Doing math in any environment can be tedious, but knowing how to do retail math as a retailer can ultimately determine if your business will be successful. S-Cube Fixtures is here to help with knowing how to calculate pricing, inventory management, sales forecasting, and more! Read more in this blog on how to fully understand retail math and use it to your advantage in a competitive landscape.
What is Retail Math?
Retail math consists of various calculations and formulas to understand, track, and optimize business operations. Retail managers use these calculations to make informed pricing, inventory management, and sales forecasting decisions. Understanding retail math isn't just about crunching numbers—it's about gaining insights to drive better business decisions, leading to increased profitability and efficiency.
4 Key Retail Math Terms to Know
There can be many math terms to remember when you're a retail manager or retailer, and that is imperative to know. Here are four key terms to keep in mind:
Markdown Percentage
When pricing changes on certain products, it is often called a markdown percentage. It’s the reduced price from the original divided by the increased sales. Knowing this term can help you understand a discount’s impact on your revenue and total sales.
Gross Margin
Having the term ‘gross margin’ in your mind is extremely beneficial because it represents the difference between sales and the cost of goods sold (COGS). Higher margins mean the store retains more money from each sale.
Inventory Turnover
Turnover can mean the amount of times something is sold or replaced. In retail terms, inventory turnover is a common phrase that shows how often goods or products are sold over a period of time. In conversation of store products or goods, high turnover rates indicate strong sales, while low rates may signal overstocking or weak sales.
Sales per Square Foot
This term is pretty self-explanatory but helps retailers understand the financial benefits of their retail space. Sales per square foot measure how much revenue you generate per square foot of retail space.
Role of Retail Math in Decision-Making
As we’ve mentioned, knowing retail math and what certain terms mean as a retailer is extremely beneficial in how you run things in a business. Not only can you make informed decisions, but you can also determine things like pricing more effectively to maximize profits. Also, inventory management becomes easier because you know how much stock is the right amount, so you’re not put in a position to deal with too much or too little. With knowledge of retail math, you’re even better positioned to predict future sales by making better staffing and purchasing decisions.
How to Integrate Retail Math into Daily Operations
At this point, you should be familiar with popular retail math terms, but how can you integrate them into your daily tasks as a retailer? First, consider implementing retail math and its formulas while reviewing key metrics, then train your staff accordingly based on what those formulas tell you. For instance, is there more of a specific product this month vs. others? Then, relay to your staff to showcase this product more through Point of Purchase displays or consider having a promotional sale so that you can push this product to sell more than the others. Also, make all your decisions on data. If your metrics tell you that customers tend to buy more during holidays, have your store and staff maximize their efforts during those times.
Related Article: What is PDQ?
Summary
Running a store or business isn’t as easy as it seems. Knowing things like retail math is essential for any retailer that wants to succeed. By being familiar with key terms and knowing how to implement them in your daily operations, you can be put in a better position than your competitors and potentially increase sales. S-Cube Fixtures is here to help give you retail tips on success as well as provide you with quality and custom fixtures or displays. Learn more on our website today for innovative retail solutions!
