Retail Math
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by Valerie Lipow
Look at retail job postings. Some of them may mention retail math skills as a requirement. So what is retail maths, and why is it so important in qualifying for a retail opening?
It's Not Rocket Science
Maths is used at every level of retailing, from the part-time sales clerk to the executive suite.
At its simplest, retail math is basic arithmetic, such as counting money and making change. Computing the total amount of a sales transaction also involves calculating percentages to determine discounts, VAT and shipping charges. Depending on the type of merchandise, a sales associate may need to determine costs by measurement -- like length or weight -- or by unit price.
More complex retail tasks require more advanced retail math skills. And the higher up in retailing you go, the more maths skills you need.
Be Friendly with Numbers
Retailers forecast income and evaluate expenses on a daily, weekly, monthly, quarterly and annual basis. Obtaining, analysing and reporting accurate financial information is performed by sales associates, stock clerks, store managers, inventory specialists, buyers, planners, marketing specialists, financial analysts and executives.
A thorough knowledge of fractions, decimals and percentages is needed to calculate such items as mark-ups, markdowns, taxes and sales receipts, as well as commissions, payroll, sales and expense budgets.
Advanced retail math responsibilities include the following:
- Calculating mark-up based on cost or selling price.
- Calculating stock turnover.
- Calculating retail sales, gross margin and break-even points.
- Planning and controlling price/stock reductions (markdowns).
- Developing seasonal budgets.
- Developing inventory plans (determining stock needs in proportion to forecasted sales).
- Interpreting profit and loss statements.
- Evaluating balance sheets (composed of assets, liabilities and equity).
- Performing ratio analysis. (Comparing items on the balance sheet or income statement with other items on these statements. Reviewing the past year's ratios will pinpoint trends, which can be used to forecast the future.)
Forecasting cash flow budgets. (Projecting cash receipts and cash expenses for a period of time into the future, usually done on a monthly basis.)
Performing these calculations often requires familiarity with retail formulas. But not all retailers use the same equations. Beth Thomas, a training manager for The Limited, notes: "New employees may bring to their positions assumptions about retail math that may not necessarily align with The Limited 's business processes."
