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MARKETING
By Ritchie Sayner RMSA Retail Solutions
Markups & Markdowns Understanding
Markup Language Let’s make sure we are all
Is Your Initial Markup Enough?
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One question I am repeatedly asked by retailers is how to increase maintained margin. Several answers readily come to mind, the most obvious being to avoid overbuying, and there- fore reduce the margin eroding markdowns that accompany such a practice. Another way of increasing maintained markup is to fi nd ways to increase initial markup (IMU).
speaking the same language. When I say, “initial markup,” I am referring to the markup percentage placed on the goods when they are received from the manufac- turer. Maintained markup is what is left after taking into account the cost of the markdowns. Stated dif- ferently, maintained markup is the difference between net sales and the gross cost of the merchandise sold. Gross margin is the differ- ence between net sales and the net cost of the merchandise sold. To- tal merchandise costs include the cost of the goods, freight inward, any workroom costs, and any ad- justments for earned discounts. It is clearly a different number than maintained markup.
The Correct Initial Markup is Crucial
Having the correct initial
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bargainoutlet@mediacombb.net 116 August 2011
markup is the cornerstone to achieving the desired maintained markup. Have you ever wondered what the determining factors for initial markup are? Why do we double the cost? What does the term “keystone markup” mean, and where did it originate? My quest into the origin of keystone markup did not yield any defi ni- tive answers. One source at the National Retail Federation (NRF) seemed to think that there was an actual “markup key” in the early days of cash registers. This prac- tice predated individually ticketed continued on page 117
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