Retail Management and Evolution

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Questions and Answers

What is the primary advantage of vending machines?

They can only be placed indoors

They are only accessible during business hours

They provide 24-hour sales (correct)

They require the presence of sales personnel

What is the primary function of the World Wide Web?

To offer online banking services

To provide phone and email support

To provide online interactive retailing (correct)

To facilitate in-store shopping

What is one way that retailers can project a presence on the Web?

By creating a website (correct)

By partnering with other retailers

By using paid advertising

By having a physical storefront

What is a major concern for consumers when shopping online?

Fear of lack of security Signup and view all the answers

What is a benefit of shopping online?

Convenience Signup and view all the answers

What is a recommendation for Web retailers?

To develop or exploit a well-known, trustworthy retailer name Signup and view all the answers

What is the purpose of a video kiosk?

To display products and related information Signup and view all the answers

What is an advantage of using a solid search engine on a Web retailer's site?

It allows shoppers to find products quickly and easily Signup and view all the answers

What is a characteristic of a convenience store?

Is typically a well-located food-oriented retailer Signup and view all the answers

What is an example of diversification in retail?

A retailer adds stores in different goods or service categories Signup and view all the answers

What is the purpose of a cost-containment approach in retail?

To hold down both initial investments and operating costs Signup and view all the answers

What is an example of a merger in retail?

A retailer combines with a separately owned firm Signup and view all the answers

What is a stage of the retail life cycle?

Growth Signup and view all the answers

What is downsizing in retail?

A retailer closes unprofitable stores or divisions Signup and view all the answers

What is scrambled merchandising?

A retailer adds goods and services unrelated to its original business Signup and view all the answers

What is a reason for retailers to adopt a cost-containment approach?

To control complicated chain or franchise operations Signup and view all the answers

What is the main characteristic of a full-line discount store?

It conveys the image of a high-volume, low-cost outlet Signup and view all the answers

What type of products does a full-line discount store typically carry?

A broad product assortment including electronics, furniture, and appliances Signup and view all the answers

What is the main difference between a full-line discount store and a traditional department store?

The prices they charge Signup and view all the answers

What is the term for the difference between net sales and the cost of goods sold?

Gross profit Signup and view all the answers

What is the purpose of the quick ratio?

To evaluate the ability to pay current liabilities Signup and view all the answers

What is a characteristic of a variety store?

It handles an assortment of inexpensive and popularly priced goods Signup and view all the answers

What is the term for the profit earned after all costs and taxes have been deducted?

Net profit after taxes Signup and view all the answers

What is the main feature of an off-price chain?

It sells brand-name products at everyday low prices Signup and view all the answers

What is a characteristic of an off-price chain?

It has community dressing rooms Signup and view all the answers

What is the result of looking at the relationship between net profit margin and asset turnover?

Return on assets Signup and view all the answers

What type of products does an off-price chain typically carry?

Brand-name apparel and accessories, linens, and cosmetics Signup and view all the answers

What is the term for the cost of running a retail business?

Operating expenses Signup and view all the answers

What is the purpose of the accounts payable to net sales ratio?

To evaluate the ability to pay current liabilities Signup and view all the answers

What is a difference between a full-line discount store and an off-price chain?

The prices they charge Signup and view all the answers

What is the benefit of using a REIT to fund construction?

To attract investors and provide a source of funding Signup and view all the answers

What is the current trend in the economy, according to the text?

Slow growth Signup and view all the answers

What is opportunistic buying?

Buying merchandise at especially low prices due to poor sales or other factors Signup and view all the answers

What is a slotting allowance?

A payment made by retailers to vendors for shelf space Signup and view all the answers

When does the retailer take title to the merchandise according to one common practice?

Immediately upon purchase Signup and view all the answers

What is a significant factor to consider when reordering merchandise?

Order and delivery time Signup and view all the answers

What is the result of a large inventory?

Lower per-item shipping costs Signup and view all the answers

What is a trade-off when considering inventory holding and ordering costs?

Lower inventory holding costs versus higher ordering costs Signup and view all the answers

What is a potential drawback of holding a large inventory?

Greater obsolescence and damages Signup and view all the answers

What is a consideration for a retailer when deciding whether to accept a large order?

The total cash outlay required Signup and view all the answers

Study Notes

Retail Life Cycle

Retail institutions pass through four stages:
- Introduction
- Growth
- Maturity
- Decline

How Retail Institutions Are Evolving

Mergers, diversification, and downsizing:
- Combinations of separately owned firms
- Expanding into businesses outside normal operations
- Closing unprofitable stores or selling off divisions
Cost-containment and value-driven retailing:
- Striving to hold down initial investments and operating costs
- Maximizing productivity in response to intense competition and economic uncertainty

Types of Retail Stores

Convenience store:
- Well-located, food-oriented retailer
- Open long hours, carries a moderate number of items
- Small store facility, average to above-average prices
Full-line discount store:
- High-volume, low-cost outlet selling a broad product assortment
- Customer service at a centralized area
- Self-service with minimal assistance in departments
Variety store:
- Assortment of inexpensive and popularly priced goods and services
- Open displays, few salespeople
- No full product lines, no delivery
Off-price chain:
- Brand-name apparel and accessories at everyday low prices
- Efficient, limited-service environment
- No gift wrapping, extra charges for alterations
Vending machines:
- Cash- or card-operated retailing format
- Eliminates sales personnel, allows 24-hour sales
- Machines placed conveniently for consumers

Emergence of World Wide Web

The World Wide Web:
- A way to access information on the Internet
- Easy-to-use Web addresses and pages
- Visual and audio content
The role of the Web:
- Projecting a retail presence
- Enhancing image and generating sales
- Reaching geographically dispersed customers
- Providing information and customer service
- Promoting new products and offering employment opportunities
Web strengths:
- Information, entertainment, and interactive communication
- Shopping online with selection, prices, convenience, and fun

Financial Ratios and Trends

Cost of goods sold:
- Amount a retailer pays to acquire merchandise
- Based on purchase prices, freight, and discounts
Gross profit (margin):
- Difference between net sales and cost of goods sold
- Includes operating expenses and net profit
Net profit after taxes:
- Profit earned after all costs and taxes deducted
- Net profit margin is a performance measure
Asset turnover:
- Performance measure based on net sales and total assets
- Return on assets (ROA) can be computed
Other key business ratios:
- Quick ratio, current ratio, collection period, accounts payable to net sales
- Overall gross profit
Financial trends in retailing:
- Slow growth in economy
- Funding sources, mergers, and consolidations
- Bankruptcies and liquidations
- Questionable accounting and financial reporting practices

Merchandise Planning and Control

Selecting merchandise source:
- Company-owned, outside supplier, or new supplier
Negotiating the purchase:
- Special considerations, especially low prices
Opportunistic buying:
- Negotiating low prices for merchandise with low sales
Slotting allowances:
- Payments to vendors for shelf space
Concluding purchases:
- Taking title immediately, upon receipt, or after billing cycle
Reordering merchandise:
- Four critical factors: order and delivery time, inventory turnover, financial outlays, and inventory versus ordering costs

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Description

This quiz covers retail management concepts, including scrambled merchandising, retail life cycle, and how retail institutions evolve through mergers, diversification, and downsizing.