ETD: 895 Calculating Gross Margin; Bleeding Edge Technology;
HP Separates PC Unit From Printer Arm
E-Tailer's Digest
etd_post at gapent.com
Tue Jun 14 12:13:52 GMT 2005
E-Tailer's Digest --- Everything for the Retailer
Issue #0895 June 14, 2005
George Matyjewicz, Moderator mailto:georgem at gapent.com
Published by: GAP Enterprises, Ltd. http://www.etailersdigest.com
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CONTENTS
[1] Greetings
[2] Calculating Gross Margin
[3] Bleeding Edge Technology
[4] HP Separates PC Unit From Printer Arm
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[1] Greetings.
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Hi All:
The consulting engagement we're on now reminded me of an engagement we had
a couple of years ago where we helped a publicly-traded e-tailer develop
the selling price of products. I thought it would be of interest to list
members today. Too often retailers, often newbies, calculate prices
incorrectly and then get hurt at the end of the year. Hope this helps.
Our thanks to list members for their help with bleeding edge
technologies. Very interesting material and concepts.
I'm glad to see that Hewlett-Packard has separated their PC and printer
divisions. While Carly Fiorina may have done some good at HP (like
becoming #2 in the PC market), I disagreed with her merging of those
business units. HP printers were the best on the market, and it's a shame
their lead slipped.
Now, let's get to everything for the retailer.
Sincerely
George Matyjewicz, PhD
Chief Global Strategist, GAP Enterprises, Ltd.
mailto:georgem at gapent.com
http://www.etailersdigest.com
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[2] Calculating Gross Margin
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Years ago I had an engagement with a major, publicly-traded e-tailer on
calculating gross margin. They wanted to obtain 30% gross margin, so they
added 30% to their cost, e.g., for an item that cost $10, they calculated
the selling price as $13. When they filed their year-end reports with the
SEC, they couldn't understand why their year-end profit was so low.
In the above example, the selling price should be $14.29. Gross margin is
calculated as follows: (Selling Price--Cost)/Selling
Price. ($14.29-$10.00) / $14.29 = 30%. Their gross margin was actually
23%, not 30%, and it was reflected on their financials (23.1% not the 30%
that was expected).
What happens if you have stale inventory - goods that don't sell? That
needs to be taken into your calculations when developing your gross margin
or selling price.
Let's say, for ease of calculation, that your stale inventory accounts for
10% of your total inventory for the year. That 10% should be added to the
cost, and the sales price should reflect that revised cost. The selling
price should really be $15.72, i.e., ($15.72-$11.00) / $15.72 = 30%.
Often competition drives price. So, if competition doesn't allow you to
include stale inventory in your cost calculation, you need to evaluate
whether or not you need to really stock the product. You cold be losing
more than you really want to lose.
BTW, to calculate selling price, you don't add the gross margin % to the
cost, i.e., 30% added to $10, yields $13.00. Rather you divide the cost by
the reciprocal of the gross margin, i.e., the reciprocal is 100% - 30% or
70%. $10.00 divided by 70% equals $14.29.
George
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[3] Bleeding Edge Technology
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Our moderator wrote...
> 1. Our eventual goal is a paperless office, which implies scanning
> everything at the point of receipt or point of entry (at least until such
KEY to this. is the ability to annotate. We often scribble notes on paper
or attach post-it notes, etc. If you can not annotate, or can not create
SCAFFOLDING to hold annotations and group things extemporaneously, DO NOT
even try to go paperless!
Scaffolding is the retention of highly specific references (to lines or
paragraphs in larger documents), allowing you to go back easily, as well as
to pass "learning" and "perspective" on to other co-workers to use or
develop further. Doing this as an AUTOMATIC, abstraction method in the
background means they do not have to write up reports -- just grab this
chunk of references, trim off some of the excess, and pass it on as an
outlined, HIERARCHED "collection" of reference to portions of documents
with added notes, and most important of all, QUESTIONS!
People write to answer questions. The most important part of doing just
about anything is ASKING the right questions. You have to make it easy to
say I don't understand "this". The "this" is often a relationship or
juxtaposition of things sometimes hard to name or describe..
Tools that do this (which I developed) allow me to do in two days what
others took months to do in huge computer programs...
Not just programs! Lockheed had a problem with Boeing's documentation on
NASA's Space Station Alpha's solar panel positioning system. (Something
like 32 feet of manuals.) Our teams spent over six man months trying to get
a grasp on certain things, and failed miserably. It took me 45 minutes;
most of that being spent on figuring out how to explain what I grasped in a
few minutes of looking at relationships by traversing some information
scaffolding one of my programs had set up.
This automatic scaffolding ability is hinted at in the present web
browsers, but they missed it, and did not deliver ANY of the essentials.
The development of transmissible, exchangeable scaffolding is the key to
making a system like this highly usable. It is the key to automating the
exchange of "learning your way around" a problem or project as a usable,
integrated CHUNK requiring little effort to create or use.
Today, Instead of photocopying or faxing, I photograph things with my
digital camera. Pages from books, work papers, diagrams, receipts, etc.
are photographed and put on the web to share across the world. I scaffold
them with notes and share the scaffold as a web page. It's so habitual and
simple that whenever I fill the gas tank of my car, I photograph the pump
and the odometer.
Give team leaders good digital cameras, put web servers on their notebook
and desk PCs, and Throw Away the photocopiers and fax scanners! Added
bonus -- with your personal web logs, you KNOW if someone actually looked
at what you did, of if he's BSing you when he said he "read it all". And
done right, you can even see how long he took to read it!
It is always fun, George, if you have the attitude that you can
learn something interesting. The person who does not see it that way is
a dead drone that should be kicked out of hive at first
opportunity. People who are having fun are the ones who take it over the
top into a new arena!
And you, George, are the master at keeping it fun for all of us with
E-Tailer's Digest! Through thick and thin in the markets, you keep us
inspired! Thanks!
-javilk- mall-net.com
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+++ [Moderator's Comments] +++
Thanks for the comments John. Yes, this is going to be a fun project, as
it has been the last couple of times.
Scaffolding is a good concept. I didn't have a name for it, but it is
something we have been doing since 1997. We had the existing system
modified so that the Post-It (tm) notes that were on the screens were now
on the application, i.e., notes about a specific order, comments on a
customer credit, instructions on put-aways in the DC, etc. I like your
concept to go to the line item.
Digital cameras, while they do have a purpose in day-to-day business, won't
work with this engagement. When somebody is entering the A/P invoice into
the system, they need to be able to scan it in right then, and then attach
that scan to the entry ("Scaffolding"). We would like to have a keyboard
with a built-in scanner.
As far as learning is concerned, I have a philosophy that if I haven't
learned something today, I have a wasted day. And there is so much to learn.
Thanks again.
George
+++ [Next Post] +++
You may want to take a look at www.xpdoffice.com based on my understanding
of your client's needs it probably can do a lot of what they are looking
for and based on the flexible design of the system it could be
configured/enhanced/customized to suit their needs.
Regards,
Nayab Siddiqui
+++ [Moderator's Comments] +++
Thanks Nayab. That looks very interesting.
George
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[4] HP Separates PC Unit From Printer Arm
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Hewlett-Packard Co. separated its personal computer and printer units just
five months after combining them, undoing one of the last acts of former
Chief Executive Carly Fiorina.
As part of the move, the diversified Palo Alto, Calif., tech company named
Todd Bradley, former CEO of handheld-computer maker palmOne Inc., as
executive vice president heading its personal-systems group, which includes
personal computers, handhelds, monitors and workstations.
Separating the units will help HP "further sharpen our competitiveness and
improve our cost structures," Chief Executive Mark Hurd said.
Mr. Bradley's appointment frees Vyomesh Joshi, another executive vice
president, to concentrate on HP's imaging and printing group, the source of
most of the company's profits. Mr. Joshi had headed the printing group
before adding PCs to his portfolio in January. At the time, analysts
worried that adding PCs would distract Mr. Joshi, who is viewed as a strong
manager, from the printer business.
The January shift was part of a struggle between HP's directors and Ms.
Fiorina, which culminated in her dismissal in February.
Mr. Bradley's appointment marks the second time in a week that Mr. Hurd has
distributed the duties of executives with more than one role. Last week,
Mr. Hurd named Cathy Lyons, a veteran of HP's printing unit, as chief
marketing officer. She replaced Mike Winkler in that role, while Mr.
Winkler remained the head of HP's customer-solutions group, which sells to
big corporate customers.
Mr. Bradley, 46 years old, was president and then chief executive of
palmOne from 2002 until he resigned in March, and was credited with helping
to stabilize the company after it suffered during the tech bust in 2001. He
is known as an operations-focused executive who helped streamline palmOne's
supply chain.
The PC unit he will take over at HP is the world's second-largest maker of
personal computers, behind Dell Inc. Profitability at the unit has been
improving, while HP has been losing market share to Dell. For the six
months ended April 30, the group's operating earnings nearly tripled to
$294 million from $105 million, on revenue of $13.2 billion.
Some analysts and investors have long wanted HP to spin off the printer
unit. A person familiar with the matter said the split of the PC and
printer groups isn't a precursor to dividing the company.
Details at...
http://online.wsj.com/article/0,,SB111869910511858446,00.html
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