Jimmy is a new buyer at a Supply Company, which serves multiple large hardware chains in the Midwest. Jimmy’s buyer category is Lighting, specifically Compact Fluorescent lightbulbs.
Each year, Dennigee’s Supply holds two promotional events: one “summer sale” and one “winter sale”.
During each of these events, selected products are marked down for three weeks. Generally, buyers at Dennigee’s Supply Company use the strategy of permanent price reductions (markdowns) to determine the promotional prices for the products on sale during these events.
For the upcoming “summer sale”, Jimmy has six compact fluorescent lighting (CFL) products that will be included. Jimmy knows that these products have the ability to generate good gross margins. The demand for these products allows Jimmy to purchase in larger quantities, which means he is able to take advantage of quantity discounts to get the products at a lower cost. However, buyers at Dennigee’s Supply Company are
discouraged from buying products in large quantities if they anticipate that the products will have to be marked down at a later date.
Jimmy’s goals for the upcoming promotional event are, for the most part, the same goals that any other buyer would have in a similar situation. He needs to:
• Maximize sales while minimizing price reductions (markdowns), and
• Get 100% sell-through by the end of the promotional period
• Additionally, Jimmy’s manager has tasked him to achieve a 60% maintained margin on the promotional products.
After analyzing several price reduction and markdown strategies, Jimmy decides to stick with the permanent price reduction markdown strategy to achieve his goals. He decides to mark the six products down by:
• 30% after one week
• by 50% after two weeks
• and by 70% after 17 days, which is where the pricing will remain for the remaining 4 days of the promotional event.
When preparing this plan, Jimmy also assumes that all of the products he promotes will be sold by the end of the event.
The spreadsheet included with this case study contains some of Jimmy’s calculations regarding full-price sales and what he expects sales to be at the 30%, 50%, and 70% markdown levels, using the permanent price reduction markdown strategy. You will need to complete the spreadsheet and analyze the data to answer the Case Study questions

 

Research different strategies for determining markdowns in various industries in the U.S.

Based on the case study & spreadsheet, answer the following questions (be sure to show your calculations for questions a. through d. to support your answers):

What are the total projected sales for the upcoming promotional event?

What are the total projected price reduction (markdown) dollars for the event?

What is the price reduction (markdown) percentage for the event?

What is the margin percentage for all of the items being sold during the event?

Identify another price reduction (markdown) strategy Jimmy could have used, and explain how its use could influence the results in the case study.

Choose a retail product or product category that you believe has particular appeal to retail customer groups. Recommend one price reduction (markdown) strategy and explain how it would appeal to those customers and drive the product's or product category's performance.
 

Transcribed Image Text:

SKU 2-pk 75W CFL 2-pk Dimmable 75W CFL 2-pk Dimmable 60W CFL Dimmable 100W CFL 2-pk 100W CFL 2-pk 60W CFL Cost $15.95 $29.33 $25.34 $23.55 $16.93 $12.69 Total Projected Sales Total Projected Markdown Dollars Markdown % Average Margin % Pertinent Information and Sales Results at Full Price Initial Unit Buy 1000 Retail $41.00 $88.00 $90.00 $71.00 $57.00 $48.00 Margin % 61.1% 66.7% 71.8% 66.8% 70.3% 73.6% 1200 1200 500 750 750 5,400 Initial Buy at Cost $15,950 $35,196 $30,408 Initial Buy at Retail $41,000 $105,600 $108,000 Unit Sales at Full Price 750 360 502 $11,775 $35,500 343 $12,698 $42,750 482 $9,518 $36,000 315 $115,544 $368,850 2,752 Dollar Sales at Full Price Sell-Thru % $30,750 75.0% $31,680 $45,180 $24,353 $27,474 $15,120 $174,557 30.0% 41.8% 68.6% 64.3% 42.0% 51.0% Jimmy Expects to sell 40% of the units to be marked down at the 30% markdown rate Units to be Marked Down 250 840 698 157 268 435 2,648 Unit Sales at 30% Off 100 336 279 63 107 174 1,059 Dollar Sales at 30% Off $2,870 $20,698 $17,577 Markdown Dollars $1,230 $8,870 $7,533 $3,131 $1,342 $4,269 $1,830 $5,846 $2,506 $54,391 $23,311 Jimmy expects to sell 45% of the balance on hand at the 50% markdown rate Dollar Sales at Markdown 50% Off Dollars $1,394 $1,394 Balance on Unit Sales Hand at 50% Off 150 68 504 419 94 161 261 1,589 227 189 42 72 117 715 $9,988 $8,505 $9,988 $8,505 $1,491 $1,491 $2,052 $2,052 $2,808 $2,808 $26,238 $26,238 Jimmy expects to sell all of the remaining balance on hand at the 70% markdown rate Dollar Sales at 70% Off $1,009 $7,313 Balance on Hand 82 277 230 52 89 144 874 $6,210 $1,108 $1,522 $2,074 $19,235 Markdown Dollars $2,353 $17,063 $14.490 $2,584 $3,551 $4,838 $44,881 SKU 2-pk 75W CFL 2-pk Dimmable 75W CFL 2-pk Dimmable 60W CFL Dimmable 100W CFL 2-pk 100W CFL 2-pk 60W CFL Cost $15.95 $29.33 $25.34 $23.55 $16.93 $12.69 Total Projected Sales Total Projected Markdown Dollars Markdown % Average Margin % Pertinent Information and Sales Results at Full Price Initial Unit Buy 1000 Retail $41.00 $88.00 $90.00 $71.00 $57.00 $48.00 Margin % 61.1% 66.7% 71.8% 66.8% 70.3% 73.6% 1200 1200 500 750 750 5,400 Initial Buy at Cost $15,950 $35,196 $30,408 Initial Buy at Retail $41,000 $105,600 $108,000 Unit Sales at Full Price 750 360 502 $11,775 $35,500 343 $12,698 $42,750 482 $9,518 $36,000 315 $115,544 $368,850 2,752 Dollar Sales at Full Price Sell-Thru % $30,750 75.0% $31,680 $45,180 $24,353 $27,474 $15,120 $174,557 30.0% 41.8% 68.6% 64.3% 42.0% 51.0% Jimmy Expects to sell 40% of the units to be marked down at the 30% markdown rate Units to be Marked Down 250 840 698 157 268 435 2,648 Unit Sales at 30% Off 100 336 279 63 107 174 1,059 Dollar Sales at 30% Off $2,870 $20,698 $17,577 Markdown Dollars $1,230 $8,870 $7,533 $3,131 $1,342 $4,269 $1,830 $5,846 $2,506 $54,391 $23,311 Jimmy expects to sell 45% of the balance on hand at the 50% markdown rate Dollar Sales at Markdown 50% Off Dollars $1,394 $1,394 Balance on Unit Sales Hand at 50% Off 150 68 504 419 94 161 261 1,589 227 189 42 72 117 715 $9,988 $8,505 $9,988 $8,505 $1,491 $1,491 $2,052 $2,052 $2,808 $2,808 $26,238 $26,238 Jimmy expects to sell all of the remaining balance on hand at the 70% markdown rate Dollar Sales at 70% Off $1,009 $7,313 Balance on Hand 82 277 230 52 89 144 874 $6,210 $1,108 $1,522 $2,074 $19,235 Markdown Dollars $2,353 $17,063 $14.490 $2,584 $3,551 $4,838 $44,881

Answer rating: 100% (QA)

ANSWER a Total Projected Sales for the Promotional Event Total Projected Sales 174557 b Total Projec... View the full answer