2. Objectives To analyze the concept of retail stores.
To examine prices of merchandise and how they vary.
To define and identify various types of discounts.
To determine how prices and discounts effect each other.

3. Retailing
Consists of the sale of merchandise to customers in a store setting
Means a store is selling directly to the customer
Occurs in places such as:
department stores: Dillard’s®, JCPenney®, Kohl’s®
kiosks: a small, freestanding retail outlet requiring a small amount of shopping

4. Price
Pertains to the amount of money a store charges a customer for merchandise
Varies depending on the retail store
tend to stay fairly consistent between stores to keep up with competition
competition: two or more retailers, selling the same nature of merchandise, competing for customers’ and business

5. Price Is based on the amount charged by a wholesaler for products
Includes the markup cost
wholesaler: an intermediary between the manufacturer of products and the retailer; buys products in bulk from manufacturers to sell to retailers; also called suppliers
markup percentage: the difference between the initial cost of a product and the price a store charges a customer for the product; determines how much profit a store will make on their products

6. Percentage Markup Example
Bethany owns a clothing store. She buys jeans from a wholesaler at a cost of $35.00 a pair. Bethany wants the markup percentage on the jeans to be 19%. The price of the jeans for customers can be figured by doing the following:
Original Price x (1 + Markup Percentage)=Price of jeans to customer
$35.00 x 1.19 = $41.65 is the price customers will pay for the jeans
$ $35.00 = $6.65 profit for Bethany on each pair of jeans sold
To get 1.19, move the decimal two places to the left in order to multiply the price by the percentage. By adding 1 before 0.19, the original price of the jeans ($35.00) is automatically added into the price during the multiplication step. That way, the price doesn’t have to be added in at the end and a step in the problem can be skipped.

7. Purchases
Are made by a customer buying merchandise from a retail store
Means a transaction occurs and necessary changes are made to a customer’s account
account: formal records of financial transactions by a person or company
transaction: an agreement between a buyer (consumer or business) and a seller (store or supplier) to exchange a product or service for payment

8. Purchases Can be carried out through: cash payments
credit card payments
debit cards payments
writing checks

9. Sales Tax Is applied to the purchase of goods or services
Varies for each state
example:
Kansas: 5.3%
New Jersey: 7%
Oklahoma 4.5%
Does not exist in some states
Alaska, Delaware, Montana, New Hampshire and Oregon

10. Discount Is a reduction in the price of a good or service
Means a customer pays less for an item than they would normally pay
Are applied at different times by various retail outlets
Determines a new price for a product

11. Types of Discounts Include the following: buying in bulk
buy one get one free
percentage-off
cash-off
rebates
employee
free shipping
reward points

12. Buying in Bulk Discount
Applies to retailers when products are purchased from wholesalers
Consists of a discount for buying a large amount of merchandise
Often occurs when a wholesaler is attempting to eliminate inventory of a product
Can be considered “borrowing from future sales”
if a retailer stocks up on merchandise, they will not need to purchase as much from the wholesaler in the future
inventory: the products on hand and ready to be sold

13. Buying in Bulk Example
Amy owns a retail store selling high-end luggage. She runs out of duffle bags and calls her supplier to order more. He informs her several new lines of luggage are about to be available, so he would be willing to sell her the duffle bags for $250 a piece compared to the normal $300 a piece if she orders at least This discount would save Amy $50 per bag. She agrees to the discount and orders the duffle bags.

14. Buying in Bulk Example Duffle Bags (100 x $300) $30,000
Bulk Discount Applied ($50 x 100)
- $5,000
Total of Purchase
$25,000
9.2% Sales Tax Applied ($25,000 x .092)
$2,300
Final Total Due
$27,300

15. Buy One Get One Free Discount
Requires a customer pay for the more expensive of the two items purchased, and gets the less expensive of the two for free
Entice customers to purchase more of the store’s merchandise
they are paying a smaller portion of what they would normally pay for it
Can also be referred to as “BOGO”

16. Shopping Example Setup
Amanda loves to go shopping when there are sales at her favorite retail stores. She finds a BOGO sale for shirts at Fran’s Fashions and finds two shirts she likes. Amanda buys the more expensive of the two shirts, and gets the second one for free.

17. Buy One Get One Free Discount Example
Black Shirt
$13.46
Blue Shirt
$19.89
Total of Purchase
$33.35
BOGO Applied
-$13.46
New Total
6% Sales Tax Applied ($19.89 x 0.06)
$1.19
Final Total Due
$21.08

18. Percentage-Off Discount
Means merchandise is discounted by certain percentage rates off the original price
Is often used for merchandise stocked in the store for an extended period of time and is not being sold at a fast enough rate
Consist of sales such as:
10% off all shoes
buy one sweater, get the second for 50% off

19. Shopping Story Continued
Amanda then makes her way to Alisha’s Accessories. She finds a percentage-off discount on hats. They are on sale for 30% off. She also notices belts are on sale for buy one, get the second one for 50% off. Amanda buys two hats and two belts at this retail store.

20. Percentage-Off Discount Example
Red Hat
$12.47
Yellow Hat
$9.81
Total of Purchase
$22.28
30% Off Applied ($22.28 x .30)
-$6.68
New Total
$15.60
Brown Belt
$18.44
Tan Belt
$16.29
Total of Belt Purchase
$34.93
50% Off Applied ($16.29 x .50)
-$8.15
New Total (-$15.60) + (-$ $8.15)
$42.38
8.5% Sales Tax Applied ($42.38 x 0.085)
$3.60
Final Total Due
$45.98

21. Cash-Off Discounts
Allow customers to receive a portion discounted off of their purchase depending on the amount of the purchase
Are incentives for customers to purchase more
Consist of sales such as:
spend $100.00, get $15 off total purchase
spend $150, get $30 off total purchase
spend $200, gets $50 off total purchase

22. Shopping Story Continued
Amanda continues shopping and heads to Carla’s Clothing. She notices they are having a sale for $25 off a purchase of $100 or more, $50 off a purchase of $150 or more and $75 off a purchase of $200 or more. Amanda shops until she finds over $175 worth of clothes she wants to buy.

23. Cash-Off Example Purple Shirt $22.34 Jeans $63.52 Earrings $12.93
Tennis Shoes
$58.05
White Shorts
$26.77
Total of Purchase
$183.61
Cash Off Applied
-$50.00
New Total
$133.61
5.4% Sales Tax Applied ( x 0.054)
$7.21
Final Total Due
$140.82

24. Employee Discounts
Allow people to receive discounts at their place of employment
May be given to employees, but are not required of the employer
Usually consist of percentage-off discounts

25. Rebates
Allow customers to submit proof-of-purchase to the manufacturer and receive a portion of their money back from a purchase
Are frequently used by retailers because many customers forget to redeem their refund after purchasing the product
proof-of-purchase: can be obtained through the use of a receipt, barcode (UPC) or other documents included with the product when purchased

26. Rebates Usually take 8-10 weeks to process
may discourage customers from returning the paperwork or buying the product in the first place

27. Free Shipping
Is another incentive offered to customers for purchasing a retailer’s products
Usually pertains to online or catalog purchases
Offers customers free shipping on purchases such as:
over a certain dollar amount
within a certain time frame
on specific store items
Example: Target® often times offers free shipping on items purchased from their store catalog.

28. Reward Points
Are programs designed to reward customers for making reoccurring purchases and becoming loyal customers
Example: Subway® uses stamp cards to record customer purchases and rewards customers with “buy 10 sandwiches, get one free.”
Example: American Airlines® offers frequent flyer miles for regular customers
customer loyalty: when a customer is bound to a certain brand and makes repeat purchases

29. Review Buying in Bulk Buy One Get One Free Discount
requires a customer pay for the more expensive of the two items purchased, and receives the less expensive of the two free
Percentage-Off Discount
means merchandise is discounted by certain percentage rates off of the original price
Cash-Off Discount
allows customers to receive a portion discounted purchase depending on the amount of the purchase
Buying in Bulk
applies to retailers when they purchase products from wholesalers
consists of a discount for buying large amounts of merchandise

30. Review Employee Discount Free Shipping Reward Points Rebate
allows people to receive discounts at their place of employment
usually consists of percentage-off discounts
Rebate
allows customers to submit proof-of-purchase to the manufacturer, and receive a portion of their money back from a purchase; usually on items like electronics
Free Shipping
usually pertains to online or catalog purchases
offers customers free shipping on purchases
Reward Points
are programs designed to reward customers for making reoccurring purchases and becoming loyal customers

31. Assessment
A wholesaler sells merchandise to customers through a store setting.
true
false
A markup percentage is the differences between the initial cost of a product and the price a store charges a customer for the product. B A

32. Assessment
Buying in bulk discounts occur when a customers buys more than five items from a retailer at one time.
true
false
Employers are required to give their employees discounts on store merchandise. B

33. Assessment
Sarah purchased 75 sweaters from a wholesaler for $16 a piece. She wants the markup percentage to be 18%. How much will Sarah sell the sweaters for? How much will Sarah’s profit be per sweater?
John buys three pairs of jeans at a 25% off discount with a tax rate of 6.7%. The jeans cost $78.46, $63.29 and $72.83 before the discount. What is John’s total amount?
How are rebates a good system for both retailer and customers?
5. 16 x 1.18 = $18.88 to charge customers
$ $16.00 = $2.88 profit for each sweater
6. $ ($78.46 x .25) = $58.85
$ ($63.25 x .25) = $47.43
$ ($72.83 x .25) = $54.62
Total Before Tax = $160.90
$ x = $ is John’s Total
7. often times customers buy items that offer rebates, but don’t end up taking the time to fill out the necessary documentation and send it in, so retailers save money; if customers do, however, take the time to fill out the documentation and send it in, they can often save a significant amount of money off of their purchase

34. Resources www.couponwinner.com www.taxadmin.org www.knowthis.com

35. Acknowledgements Production Coordinator: Production Manager:
Liz Weber
Production Manager:
Dusty Moore
Project Coordinator:
Meghan Blanek
Executive Producers:
Gordon Davis, Ph.D.,
Jeff Lansdell
Graphic Designer:
Ann Adams
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