Retail Management: Exam Notes

Introduction to Retail Management Exam - Shift 2 (26th March 2021) Notes

• There are 50 questions and the exam duration is 180 minutes.
• The total marks are 100 and displaying marks is enabled.
• There is a group for examiners, and the total group marks are 100.
• Question shuffling and marking answers required is enabled.
• The section type is online-based, and it is mandatory.
• Section Id is 512452896.
• Section number is 1, which consists of 50 Questions.

Overhead costs of retail business operations

• Overhead costs are salaries, advertising, utilities, office supplies, rentals, and transportation from the warehouse to the stores.

Strategic Profit Model

• The 'Strategic Profit Model' in Retail Management measures a firm's performance based on Return on Assets.

Firm performance evaluation

• The measure evaluates a firm's performance, assessing profit against the cost incurred to generate that profit.

Retail firm efficiency

• Efficiency is determined by analyzing the assets and profits of a retail firm
• For instance, Firm A has Assets of Rs. 300 million and a Profit of Rs. 20 million
• Contrarily, Firm B has Assets of Rs. 600 million and a Profit of Rs. 20 million
• Firm A is more efficient.

Retail management context

• From retail management, this equation is correct:
• Net Profit Margin multiplied by Asset Turnover equals Return on Assets.

Retail organization profitability

• Net Profit Margin is the metric used to evaluate a retail organization's profitability from its ongoing operations.

Retailer asset generation

• Return on Assets shows how much a retailer is generating from its investments in assets.

Operating profit margin

• The operating profit margin is computed as gross margin minus operating expenses.

Gross Margin Percentage

• Gross margin percentage is gross margin divided by net sales.

Food-based retailers

• Food-based retailers include convenience stores and warehouse stores.

Key stakeholders

• Key stakeholders in a retail business involving food and grocery are the manufacturer and suppliers, consumers and retailers, and third-party logistics, hardware equipment, and service providers.

Asset Turnover Ratio Example

• Company X: Net Sales 14000, Total Assets 6000
• Company Y: Net Sales 16000, Total Assets 12000
• Company Z: Net Sales 18000, Total Assets 10000
• Company X has the highest Asset Turnover ratio.

Financial ratio

• Current ratio is computed as the ratio of short-term assets to short-term liabilities.

Debt Equity Ratio

• The retailer's total debt (short term + long term) divided by the value of the owner's or stockholder's equity in the firm is the Debt-Equity Ratio.

Merchandize grouping

• The grouping of merchandize classification into various departments and classes is known as Category.

The smallest unit for inventory

• Stock Keeping Unit is the smallest available unit for maintaining inventory.

Inventory Turnover

• Inventory turnover equals net sales divided by average inventory.

Merchandise Classification

• 'Style' is the level of merchandise classification for "slim fit" shirt.

External factors

• External factors influencing the supply-demand scenario and retail price are consumer price sensitivity, economic and legal and technology scenario, and competition.

Pricing objective

• The pricing objective must align with overall organizational objectives.

Market Penetration strategy

• The market penetration strategy is used when customers are highly sensitive to price, low price discourages competition, and sales volume increases much more in comparison to retail costs.

Demand ceiling

• A demand ceiling defines the maximum amount consumers will pay for a product.

Prestige pricing

• Prestige pricing assumes that high prices mean high quality, and low prices mean low quality.

Retail price continuity

• Everyday Low Pricing stresses continuity of retail prices at a level between the regular non-sale price and the deep discount sale price of the retailer's competitors.

Pricing strategy

• With High-Low strategy, retailers offer prices that are sometimes above their competitors EDLP but they use advertising to promote frequent sales.

Consumer response micro-model

• The micro-model of consumer response assume the buyer passes through (i) Cognitive stage, (ii) Affective stage, and (iii) Behavioural stage.

Disadvantage of rapid turnover

• The disadvantage of rapid turnover is increased ordering time and increased cost of goods sold.

Response sequence

• The "do-feel-learn" response sequence is appropriate when the audience has low involvement and perceives little differentiation within the product category

Formal dress communication

• When buying formal dresses, customers follow the "learn-feel-do" communication response.

ABC Bazaar role

• Vidya, associated with ABC Bazaar decides what items and stock would be available and what time period.
• Vidya is the merchandise manager.

Marketing mix element

• "Place" in the marketing mix provides time utility.

Key stakeholders

• The key stakeholders are customers, who involve their personal use in this business activity.

Price conscious consumers

• A Factory Outlet appeals to price-conscious consumers as it provides the lowest price points for limited or maximum used SKUs.

Retail formats

• Broad merchandise variety, limited assortment, low operating cost, low prices and minimal customer service are the characteristics of hypermarket stores.

Strategic Analysis

• Strategic group analysis helps in classifying the competing stores on the shopping opportunity line.

Open to buy-system

• Open-to-buy system is used for keeping track of the actual merchandise flow.

Inventory Turnover

• Inventory Turnover is no. of SKU Ratio.

True or False Statements

Company Data Analysis

• Given three companies (X, Y, Z) with provided Net Sales, Gross Margin, Sales General and Administrative Expenses, and Total Assets data.

Statement A

• "Selecting the pricing objective" is the first step in a typical retail price development process is True.

Statement B

• "Once the merchandising team has made their merchandise plan, they forward the same to store managers" is False.

ELDP

• ELDP always means that it is the lowest price in the market and is False.
• Cyclical Theory proposes that retail Institutions begin with one state, go through cycles, and return to the original state is True.

True or False statements

Demand and Category

• Demand oriented pricing method seeks to estimate the quantities customers would buy and focuses on the stated sales goals, is TRUE.
• "Category" in retail management, is an assortment of items that customers see as a reasonable substitute for each other, is TRUE.

Asset and Wheel of Retailing

• Asset Turnover ratio shows the retailer's net sales divided by its total assets is TRUE.
• On the other hand, the Wheel of retailing is that it can be used to explain all possible retail formats and their evolution is FALSE.

Key Indicators

• Statement A: Net Profit Margin is a good indicator of the retail firm's profitability in the future is FALSE.
• Statement B: Leased Departments broaden the merchandise or service offerings of the store and hence the target consumer base is TRUE.

Store Management

• Non-alcoholic beverages can be a category in a supermarket whereas aerated soft drinks can be a category in a convenience store is TRUE.
• The store manager is responsible for the availability of merchandise in the store; But he is not responsible for delay in delivery is TRUE.

Brand stores

• Most of the brand stores in emerging markets can be classified as fully integrated VMS whereas the apparel or food stores are partially integrated is FALSE.
• A retail business model will change significantly for different retail formats vis-a-vis Brick and mortar stores, Click and mortar stores, pure online players and mobile app-based formats is TRUE.

Business Models

• Needs framework is needed to propagate a compelling story regarding the value proposition to the public so that they are better than the revenue vs cost of doing business is TRUE.
• A strategic profit model measures the performance of the firm based on asset based ratios rather than profitability or market share Is FALSE.