Retail Math Formulas and KPI Dictionary

This glossary is available for your reference throughout the online course. To keep the definitions open as you move through the course, right-click the "Retailer KPI Glossary" lesson in the sidebar and "Open link in a new tab".

Average selling price (ASP):

The average price an item (or group of items) sells for at POS (the point of sale). The calculation is:

Average selling price = total sales volume ÷ units sold.

Beginning of period (BOP): 

The inventory value at retail (excluding VAT) the retailer has in stock at the beginning of the period. The beginning of period inventory is equal to the previous month's end of period inventory. Sometimes referred to as "beginning of month (BOM)" inventory.

Benchmark: 

The standard against which we measure our performance.

Contribution:  

Represents an item, category or business percent to the total, or blend of the total. Contribution is often referred to as business blend, or "share" of business. The formula is:

Category Cont. = category ÷ total

End of period (EOP): 

The inventory value at retail (excluding VAT) the retailer has in stock at the end of the period. The end of period inventory considers the beginning of period inventory, receipts, sales and any returns. Sometimes referred to as "end of month (EOM)" inventory.

Exception analysis: 

A style of analysis that identifies anything above or below the standard performance range.

Forecast: 

To forecast (verb) is to predict a business's key performance indicators one to three months in advance, given the current business and market situation. A forecast (noun) is the document the retailer uses to outline its predictions for those key performance indicators in the coming months. It is also, usually, the retailer's Merchandise Plan. A forecast is a business overview and prediction made during the season.

Gross merchandise volume (GMV): 

GMV is most commonly used in online retailing to indicate a total sales monetary-value for merchandise sold through a channel over a certain time frame. GMV includes any fees or other deductions which a seller might calculate separately.

Initial markup (IMU):

IMU is the potential profit or mark-up of an item before it reaches the sales floor. It is the pre-season mark-up. IMU is calculated using the formula:

IMU = (retail price – landed cost) ÷ retail price 

Landed cost:

Landed cost captures all associated costs in the acquisition of goods, in addition to the product cost. It includes import and customs costs, transport costs, currency exchange and risk-associated costs like insurance and compliance. The calculation is:

Landed cost = (Bulk FOB x Landing factor) + Bulk FOB

Markdown:

A reduction in retail price. Markdowns can be temporary (also known as provisional or promotional markdowns), or permanent (also referred to as firm markdowns). The markdown type will determine how its “cost” is calculated.

Market share:

The percent of the market occupied by a particular brand, category, or business. The formula is:

Market share = category or brand sales ÷ total market sales

Mark-up (MU): 

The difference between the cost of an item and its selling price. The mark-up % is that difference when compared with the retail price of an item. The general calculation for mark-up is:

MU = (Retail – Cost) ÷ Retail

Months on hand (MOH): 

This is an internal metric, referring to the number of months of inventory the retailer has on-hand. Sometimes referred to as Months of Stock (MOS). The calculation is:

MOH = Month end inventory value ÷ 12-month sales average.

Momentum: 

The force gained by an object moving in a particular direction. Used in reference to a trend.

Natural Margin:

Natural margin is the gross margin a business achieves without any vendor assistance or post-season adjustments.

Net sales: 

Sales volume at retail (excluding VAT), minus consumer product returns, at the retailer. In the broader industry, net sales are typically referred to as Revenue

On hand (OH): 

The quantity (units) of a product in-stock at the retailer.

On order (OO): 

The volume of orders that have not yet been filled at a retailer. Any future deliveries and purchase orders that have not been receipted (processed) at the retailer will show on the on order report.

Point of sale (POS): 

The physical "point" where a product is sold to a consumer through the retailer. It often also refers to the check-out system at a retailer.

Rate: 

A measure, quantity, or frequency, typically one measured against some other quantity or measure. We often measures a metrics rate against sales. The formula is:

Metric rate = metric ÷ sales

Rate of sale (ROS): 

Rate of sale is the weekly units sold in a given week. Rate of sale is used in calculations as a projection for a future week's sales. For example, when determining how many weeks of supply we have remaining.

Receipts: 

The volume of shipments the retailer receives at retail (excluding VAT).

Revenue: 

Is the net sales at the retail selling price the retailer makes, excluding V.A.T. and any product returns.

Sell-thru: 

The percent of merchandise that has been sold through. The calculation is:

Sell-thru = units sold ÷ units received.

Stock-to-sales (STS):

a ratio indicating how much inventory is on hand to the volume of sales for the same period. Sometimes referred to as MOS or Months of stock. The formula is:

STS = BOP inventory ÷ Sales

Tailwind: 

a wind having the same general direction as a course of movement; a force or influence that advances progress toward an improved condition  

Variance: 

The change between two metrics, usually expressed as a percent. The formula is:

%Var = (This Year – x ) ÷ x, where x is the benchmark.

Weeks on hand (WOH):

Refers to the number of weeks of stock or supply we have remaining in inventory (on-hand). The calculation is

WOH = on hand ÷ rate of sale.

Weeks of supply (WOS): 

Another name for the "weeks on hand" metric. May also be called "weeks of supply"