Margin - Markup Stock Turn Stock Productivity ROSE GMROI Pricing Markdown

MARGIN In Laymans Language – How much

you get by selling goods worth Rs.100-

Eg.Vicks Vaporub cost price – Rs.20.83

Selling price – Rs.25.00 Difference Rs.4.17 i.e.16.64% is the

MARGIN

MARKUP In Laymans Language – How much you

add to the cost Eg. Vicks Vaporub cost price Rs.20.83 You add 20% i.e.Rs.4.17. So the selling

price is Rs.25.00 Both MARKUP & MARGIN are talked,

expressed & written in percentage only.

FORMULA MARKUP = (SP -CP) ------------ X 100 CP

MARGIN = (SP-CP) ----------- X 100 SP

FIXED MARKUP STRUCTURE OF FMCG COMPANIES.

Eg. Hindustan Lever Limited a) 6.66% on TEA b) 8.00% on ALL SOAPS and DETERGENTS JAI and BREEZE 14% c) 10.00% on all other items d) 12% on SANITARY NAPKINS e) 15% on DIAPERS This is apart from cash discount, schemes, offers and

bargain if any. Eg. BROOKE BOND, RED LABEL MRP is Rs.181.00 How do you know the Cost Price

181/1.0666=169.70

FIXED MARKUP STRUCTURE OF FMCG COMPANIES Eg. Proctor & Gamble a) 8% on SOAPS and DETERGENTS b) 10% on SHAMPOOS c) 12% on SANITARY NAPKINS d) 20% on MEDICINES & MEDICAL PRODUCTS Eg. TIDE 2 kg MRP - Rs.102.00 CP = ? TIDE 500g MRP - Rs. 26.00 CP = ?

This is item wise MARKUP, MARGIN with reference to FMCG Products

NON MRP PRODUCTS Management has to decide the MARKUP, keeping in mind,

market practice, degree of competition and sales strategy. Eg. GROCERY- TURDAL- 100kg Bag-Rs.3200.00 Transportation- Rs. 16.00 per bag APMC 1%- Rs. 32.00 OCTROI- NIL __________ Total CP - Rs.3248.00 MARKUP-20% Rs. 649.60 Rs.3897.60 per 100kg Per kg price Rs 38.976 Rounded to Rs. 39.00

MARKUP & MARGIN Varies from ITEM TO ITEM & sometimes from SKU TO SKU

JEERA CP = 80/-per kg MARKUP MARGIN

100kg Pack SP 12/- 50% 33%

500kg Pack SP 55/- 37.50% 27.27%

HOW DO YOU KNOW THE AVERAGE MARGIN OF A STORE?

From Trading Account only.

EROSION OF MARGIN a) Carriage inward. b) Packing Material & Shopping Bag. c) VAT d) Shortage (Invisible). e) Commission on mode of payment

(Credit Card, Sodex,etc)

d) Loyalty Schemes Why MARGIN varies from store to store??

STOCK TURN Means rotation of STOCK in a year. FORMULA = SALES / Avg Stock

• Eg. Sale = Rs.12,00,00,000-

Opening Stock = Rs.50,00,000- Average Stock = Rs.50,00,000- Stock Turn = 24 Times Stock Turn is always expressed in No. of Times. This is the root of comparitive efficiency between

stores.

STOCK PRODUCTIVITY How much Gross Profit is generated by

average stock. Gross Profit in retailing is generated by

cross force of MARGIN and STOCK TURN. This is called ROSE – Return on Stock

Employed. Formula – 1) MARGIN X STOCK TURN 2) (GP X 100) / AVG.STOCK

GMROI FORMULA = (GP X 100) / Paidup

Stock GMROI > ROSE