Monday
Oct202014

Cumulative markup (CMU) in assortment planning

The right product into the right stores at the right time is key to natural success and profitability for any account manager’s retailers. With the challenges in today’s market place, including unprecedented pricing pressure, retailers are looking for new ways to increase their protect their profit.

 

Major retailers are able to negotiate post-season profit agreements with many brands – which can mean significant financial cost for the brand.

 

Specialty retailers are often working with profit margins at half the level of the Majors.

 

A solution that may work for brands, major retailers and specialty retailers is a higher initial markup pre-season. Depending on your brands strategy, this may not be possible to negotiate for all or even your best retailers. But what may be possible is a higher mark-up on select items.

 

How will you (and your retailer) know the kind of profit impact a few items at a higher mark-up may have on their overall profit? By calculating the cumulative markup on the group of goods.

In the case below, the cumulative markup is calculated on a group of purchase orders. The same formula could also be applied to calculate the mark-up on a group of items on a purchase order, or to calculate a season’s on order receipts. 

 

 

Click to enlarge

 

In the case above:

CMU = 1 – (total cost / total retail)
CMU = 1 – ($79,910.22 / $240,930.00)
CMU = 1 – 0.3317
CMU = 0.668  or  66.8%