest advantage a retailer can have going into vendor negotiations. Learn as much about the supplier and its products as possible. How do their prices compare to the competition? What level of service do they provide their customers? Vendor negotiation preparation also includes setting goals to determine what you want and what you can live with.

2. Always Tell the Truth

Deception tactics, such as bluffing or falsification, may do more damage than good in the vendor negotiation process. Lying is not only unethical, but it can be difficult to maintain. While being honest, be careful not to give away your bargaining power. It's not necessary to tell everything you know, but when you do tell... tell the truth.

3. Show Your Potential

If you are meeting with a potential vendor for the first time, odds are he/she may know nothing about your company. Begin the negotiation with some history about your retail business. Explain any future expansion plans and let the vendor know how doing business with you will help them.

4. Ask About Incentives

The whole idea behind negotiating with manufacturers and suppliers is to receive the best price, payment terms, advertising allowances and even exclusivity. Start by asking what incentives you qualify for and let the negotiations begin from there. Don't be afraid to ask for what you want.

5. Mention the Competition

It is okay to mention the vendor's competition in the negotiation process but don't disclose any pricing or other confidential details. There is nothing wrong with letting a supplier know their competitor is in a good position, whether it is real or perceived.

6. Find a Fair Compromise

Just like the retailer, the vendor must make a profit to stay in business. Vendor relations should be treated as collaboration rather than conquest. As you negotiate a good deal for your retail business, consider the outcome for the supplier.

7. Think Long Term

Establishing a solid, trustworthy relationship with a supplier can only help your retail business. Vendors, who feel the customer will be loyal, may concede to even more incentives in order to maintain a long-term partnership.

8. Take Your Time

Never feel pressured to buy from a salesman. If you're not satisfied with the negotiating process, ask for time to think about the offer.

9. Get It in Writing

As the negotiation process comes to a close, make sure the offer is put to paper. Don't sign any sales contract unless it matches the verbal agreement.

10. Practice Makes Perfect

Not everyone is a natural negotiator. It takes time to learn when to speak, when to be silent and how to read body language. The more you negotiate and sharpen your skills, the better you'll get.

Especially for Muslimah

Note: image of gems is not of administrator's work


Salam all...

As future retailers, we know that we are going to handle different categories of merchandise. There are cheap and expensive merchandise.

Cheap non-perishable merchandise such as food and plastic ware has to be sold immediately.They are displayed on cheap racks; touched, held, poked and even squeezed by customers. There are times when if any of these items fall on the floor, they will not be picked up or maybe ignored, or swept away and dumped in the garbage can.

Whereas, expensive merchandise such as gem and jeweleries, are always handled with care and kept in very expensive display cabinet, with beautiful lighting and locks. Sometime they are kept away in bullet proof vaults. Customers can only look and admire their beauty from afar; no one can touch, hold, poke or even squeeze these items without permission from the store owner. If these customers have the ability to purchase these item, they will continue to care and handle them with love and care.

I put in this analogy just to poke your mind and hope you start thinking about yourselves.

You, my students are precious gems and jeweleries in my eyes. I hope you see yourselves as I do, insya Allah.

Please refer this site insya Allah...
http://www.facebook.com/#!/photo.php?pid=5456875&fbid=423013721575&id=226669856575

BY THE WAY... THIS IS NOT THE WAY TO GO...

MARKAH PENILAIAN BERTERUSAN RETAIL OPERATION 1, RETAIL OPERATION 2, FASHION MERCHANDISING DAN PEMASARAN 1

P4720 RETAIL OPERATION 2
1 01DRM07F033 -74
2 01DRM07F2001 -91
3 01DRM07F2002 -75
4 01DRM07F2004 -84
5 01DRM07F2005 -80
6 01DRM07F2006 -84
7 01DRM07F2007 -78
8 01DRM07F2008 -81
9 01DRM07F2009 -91
10 01DRM07F2010 -88
11 01DRM07F2015 -86
12 01DRM07F2016 -77

P4723 FASHION MERCHANDISING
1 .01DRM07F033 -67
2 .01DRM07F2001 -77
3 .01DRM07F2002 -76
4 .01DRM07F2004 -80
5 .01DRM07F2005 -72
6 .01DRM07F2006 -78
7 .01DRM07F2007 -76
8 .01DRM07F2008 -81
9 .01DRM07F2009 -82
10 .01DRM07F2010 -77
11 .01DRM07F2015 -74
12 .01DRM07F2016 -66

P1701 PEMASARAN 1
1 .01DRM09F1006 -50
2 .01DRM09F1007 -70
3 .01DRM09F1008 -58
4 .01DRM09F1024 -69
5 .01SPP09F1004 -67
6 .01SPP09F1005 -50
7 .01SPP09F1014 -72
8 .01SPP09F1019 -42
9 .01SPP09F1023 -51
10 .01SPP09F1041 -67
11 .01SPP09F1045 -39
12 .01SPP09F1046 -73
13 .01SPP09F2001 -40
14 .01SPP09F2002 -64
15 .01SPP09F2003 -40
16 .01SPP09F2004 -63
17 .01SPP09F2005 -76
18 .01SPP09F2006 -68
19 .01SPP09F2007 -42
20 .01SPP09F2008 -74
21 .01SPP09F2009 -70
22 .01SPP09F2010 -48
23 .01SPP09F2011 -49
24 .01SPP09F2012 -50
25 .01SPP09F2013 -69
26 .01SPP09F2014 -61
27 .01SPP09F2015 -50
28 .01SPP09F2016 -54
29 .01SPP09F2017 -53
30 .01SPP09F2018 -42
31 .01SPP09F2019 -31
32 .01SPP09F2020 -58
33 .01SPP09F2021 -38
34 .01SPP09F2022 -40
35 .01SPP09F2023 -38
36 .01SPP09F2024 -54
37 .01SPP09F2025 -52
38 .01SPP09F2026 -39
39 .01SPP09F2027 -0
40 .01SPP09F2028 -41
41 .01SPP09F2029 -51
42 .01SPP09F2030 -55
43 .01SPP09F2031 -39
44 .01SPP09F2032 -61
45 .01SPP09F2033 -33
46 .01SPP09F2034 -62
47 .01SPP09F2035 -61
48 .01SPP09F2036 -42
49 .01SPP09F2037 -40
50 .01SPP09F2038 -39
51 .01SPP09F2039 -32
52 .01SPP09F2040 -67
53 .01SPP09F2041 -49
54 .01SPP09F2042 -41
55 .01SPP09F2043 -25
56 .01SPP09F2044 -44
57. 01SPP09F2045 -52


P3719 RETAIL OPERATION 1
1 .01DRM08F2001 -86
2 .01DRM08F2002 -72
3 .01DRM08F2003 -89
4 .01DRM08F2004 -85
5 .01DRM08F2005 -71
6 .01DRM08F2006 -94
7 .01DRM08F2007 -78
8 .01DRM08F2008 -81
9 .01DRM08F2009 -72
10 .01DRM08F2010 -70
11 .01DRM08F2011 -86
12. 01DRM08F2012 -75
13 .01DRM08F2014 -75
14. 01DRM08F2015 -80
15 .01DRM08F2016 -66
16. 01DRM08F2018 -79

Selecting of Merchandise Sources (from Retailing; Dunne & Lusch, 2008)

1. Dependent on retailer’s type of store and merchandise sold:
a. selling history,
b. consumer’s perception of the manufacturer’s or wholesaler’s reputation,
c. reliability of delivery,
d. trade terms,
e. projected markup,
f. quality of merchandise,
g. after sale service,
h. transportation time,
i. distribution center processing time,
j. inventory carrying cost,
k. country of origin,
l. fashionability, and
m. net cost

2. Private label brands
a. increases as the perceived consequences of making a buying mistake decrease
b. increases when the different brands in the category are perceived to have a wide variance in quality
c. decrease in the quality benefits are deemed to require actual trial/experience rather than being assessable through a search of package label information

3. vendor profitability analysis statement : is a tool used to evaluate vendors and shows all purchases made the prior year, the discount granted, the transportation charges paid, the original markup, markdowns, and finally the season-ending gross margin on that vendor’s merchandise.

4. confidential vendor analysis : is identical to the vendor profitability analysis but also provides a three- year financial summary as well as the names, titles, and negotiating points of all the vendor’s sales staff.

5. Retailers can classify vendors into five categories:

a. Class A vendors : are the vendors from whom the retailer purchases large and profitable amount of merchandise. The retailer may distinguish these vendors from others by purchasing a certain minimum quantity from them.
b. Class B vendors : are those that generate satisfactory sales and profits for the retailer.
c. Class C vendors : are those that carry outstanding merchandise lines but do not currently sell to the retailer.
d. Class D vendors : are those from whom the retailer purchases small quantities of goods on an irregular basis.
e. Class E vendors : are those with whom the retailer has had an unfavourable experience.

6. Retailers should indentify the image they want to portray as retailers when merchandising and choosing vendor. They should ask themselves:
a. Where does this product fit into the strategic position that I have staked out for my department?
b. Will I have an exclusive with this product or will I be in competition with nearby retailers?
c. What is the estimated demand for this product in my target market?
d. What is my anticipated gross margin for this product?
e. Will I be able to obtain reliable, speedy stock replacement?
f. Can this product stand on its own, or is it merely a “me-too” item?
g. What is my expected turnover rate with this product?
h. Does this product complement the rest of my inventory?

7. Vendor Negotiation
Negotiation: is the process of finding mutually satisfying solutions when the retail buyer and vendor have conflicting objectives.

Retail buyer must negotiate:
a. price,
b. delivery dates,
c. discounts,
d. shipping terms,
e. exclusivity,
f. guaranteed sales,
g. markdown money,
h. promotional allowances,
i. and return privileges
Manufacturers become increasingly aware of the cost of carrying excess inventory. Both manufacturers and retailers have become more concern with the time value of money and the effect on the cash flow. Buyer puts all the upcoming areas of negotiations and previous agreements in letter form and sends it to vendors before going into market to eliminate any misunderstanding afterward. Buyers must also be familiar with the prices and discounts allowed by each vendor.
Trade discounts: is also referred to as a functional discount and is form of compensation that the buyer may receive for performing certain wholesaling or retailing services for the manufacturers. Often express in a chain, or series such as “list less 40-20-10” which represents a percentage reduction from the list on an item.
Quantity discounts : is a price reduction offered as an inducement to purchase large quantities of merchandise. Three types:
a. noncumulative quantity discount : a discount based on a single purchase
b. cumulative quantity discount : a discount based on total mount purchased over a period of time
c. free merchandise : a discount whereby is offered in lieu of price concessions
Promotional discount : is a discount provided for the retailer performing an advertising or promotional service for the manufacturer
Seasonal discount : is a discount provided to retailers if they purchase and take delivery of merchandise in the off season
cash discount : is a discount offers to the retailer for the prompt payment of bills
2/10 net 30 means 2 percent discount is given if payment is received within 10 days of the invoice date and the net amount is due within 30 days.
In order to obtain more advantage from this discount, retailer/buyer could negotiate:
a. End-of-month (EOM) dating: allows the retailer to take a cash discount and the full payment period to begin on the first day of the following month instead of the invoice date.
b. Middle-of-month (MOM) dating is similar to EOM except the middle of the month is used as the starting date.
c. Receipt of goods (ROG) dating allows the starting date to be the date retailer received the goods
d. Extra dating (Ex) merely allows the retailer extra or free days before the period of payment begin.
e. Anticipation is something that is not widely use nowadays. Anticipation allows a retailer to pay the invoice in advance of the expiration of the cash discount periods and earn an extra discount.

8. Delivery Terms
Another factor in negotiation. This is because it determines the title to the merchandise passes to the retailer, who pays the freight and who is obligated to file damage claims. Three most common shipping terms are:
a. Free on board (FOB) factory : the buyer assumes title at the factory and pays all transportation costs from the vendor’s factory
b. Free on board (FOB) shipping point : the vendor pays the transportation to a local shipping point, but the buyer assumes title at this point and pays all further transportation costs.
c. Free on board (FOB) destination: The vendor pays all transportation costs and the buyer takes title upon delivery.

Tasks can wait, customer's won't

from: http://www.dmsretail.com

Note from me : This is a simple common courtesy everybody in retail should know. Please read carefully...

"Give me a minute" says the Associate...let me see if I understand this.

The other day I walked into a retail store in a busy mall just as it was opening. The doors were completely open. The lone staff member was busily moving fixtures toward the front of the store - those fixtures that have to be moved back at day's end so that the door grills can be closed.

I was holding a cup of coffee and was pulling my briefcase and carrying a purse. I saw an item that caught my eye as I was walking past the store. Isn't that great? The store had a visual display that attracted me - a customer.

I approached the display and realized that I would probably not be able to reach the item comfortably and would likely make a mess if I tried. I turned and asked the young woman working there if the item was merchandised anywhere else in the store so I could have a closer look at it. I should mention that the employee had not yet acknowledged my presence in the store but there is no question she knew I was there.

Her response, delivered without looking at me and in a tone that said ‘you're disturbing me', was "give me a minute". Excuse me? Give you a minute? I don't believe that was the correct response. Perhaps something like "oh yes, they are right over there" or "I'll be happy to get that one down for you" would have been appropriate. I am not an impatient person but

I certainly don't think that I should have to shop on the Associates' schedule. The store was open and the item was available for sale. She should have reacted differently. So, no, I did not give her a minute. I left the store. And just in case you are wondering...I would definitely have made the purchase if things had worked out differently.

The customer in your store is much more important than any task. This is Customer Service 101. If you are not servicing another customer then you have no right to expect someone to "give you a minute" for anything. The customer who is there in your store asking for your help may purchase something. Isn't this what you want? Don't you want to sell your merchandise to customers? It is unbelievable to me that some retailers do not yet understand these simple concepts.

Customers are time starved. Don't make them wait. If you must make them wait, make sure you have a good reason and make sure you explain why they are waiting.