To crack on with our masterclass, do you know the difference between profit on return and mark-up?
So asked Theresa Jennings, who at 25 and with a new baby isn't really 'into retailing' but she helps her dad out at a caravan site and shop on the east coast of Norfolk.
She posed the question having suggested to her dad that they sounded like the same thing and sent me diving deep into my files chasing a dim memory. Ah, there it was.
In 1991 I wrote and edited a large slice of a C-Store supplement called Fact Pack. It was so popular it was updated the following year, but then faded into the obscurity of my files.
The introductory spread in both issues was entitled 'Parlez-vous retail?' This piece on retail speak mainly covered the shorthand stuff like KVI (known-value item) and RSP (recommended you-know-what) and GP (no, I won't even bother with this one). It also included SKU (stock-keeping unit), USP (unique selling proposition, a marketing invention if ever there was one) and FMCG (fast-moving consumer goods, ditto the previous example).
In among all this were definitions of POR and mark-up. Profit on return is pretty straightforward. Even I get it. The trick is to get the right mix of low POR-groceries (hang your head baked beans) and high ones (good on you shampoos and sarnies).
And here is an equation on the subject (actually I pinched it from Nurdin & Peacock back in the eighties). How to compute POR: To sell an item costing £1.20 at 17% POR, programme 120 divided by 83 which gives a selling price of £1.45. (The division figure of 83 is arrived at by deducting the POR required - 17 - from 100.)
And on to mark-up. This is the selling price minus the cost price and is not to be confused with margin. Thus a £1 sale which cost you 75p to buy has a mark-up of 25p, which expressed as a percentage is 33.3%.