Fixed Markups. Arch User Guide. Arch User Guide. Document History. Fixed Markups

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1 Arch User Guide Classification: Document History Date Version Changed By Details Karl van Niekerk Created Document Document Version 1.0 Last Update: 2016/02/10 Page 1 of 13

2 Table of Contents Overview... 3 Settings... 4 Department Setup... 7 Product Setup... 8 Single Variant Products... 8 Price Link Products Goods Receiving Price Changes Reports Document Version 1.0 Last Update: 2016/02/10 Page 2 of 13

3 Overview This manual serves to explain the purpose and functionality of in Arch Retail Software. The Retail Industry has become increasingly competitive over the last 15 years or so with the increasing use of Integrated Software Intelligence Solutions such as Arch Point of Sale software by wholesalers and retailers alike. This has led to an environment where retailers are increasingly forced to use creative and aggressive marketing methods to attract and retain repeat customers to their stores. Another by-product of this competitive environment is the fact that retailers are increasingly cutting prices to the bone in order to attract more clientele to their stores, sometimes at the expense of healthy profit margins on these products. One way to ensure that products are sold at a competitive price while maintaining a low Markup or GP Percentage, is to use the Fixed Markup feature in Arch. allow store owners to decide on a pre-arranged markup or gross profit percentage which will be added to the products in question. In so doing the store will ensure that the required profit margin is maintained and protected in the event of an increase or decrease of the cost price of the product, while at the same time ensuring that the sales of the product is not detrimentally affected. Document Version 1.0 Last Update: 2016/02/10 Page 3 of 13

4 Settings Arch permits users to choose whether they would like to use Gross Profit (GP) or Markup (MU) based profit margin calculations. Based on the choice made by the store owner, the setting can be selected in the Options module of Arch under the Settings tab. Enable GP Base Pricing Checked Unchecked Uses Gross Profit (GP) method to calculate profit Uses Markup (MU) method to calculate profit Gross profit calculates profit margins as a percentage of the sales price of an item s VAT exclusive price. I.e. a GP of 30% means that the profit margin is equal to 30% of the selling price. So if a product is marked at R excl VAT, then the GP% = R30.00 Markup calculates the profit margins as a percentage of the cost price of an item s VAT exclusive price. I.e. an MU of 50% means that the profit margin is 50% of the cost price. So if a product has a cost price of R50.00, then the MU% would mean that the selling price is equal to cost + 50% of the cost, i.e. R50.00 cost + R25.00 MU = Selling Price R75.00 Document Version 1.0 Last Update: 2016/02/10 Page 4 of 13

5 Fixed Markup Threshold % Increase Decrease Threshold % of cost price increase Threshold % of cost price decrease This setting will absorb any margin fluctuations that fall within the preset margin threshold percentages. If any Landed Cost increases or decreases occur in the Goods Receiving process that fall within the Fixed Markup Threshold % limits, Arch will not alter the Selling Prices of any affected products linked to a Fixed Markup. It is important to note that the Fixed Markup Threshold % operates independently of the Deviation Threshold. Document Version 1.0 Last Update: 2016/02/10 Page 5 of 13

6 Deviation Threshold The Deviation Threshold setting is not to be confused with the Fixed Markup Threshold % setting. The Deviation Threshold is set in order to notify the user if a Landed Cost price change occurs during a Goods Receive Voucher capture. If the Landed Cost variation exceeds the Deviation Threshold, Arch will notify the user on the GRV capture screen by means of the Cost Deviation field which will change colour from white to red if the Landed Cost exceeds the Deviation Threshold. This will not impact the Fixed Markup calculation if the cost deviation is less than the fixed markup threshold %. Document Version 1.0 Last Update: 2016/02/10 Page 6 of 13

7 Department Setup The user can also elect to set a margin % on Department level for all products which are linked to the department. Programming > Departments In the Department module, select the appropriate department and then set the required percentage value for the different Price Levels. Please take note that Arch will use the margin as set in the department setting by default, unless there is a margin set on product level. If the product links to a Price Link, then this will override any setting either on the product or department level. Also remember that depending whether the system has been set to use either GP or Markup as the margin calculation in Options > Settings, Arch will display either Markup % or Gross Profit % in the highlighted field of the image above. Document Version 1.0 Last Update: 2016/02/10 Page 7 of 13

8 Product Setup Single Variant Products For products that only have a single variant, the user will set the following settings; In the General Tab, select the Product maintains a fixed Mark-up (Price 1) This setting will force the product to calculate the Selling Price Level 1 to be determined according to the margin set either by department or product level. This price is determined by the changing of the landed cost via GRV. Document Version 1.0 Last Update: 2016/02/10 Page 8 of 13

9 The user can also set Price Levels 1 4 to fixed markup via the Details tab. The margin can also be set on product level in the Settings tab; Document Version 1.0 Last Update: 2016/02/10 Page 9 of 13

10 Price Link Products Products that link to Price Links in Arch will be configured according to the following method; Programming > Product Price Links Select the required Price Link and set the required Preset Markup % for each price level and select the Fixed tick box. Arch will display the new Calculated Selling Price according to the Fixed Markup rate. Please note that this price will not be updated prior to Activation of the Price Change Batch if the setting on price changes has been set for Batch Activation. If the user tries to change the Suggested Markup on the Settings tab of the products linked to the Price Link, Arch will notify them that markup value cannot be changed if a product is linked to a Price Link Group. Document Version 1.0 Last Update: 2016/02/10 Page 10 of 13

11 Goods Receiving Once the new stock has arrived, Arch will notify the Capture Clerk that the Cost Price has increased or decreased in the Cost Deviation field if it exceeds the Deviation Threshold. After accepting the GRV, Arch will notify the user that the Selling Prices have been updated according to the Fixed Markup if the Landed Cost exceeds the Fixed Markup Threshold %. It is important to note that the user cannot cancel this price change, but is only able to click Accept in the notification window. The below example is for the Single Variant Product; The following example shows the Fixed Markup impact on the Selling Price of all products linked to the Price Link Group for the purchased product in the GRV. Document Version 1.0 Last Update: 2016/02/10 Page 11 of 13

12 Price Changes In the Price Calculator, Arch will display the New Selling Price as well as the Suggested Markup and Suggested Selling Price for the products. Please note that the OK Foods Supermarkets Markup field and OK Foods Supermarkets Suggested Selling fields (highlighted in the green rectangle of the image above) are only sent down by OKFD as a guideline notification to the stores, and does not have any impact on the Fixed Markup calculation at all. This guideline from OKFD is to be used as a way for stores to see what the OKFD selling price suggestion is in order to decide market related selling prices at store level for the relevant products. Depending on the Activate method selected for the product, it may mean that the items must be updated in the Price Change Batch on the Arch Dashboard prior to activation. Please take note that due to the Price Rounding Setting in Arch, the actual Markup versus Suggested Markup might differ marginally. This can be altered by deselecting the Price Rounding setting. Document Version 1.0 Last Update: 2016/02/10 Page 12 of 13

13 Reports In the Reports > Product Analysis > Fixed Markup Products the user can view reports or products linked to Fixed Markup by Department or Supplier. Document Version 1.0 Last Update: 2016/02/10 Page 13 of 13