Exam 3 Retail

Access/participation

Allows for the confirmation of information accuracy by consumers

Which of the following statements is true about determining the quality of products or services?

Consumers cannot accurately assess the quality of service due to their intangibility

Which of the following is the information in a customer database that contains the demographic and psychographic data describing the customer that can be used in developing market segments?

Descriptive information

The sales of staple merchandise categories cannot be affected by factors such as the opening and closing of stores and the price set for the merchandise in the category

False

True or False: Customer loyalty cannot be enhanced by offering store brand or by providing convenient locations to customers

False

True or False: Programs that merely offer price discounts encourage customers to always develop a relationship with one retailer rather than look for the best deal

False

True or False: Programs that simply offer customers price discounts always provide a sustainable advantage since they cannot be copied by competitors

False

True or False: Research indicates that retailers are less profitable when they focus on retaining and increasing sales to their best customers rather than attempting to generate sales from new customers.

False

True or False: Retailers cannot achieve customer alchemy through add-on selling.

False

True or False: To calculate customer lifetime value, retailers cannot use past buying behaviors of customers

False

When editing the assortment, a buyer does not consider the physical characteristics of the store

False

The percentage of complete orders received from a vendor

Fill rate

Merchandise Planning Process

Forecast category sales Develop an assortment plan Determine appropriate inventory level and product availability Develop a plan for managing inventory Allocate merchandise for stores Buy merchandise Monitor and evaluate performance and make adjustments

A(n) ____ ____ agreement occurs when a vendor restricts a retailer to carrying only its products and nothing from competing vendors

Exclusive Dealing

Identify the true statement about frequent-shopper programs.

Frequent-shopper programs are not particularly useful for building long-term customer loyalty.

In which of the following scenarios will a retailer find it most difficult to collect customer information?

Hanna, a university student, purchases a pair of jean at a store using a third-party credit card.

Merchandise Group

Highest classification level of Merchandise Classifications and Organization Chart

Customers belonging to the ______ segment have a customer lifetime value lower than the customer life value of customers belonging to the gold segment and purchase modest amount of merchandise from a retailer.

Iron

Iron

Modest amount of merchandise, but their spending levels, loyalty, and profitability are not substantial enough for special treatment. It is possible to move these consumer to a higher tier for reasons such as limited income, price sensitivity, or shared loyalties with other retailers, additional expenditures on them may not be worth it.

Customers belonging to the ______ segment in the customer pyramid buy a lot of the merchandise sold by a retailer and often place more value on customer service than on price.

Platinum

What is a feature of products that are price elastic?

Products that are expensive relative to a consumer's income are price-elastic

A(n) _______ reader in a store can acquire a customer's personal information from small devices carried by customer and tags on the merchandise they want to purchase

RFID

analysis is a method that uses three factors to evaluate the potential contribution of each customer segment: how recently the customers in the segment made a purchase, how frequently they make purchases, and how much money they have spent.

RFM

Identify the correct statement about negotiations between retailer buyers and vendors from the following.

Retail buyers should rely on objective information to resolve business issues.

Identify the true statement about retailers selling private-label brands.

Retailers are motivated to devote more resources toward selling store brands than they would for selling similar national brands

Identify an advantage for retailers selling national brands.

Retailers are not responsible for developing and producing national-brand merchandise

Which of the following should retailers consider when implementing the leader-pricing strategy?

Retailers do not have to sell a product below cost in order to use a leader-pricing strategy

Identify the accurate statement about foreign suppliers from the following.

Retailers purchasing private-label merchandise from foreign suppliers are most likely to have a low inventory turnover.

Identify the accurate statement about the markdown approach undertaken by retailers

Retailers use promotional markdowns to increase the sale of complementary products

Identify the statement about reverse auction from the following.

Reverse auctions are not popular with most manufacturing firms.

The ______ Act passed in 1936 makes it illegal for vendors to offer different terms and conditions to different retailers for the same merchandise and quantity.

Robinson-Patman

Identify the customer belonging to the platinum segment

Roxanne prefers buying electronics of a specific brand due to its excellent customer service

Retail ______ are applications of statistical techniques and models that seek to improve retail decisions through analysis of customer data.

analytics

second-degree price discrimination

approach offers the same multiple-price schedule to all customers, which encourages price-sensitive customers to take advantage of the lower prices

Category management

approach to managing merchandise assigns one buyer or category manager to oversee all merchandising activities for t he entire category

Matt, the owner of a retail store, is in the process of developing frequent-shopper programs to encourage repeat purchases. he should ensure that the programs

are easy for customer to keep track of their spending and available rewards

Reverse auctions

are mostly used to buy the products and services used in retail operations rather than merchandise for resale

Private-label brands

are store-brand products developed and sold exclusively by a retailer

Product ______ is defined as the percentage of the demand for a particular stock-keeping unit that is satisfied

availability

In the _____ stage, no transactions take place between a retailer and a vendor.

awareness

When developing assortment plans,

buyers need to consider the degree to which categories in a department complement each other

sell-through analysis

compare actual and planned sales to determine whether more merchandise is needed to satisfy demand or whether price reduction (mark-downs) are required

Platinum

composed with customers in the top 25%. Typically the most profitable and loyal customers, and are not concerned with price

A retailer should

consider the physical characteristics of the merchandise and the depth of assortment when making allocation decisions for a category

Seasonal Merchandise

consist of items whose sales fluctuate dramatically depending on the time of the year

Generally in a price-sensitive target market, as the price of a product increases,

fewer customers feel the product is a good value

A _____ group is a small group of respondents interviewed by a moderator using a loosely structured format, in which participants are encouraged to express their views and comment on the views of others in the group

focus

Retailers using a high/low pricing strategy

frequently discount the initial prices for merchandise through sales promotion

In the customer pyramid, the platinum segment is followed by the _______ segment

gold

Using foreign suppliers to purchase private-label merchandise

increases a retailer's inventory carrying costs

Typically, in order to increase the gross margin, retailers are

increasing the price of products

is an example of first-degree discrimination approach

individualized pricing

Perpetual Inventory

information system determines the inventory level at each point in time

Horizontal price fixing

involves agreement retailers that are in direct competition with each other to set the same price

classification

is a group of items targeting the same customer type

Focus group

is a small group of respondents interview by a moderator using a loosely structured format. Participation is encouraged to express their views and comments on the views of others in the group

A product is more likely to be price-sensitive if

it has more substitutes in the market

Cyle Stock

or base stock is when inventory levels go up and down due to the replenishment process

variety

or breadth, of merchandise category is the number of difference merchandising subcategories offered

assortment

or depth, of merchandise is the number of SKUs within a subcategory

Level of Support

or service level is referred to as product availability

Price Elasticity

or the percentage change in quantity sold divided by the percentage change in price

In an inventory management report, the _____ _____ is the number that tells a buyer that when the inventory levels drop to a certain level, additional merchandise should be ordered.

order point

The ____ ____ is the amount of inventory below which the quantity available shouldn't go or the item will be out of stock before the next order arrives

order point

There is a growing consensus that personal information

must be transferred only with the permission of the consumer

markdown

need to make adjustments depend on a variety of factors, including experience with the merchandise in the past, plans for featuring the merchandise in advertising, and the availability from vendors.

A(n) _____ system keeps track of what the present inventory level is, when purchased merchandise is scheduled for delivery, and how much has been sold to customers

open-to-buy

According to the EU directive on consumer privacy, a business

operating in the EU can use consumer information only for the specified purpose

What does the statement "A merchandise category has a high stock-to-sales ratio." indicate?

The merchandise category sells quickly in the market

Identify a feature of customers in the platinum segment of a customer pyramid

They are not overtly concerned about prices and often place more value on customer service

Identify a feature of customers in the gold segment of a customer pyramid

They are not very loyal to a retailer and frequently patronize some of the retailer's competitors

Classification

Third level for categorizing merchandise and organizing merchandise management activities

Buyers must have the ability to sense market trends, analyze sales data continually, and make appropriate adjustments in the price and inventory levels

True

Buyers reduce number of stock-keeping units within a category to increase their inventory turnover

True

Retailers

employ promotional markdowns to promote merchandise and increase customer traffic flow

A(n) _____ brand is a brand that is developed by a national-brand vendor, often in conjuction with a retailer, and sold only by that retailer.

exclusive

T or F: The vendor of a national brand is for developing the merchandise, producing it with consistent quality, and undertaking a marketing program to establish an appealing brand image

True

T or F: Vendors enforce manufacturer's suggested retail prices by withholding benefits such as cooperative advertising

True

The inventory management report provides information about the inventory management for a staple merchandise category

True

True or False: All the elements in the retail mix contribute to the development of customer loyalty and repeat-purchase behavior

True

True or False: For most retailers, a relatively small number of customers account for the majority of their profits

True

Slotting fees are charges imposed by

a retailer to stock a new product in store

Buyers do not have control over

a retailer's operating expenses

reductions

factors that reduce the actual selling price from the initial sale price

In the EDLP strategy, there is a(n):

surety for the customers that they will get the same price all the time

open-to-buy

system used to keep track of the actual merchandise

A retailer needs to carry less backup stock when

the sales are less than average

breaking sizes refers to

the stocking out of a specific size or color stock-keeping unit

Gender-based pricing is an example of

third-degree price discrimination

Fill Rate

percentage of SKY's received complete on a particular order from a vendor

Product availability

percentage of the demand for a particular SKU that is satisfied. 100 people go into PetSmart store to purchase a small portable kennel but only 90 people can make the purchase before the kennel stock is depleted.

prices arises when a dominant retailers sets prices below its cost to drive competitive retailers out of business

predatory

Merchandise Management

process in which retailers attempt to offer the appropriate quantity of the right merchandise, in the right place at the right time, so that it can meet the company's financial goals

The retailer can _____ to liquidate markdown merchandise.

sell merchandise over an online auction

A(n) _____ ____ compares actual and planned sales to determine whether more merchandise is needed to satisfy demand or whether price reductions are required

sell-through analsysi

Retailers can liquidate unsold merchandise by

selling the merchandise to another retailer

The ______ is a factor that affects the sales of staple merchandise and cannot be controlled by a retailer.

special promotional activities by vendors

Janet, a buyer for a department store, is looking for information about the latest fashion trends. She should

spend more time on the selling floor to be attuned to local customers demand

A(n) _______ unit or SKU is the smallest unit available for inventory control

stock-keeping

breaking sizes

stocking out of a specific size or category and the buyer cannot reorder during the season, the buyer will typically discount the entire merchandise type

Buybacks are also known as _____________ or ________________

stocklifts; lift-outs

relationship emerges when a retailer and a vendor are committed to maintaining the relationship over the long term and investing in opportunities that are mutually beneficial to both parties

strategic relationship

A retailer increasing its merchandise's assortment breadth and depth can result in a decrease in the retailers gross margin

true

The use of customer lifetime value to classify customers into the segment in the customer pyramid is based on the profitability of the customers, not sales.

true

is a belief that a partner is honest and benevolent

trust

A(n) ____ ____ exists when a vendor requires that a retailer takes a product it doesn't necessarily desire to ensure hat it can buy a product it does desire.

tying contract

A family brand is also known as a(n) _____ brand

umbrella

A family brand is also known as a(n) _______ brand

umbrella

cost is the retailer's expenses that vary directly with the quantity of the product produced and sold

variable

Category Captain

when a vendor works with a retailer to develop a better understanding of consumer shopping behaviors, create assortments that satisfy consumer needs, and improve the profitability of the merchandise category.

inelastic

when its price elasticity is more positive than -1.0 (e.g., -.50) - that is, when a 1 percent decreases in price results in a 1/2 percent increase in quanity.

elastic

when the elasticity is more negative than -1 (e.g., -2.0), that is, when a 1 percent decrease in price produces a 2 percent increase in quantity sold.

Inventory Turnover

= (1-gross margin percentage) x sales-to-stock ratio

Staple merchandise categories are also called _____ merchandise categories

basic

Assume that a product costs $0.40, and the initial price for the item is $0.80. The initial markup is

0.40

Assume that Fertilizer Inc. incurred a fixed cost of $520,000 to introduce a new fertilizer in the market. If it needs to sell 40,000 bags of fertilizer at $15 per bag to break-even, determine the variable cost of each bag of fertilizer

$2

If an electronic goods retailer buys a gaming console for $300 and sets the retail price at $350, the markup of the gaming console is

$50

The formula price elastcity x cost / price elasticity + 1 can be used to calculate the profit-maximizing price of a product if the price elasticity of the product is

0.75

Assume that a retailer originally priced a private-label DVD player at $90 and then raised the price to $100. Before raising the price, the retailer was selling 1,500 units a week. When the price increased, sales dropped to 1,100 units per week.

(new quantity sold - old quantity) / (old quantity) / (new price - old price) / (old price) 1100 - 1500/1500 / 10-9/9 = -0.2667 / .1111 + -2.4005 Quantity sold usually decreases when the price increases, price elasticity is a negative number.

Retailers can increase value and stimulate more sales (exchanges) by either:

- increasing the perceived benefits offered - reducing the price

Assume that a retailer originally priced a private-label television at $105 and then raised the price to $110. Before raising the price, the retailer was selling 2,000 units a week. When the price increased, sale dropped to 1,800 units a week. Determine the price elasticity of the private-label television.

-2.1

The manufacturing cost of a product is $400. If the product's price elasticity is -1.5, determine its profit-maximizing price.

1,200

Arrange the phases in developing a strategic partnership in order to increasing levels of involvement

1. Awareness 2. Exploration 3. Expansion 4. Committment

Arrange the steps followed in a typically customer relationship management program (CRM)

1. Collect customer data 2. Analyzing customer data and identifying target customers 3. Developing CRM frequent-shopper programs 4. Implementing CRM programs

Arrange the steps that buyers use to evaluate vendors in the correct order

1. Develop a list of issues to consider 2. Determine the importance weights of each issue 3. Make judgments about each individual brand's performance on each issue 4. Develop an overall score by multiplying the importance of each issue by the performance of each brand or its vendor 5. To determine a vendor's overall rating, add the products of each brand for all issues

Pricing Strategies-

1. High/Low Pricing 2. Everyday Low Pricing

Customer Pyramid

1. Platinum 2. Gold 3. Iron 4. Lead

Retailers use to develop forecasts for fashion merchandise categories

1. previous sales data 2. market research 3. fashion and trend services 4. vendors

Issues to consider when pricing services

1. the need to match supply and demand 2, the difficulties customers have in determining service quality

Four factors retailers consider in setting retail prices

1. the price sensitivity of consumers 2. the cost of the merchandise 3. competition 4. legal constraints

A retailer originally priced a private-label at $105 and then raised a price to $110. Before raising the price, the retailer was selling 2,000 units in a week. When the price increased, sales dropped to 1,800 units a week. if the manufacturing cost of each television is $60, determine its approximate profit-maximizing price.

115

Assume that an extreme -value food retailer sets a 40% markup for a pork pie and sells it at $3.60. What is the cost of the pork pie?

2.16

The inventory turnover and stock-sales-ratio of a merchandise category are 4.0 and 5.0, respectively. Determine the gross margin percentage of the merchandise category

20%

Assume that a department store sets a retail price for a loaf of bred at 4. if the store purchased this load of bread for $3, what is the markup percentage of the loaf of bread?

25% (3/4 = 75%; 100- 75 = 25)

The gross margin, average inventory at cost, and net sales of a merchandise category are $250,000, $100,000, and $1,200,000, respectively. Calculate the gross margin return on inventory investment.

250%

THe gross margin percentage and gross margin return on inventory investment of a merchandise category are 75%, and 225% respectively. calculate sales-to-stock ratio

3.0

Calculate the retailer price of a laptop if its cost and markup are $275 and $50, respectively

325

The gross margin return on inventory investment (GMROI) and sales-to-stock ratio of a merchandise category are 175% and 5.0, respectively. Calculate the gross margin percentage.

35%

The inventory turnover and gross margin percentage of a merchandise category are 3.5 and 30%. Calculate the sales-to-stock ratio

5.0

An apparel retailer set the retailer price of a formal shirt at $65. If the markup is $15, the cost of the shirt is

50$

A costume jewelry store purchases earrings from a vendor at $6 per pair and retails the earrings for $15. What is their markup percentage?

60%

For retailers, 80-20 rule is a condition in which

80 percent of the sales or profits comes from 20 percent of the customers

Identify the true statement about the EU directive on consumer privacy

A business can collect consumer information only if it has clearly defined the purpose, such as completing transaction

Identify an example of a buyer in the awareness phase during the development of strategic relationships

A buyer browses through some interesting merchandise at a retailer market

Who among the following buyers is in the expansion phase during the development of strategic relationships?

A buyer develops joint promotional programs with a vendor

Who among the following buyers is in the exploration phase during the development of strategic relationships?

A buyer making small purchase from a vendor to rest the demand for new merchandise

Identify the accurate statement about factors that influence the price elasticity of products.

A product is more likely to be price-inelastic if it has fewer substitutes in the market

Identify the true statement about identifying customers

A retailer cannot identify customers who make purchases using third-party credit cards

Identify an example of a retailer in the commitment phase during the development of strategic relationship

A retailer develops a long-term perspective toward its collaboration with a vendor.

Identify an example of a retailer in the commitment phase during the development of strategic relationships.

A retailer develops a long-term perspective towards its collaborative with a vendor.

A(n) _____ _____ identifies the performance of individual SKUs in the assorted plan

ABC analysis

involves offering and selling more products and services to existing customers to increase the retailer's share of wallet with these customers

Add-on Selling

Identify the statement about the government regulations on customer privacy in the United States.

American customers must explicitly tell retailers not to use or share their personal information for other purposes

In the ______ stage, no transactions take place between a retailer and a vandor

Awareness

The first phase in building partnership relationships is

Awareness

Identify the true statement about using biometrics in retailing

Biometrics provide a cashless method of payment to customers

A retail ____ _____ is a group of customers who are bound together by their loyalty to a retailer and the activities the retailer sponsors and undertakes

Brand community

Gold

Buy significant amount of merchandise from the retailer, they are not as loyal as platinum customers and patronize some of the retailer's competitors. Profit level is less than those of platinum because price plays an important role in their decision making.

Which of the following is an attribute of fashion merchandise categories

Buyers for fashion merchandise categories have must less flexibility in correcting forecasting errors

Identify the correct statement from the following

Carrying over unsold markdown merchandise to the next season is not profitable because of excessive inventory carrying costs.

is the lowest level in the merchandise classification scheme

Category

occurs when a vendor or its agent offers or a buyer asks for "something of value" to influence purchase decisions

Commercial Bribery

factors that affect sales of staple merchandise include the price set for the merchandise in the category and the pricing and promotion of complementary categories

Controllable

Integrity/Security

Controls for the theft and tampering with personal information

are small files stored on a customer's computer that identify customers when they return to a website

Cookies

Brands imitate the manufacturer's brand in appearance and packaging, generally are perceived as lower-quality, and are offered at lower prices.

Copycat

______ merchandise are goods made and sold without the permission of the owner of a trademark or copyright.

Counterfeit

Notice and Awareness

Covers the disclosure of information practices, including a comprehensive statement of information use.

involves spending money to improve products or services

Credible commitments

Identify the true statement about customer loyalty in the retail industry.

Customer loyalty means developing an emotional connection with customers

Which of the following is a difference between the gold segment and the iron segment in the customer pyramid?

Customers in the Iron segment purchase fewer amounts of merchandise compared to customers in the gold segment.

Which of the following is a difference between the platinum segment and the gold segment in the customer pyramid?

Customers in the gold segment have lower customer lifetime value than customers in the platinum segments

Lead

Customers with the lowest CVL can make negative contributions to the firm's income. They often demand a lot of attention but do not buy much from the retailer. Why they do buy, they often buy merchandise that is on sale or abuse return privileges. They may even cause problems by complaining about the retailer to others. As a result, retailers do not direct attention to these customers

is similar to gray-market merchandise except there need not be distribution across international borders.

Diverted merchandise

In terms of the customer pyramid, the process of no longer selling to unprofitable customers - with negative lifetime values - can be referred to as "______"

Getting the lead out

is the disingenuous practice of marketing products or services as being environmentally friendly with the purpose of gaining public approval and sales rather than actually improving the environment.

Greenwashing

Average inventory at cost =

Gross Margin/ Gross Margin return on Inventory investment

Gross Margin Return on Inventory Investment (GMROI)

Gross margin percentage x Sales-to-stock ratio = Gross Margin/Net Sales x Nets Sales/ Average Inventory at Cost = Gross Margin/ Average Inventory At Cost

Gross margin return on inventory investment (GMROI) =

Gross margin percentage x sales-to-stock ratio

Keystoning

Gross margin that is 100 percent of the cost price or 50 percent of the sale price. Any item selling at twice the price for it was bought or produced is said to have a keystone markup.

Choice/Consent

Includes both out out and opt in options and allows customers to have the opportunity to trade information for benefits

Advantages of pricing strategies

Increases Profit Creates excitement Sells slow moving merchandise Assure customers of low prices Reduces advertising and operating expenses Reduces stockouts and improves inventory management

Identify the accurate statement about strategic relationships from the following

It is difficult for retailer-vendor relationships o be as committed as supplied-manufacturer relationships.

Identify the accurate statement about global sourcing from the following.

It is more difficult to perform supply chain activities when sourcing globally.

Which of the following statements is true about diverted merchandise?

It need not be distributed across international borders.

Identify the customer belonging to the iron segment

Jamie is price sensitive and buys a limited number of dresses from a particular apparel store

Identify the reason why most large retail chains use customer relationship management processes to efficiently develop relationships similar to those that many small local retailers have with customers.

Large retail chains do not have the intimate knowledge about the customers who entire their stores

Customers belonging to the _______ segment demand a lot of attention but do not purchase any products from a retailer

Lead

Identify the true statement about customer loyalty

Loyal customers have a bond with the retailer based on an emotional connection

Identify the accurate statement about managing merchandise categories.

Managing merchandise by category can help ensure that a store's assortment includes the best combination of sizes and vendors

Identify the true statement about buying national-brand merchandise.

Meetings between buyers and vendors during a market week are typically more formal than meetings at trade shows.

Fred is one of senior vice presidents of Gray House Inc., a chain of department stores. He makes decisions about the management of inventory and oversees the responsibilities of the divisional merchandise managers and buyers. Fred belongs to the ______ in the organization

Merchandise Group

pricing refers to the practice of using a price that ends in an odd number, typically a 9

Odd

Value

Perceived benefit / Price

Elasticity

Percent change in quantity sold / Percentage change in price

markdowns are used by retailers to generate more sales

Promotional

Enforcement/Redress

Provides a mechanism to ensure compliance by participating companies

Identify the accurate statement about staple merchandise categories

Sales of staple merchandise are relatively steady week to week

Which of the following customers can be categorized in the lead segment of the customer pyramid?

Samuel frequently browses through the fishing equipment at a store but does not purchase any item from that store

Department

Second level of merchandise classification sceme

Continuous Replenishment

Systems involve continuously monitoring merchandise sales and generating replacement orders, often automatically, wen inventory levels drop below predetermined levels

are taxes collected by government on inpout

Tariffs

Identify the accurate statement about editing the assortment

The breadth and depth of the assortment in a merchandise category affects a retailer's brand image

What should a retailer know about managing fashion merchandise categories?

The performance evaluations of a category should not be based solely on GMROI, inventory turnover, and sales forecast.

Identify a disadvantage for a retailer selling store brands.

The retailer has to assume the risk associated with uncertain sales of store brands

Break-even Quantity

Total fixed cost / actual unit sales price - unit variable cost

Which of the following is the information in a customer database that contains a complete history of the purchases made by the customer, including purchase data, the stock-keeping units purchased, the price paid, the amount of profit, and whether the merchandise was purchased in response to a special promotion or marketing activity.

Transactions

Service retailers devise approaches for managing demand for their offering to ensure that demand does not exceed capacity

True

T or F: Buyers and vendors in a relationship need to understand what is dividing each other's business, their roles in the relationship, each firm's strategies, and any problems that arise over the course of the relationship.

True

T or F: Greenwashing is also known as doing a green whitewash

True

T or F: If consumers are unfamiliar with a service or service provider, they may use price to make quality judgements.

True

Identify the true statement about the factors that determine the level of backup stock needed for a particular SKU in the staple merchandise category

Typically, shorter lead times from a vendor results in a lower level of backup stock required to maintain the same level of product availability

Which of the following is a characteristic of fashion merchandise categories?

Typically, they are in demand only for a relatively short period of time

factors that affect sales of staple merchandise include the weather, general economic conditions, and the new product and pricing activities by competitors

Uncontrollable

Identify the difference between government regulations on customer privacy in the United States and the European Union.

Unlike retailers in the United States, retailers in the European Union must get consumers to agree to share their personal information

Difference between sourcing global and sourcing domestically

When sourcing globally, it is harder to maintain consistent quality standards than it is when sourcing domestically.

market for retail buyers is a concentration of vendors within a specific geographic location, perhaps even under one roof over the Internet

Wholesale market

If the price elasticity of a product is less than -1,

a 1 percent decrease in price results in more than 1 percent increase in quantity sold

maintained markup

actual sales realized for the merchandise minus its cost.

Retailers achieve customer alchemy through

add-on selling

Retailers can reduce markdowns and their inventory carrying costs by

adopting a just-in-time inventory policy

A retailer of today would most likely

aim to develop a base of loyal customers

The high/low pricing strategy

allows retailers to charge a higher price to customers who are not price-sensitive

merchandise category

an assortment of items that customers see as substitutes for one anoter

Frequent-shopper programs

are very expensive to establish and cannot be easily corrected

The ______ of merchandise is the number of stock-keeping units within a subcategory offered by retailers to customers

assortment

Variety of a retailer's merchandise is also known as the ________ of merchandise

breadth

The assortment plan reflects the ______ and ______ of merchandise that the retailer plans to offer in a merchandise category

breadth; depth

A(n) _____________ and _______________ is an unlawful, deceptive practice that lures customers into a store by advertising a product at a lower-than-normal price and then, once they are in the store, induce them to purchase a higher-priced model.

bait and switch

Cycle stock is also called

base stock

A partner is said to be ____ if he is concerned about the other party's welfare.

benevolent

A(n) market occurs when consumer goods are scarce, heavily taxed, or illegal.

black market

Staple Merchandise (basic merchandise)

categories that are in continuous demand over an extended time period.

Backup Stock

called buffer or safety stock is the model stock plan determines product availability

Customers in the lead segment

can make a negative contribution to a retailer's income

Fashion merchandise

categories are in demand only for a relatively short period of time. New products are continually introduced into these categories

A(n) ____ is a practice used by retailers in which they deduct money from the amount they owe a vendor

chargeback

To effectively negotiate with vendors, a retailer should

choose a good place to negotiate

Jerry, a retail buyer, has arranged a meeting with his vendors to discuss the negotiation terms before buying the merchandise. He should

choose a good place to negotiate where supervisory assistance is easily available

The _____ is the third level of categorizing merchandise and organizing merchandise management activities.

classification

The program undertaken by a vendor in which the vendor agrees to pay for all or part of a pricing promotion of a retailer is also known as

co-op advertising

Gary, a retail buyer, is in the exploration if he

collects detailed information about the working style of a vendor

protects the original work or authors, painters, sculptors, musicians, and others who produce works of artistic intellectual merit.

copyright

retail price

cost of merchandise + mark up

retail price

cost of merchandise + markup

offer a discount on the price of specific items when they are purchased

coupons

is the expected contribution from a customer to a retailer's profits over their entire relationship with the retailer.

customer lifetime value

A business philosophy and set of strategies, programs, and system that focus on identifying and building loyalty with a retailer's most valued customers is called _________ ________ management

customer relationship

A customer _______ contains all the information a firm has collected about its customer and is the foundation for subsequent customer relationship management activties

database

_____ the second level in the merchandise classification scheme, are managed by divisional merchandise managers (DMMs)

departments

Identify the accurate statement about multi-unit pricing

depending on the type of product, customer stockpile multiunit-priced items for use at a later time.

To encourage repeat purchases, retailers should __________

develop loyalty programs that reward all purchases made through different channels

inventory strinkage

discounts are given to employees, and some merchandise is lost to theft and accounting errors

From a customer's perspective, one of the main concerns associated with the collection of customer data is the

distribution of data by a retailer to third-party businesses

Retailers who adopt an everyday low-pricing strategy

do not always offer the lowest prices in the market

fixed cost

do not change with the quantity of products produced and sold

Identify the characteristics that separate generic brands from other brands.

do not have a brand name distinguishing them

ROA is not a good measure for evaluating the performance of merchandise managers because they generally

do not have control over all the assets of a retailer

Retailers using the everyday low pricing strategy

do not have to incur the labor costs of changing price tags and putting up sale signs.

the price lining strategy

eliminates the confusion that often arises from multiple-price choices offered by retailers

Typically, strategic relationships

encourage partners to develop and exploit joint opportunities

HIgh/Low pricing

frequently used - often weekly - discount the initial prices for merchandise though sales promotions. However some customers learn to expect frequent sales and simply wait until the merchandise they want goes on sale and then stock up at the low prices

low-price guarantee policy

guarantees customers that the retailer will have the lowest price in a market for products it sells. Usually promises to match or beat any lower price found in the market and might include a provision to refund the difference between the seller's offer price and the lower price

Customers in the iron segment

have limited income and are price sensitive

Typically, reverse auctions

have one buyer and many potential buyers

The illegal practice of _____ is when retailers agree to charge the same price for products or services in an effort to reduce competition.

horizontal pricing

ABC analysis

identifies the performance of individual SKUs in the assortment plan. It determines which SKUs should be in the plan and how many backup stock and resulting product availability are provided for each SKU in the plan

is used to determine which SKUs should be in the assortment plan and how much backup stock and resulting product availability are provided for each SKU in the plan

in-depth

In-depth review

is an unstructured personal interview in which the interviewer uses extensive probing to get individual respondents to talk in detail about a subject. For example, one grocery store chain goes through personal checks received each day to identify customers to interview

Typically, a generic brand

is neither a store brand nor national brand

SKU rationalization programs

is retailer's effort to analyze the benefits they might gain from deleting, adding, or keeping certain items in their assortments.

Order Point

is the amount of inventory below which the quantity available shouldn't go or the item will be out of stock before the next order arrives

Lead time

is the amount of time between recognition that an order needs to be placed and the point at which the merchandise arrives in the store and is ready for sale

mark up

is the difference between the retail price and the cost of an item

markup percentage

is the markup as a percentage of the retail price:

Yield Management

is the practice of adjusting prices up and down in response to demand to control the sales generated.

Keystoning

is the pricing approach that sets the retail price of a product by simply doubling its cost

Value

is the ratio of what customers receive (the perceived benefit of the products and services offered b ythe retailer) to what they have to pay for.

Assortment Plan

is the set of SKUs that a retailer will offer in a merchandise category in each of its stores and from its website

Stock-keeping Unit (SKU)

is the smallest unit available for inventory control

1-to-1 retailing

is used by retailers to develop retail programs for small groups or individual consumers

An advantage of the high/low pricing strategy is that

it allows retailers to get rid of slow-selling merchandise

Which of the following is true of individualized variable pricing?

it can be used as a strategic differentiator

Frequent-shopper programs are also called ______ programs

loyalty

initial markup percentage

maintained mark up percentage + percentage reductions / 100% + percent reductions

gross margin percentage

maintained markup - workroom costs + cash discount / net sales

A drawback of offering large assortments is that they

make the purchase decision more complex and time-consuming and can potentially overwhelm the customer

The funds vendors give retailers to cover lost gross margin dollars due to the price reduction needed to sell unpopular merchandise is called ______ money

markdown

In a _______ ______ analysis, the data mining tools determine which products appear in the market basket that a customer purchases during a single shopping trip.

market basket

At specific times during the year, wholesale centers host _________ ______________ during which buyers make appointments to visit the various vendor show rooms

market weeks

The ______ _____ plan specifies the amount of merchandise in dollars (not units) that need to be delivered during each month, based on the sales forecast, the planned discounts to employees and customers, and the level of inventory needed to support the sales and achieve the desired GMROI objectives.

merchandise budget

The ______ is the highest classification level in the merchandise classification scheme

merchandise group

Multiattribute analysis

method for evaluating vendors uses a weighted-average score for each vendor

The _____ _____ plan is the number of each stock-keeping unit in the assortment plan that the buyer wants to have available for purchase in each store

model stock

Retailers often

negotiate with vendors for an exclusive arrangements to achieve a differential advantage

model stock plan

number of each SKU in the assortment plan that they buyer wants to have available for purchase in each store.

Geoffrey, a multiattribute retailer, is in the process of developing an assortment plan. He should

offer a greater assortment through his internet channel to overcome the space limitations of his store

Frequent-shopper programs should

offer choices to customers in order to be more effective

Retailers practicing the high/low pricing strategy:

offer frequent discounts on the initial prices for merchandise through sales promotions.

Gray-market goods are also known as ____ _____

parallel imports

Every Day low-pricing strategy (EDLP)

particularly home improvement centers, supermarkets, and discount stores adopt this. This strategy emphasizes the continuity of retail prices at a level somewhere between the regular price and the deep-discount sale price of high/low retailers.

The inventory level at each point in time is known as the ______ inventory, is determined by comparing the sales made through the point-of-sale terminals with the shipments received by the store

perpetual

A large chain retailer opened a few months ago in the community where Carl lives. He was pleasantly surprised by how low their prices were compared to the local independently owned shops for the exact same items. Unfortunately, those independently owned retailers have all closed now because they were not able to compete on price with the larger new store. However, Carl has noticed that the newer large store has raised all of its prices up to where the independent stores had their products priced and some products are priced even higher now. This is an example of _____.

predatory pricing

store brands offer the consumer a private label that is comparable to a manufacturer's brand quality, sometimes with modest price savings.

premium

is the practice of offering two or more different products or services for sale at one price

price bundling

for products with a price elasticity less than 1, the price that maximizes profits can be determined by the formula

price elasticity x cost / price elasticity + 1

A product's cost and profit-maximizing price are $200 and $400, respectively. The product's price elasticity is

price elasticity x cost / price elasticity + 1 = -2

A store has coffee makers priced at $9.99, $19.99, and $29.99. Which of the following pricing practices is being utilized?

price lining

software programs use a set of algorithms that analyze past and current merchandise sales and prices, estimate the relationship between prices and sales generated, and then determine the most profitable initial price for the merchandise and not the appropriate size and timing of markdowns

pricing optimization

National brands are:

products designed, produced, and marketed by a vendor and sold to many different retailers

Unlike customers in the lead segment, customers in the platinum segment often

purchase a lot of merchandise sold by a retailer

The objective of the SKU ________ program is to increase inventory turnover by reducing the number of stock-keeping units without reducing sales

rationalization

Vendors set manufacturer's suggested retail prices to

reduce retail price competition among retailers

the factors that decrease the actual selling price from the initial sales price are called

reductions

price is the price against which buyers compare the actual selling price of the product, and thus it facilitates their evaluation process

reference

The buyer of menswear was evaluating the prices of incoming orders. She decided to adjust the price of the incoming pea coats from $120 to $99.99 and use a price tag on the product that showed an original price of $120. The original price of $120 is referred to by retailers as the _____.

reference price

first-degree price discrimination

refers to the practice of charging each individual customer a different price based on their willingness to pay

Organization located in major market centers that provide service to help retailers buy merchandise are known as ____ ______ offices

resident buying

Market up percentage

retail price - cost of merchandise / retail price

initial mark up

retail selling price initially set for merchandise minus the cost of the merchandise

merchandise category consist of items whose sales fluctuate dramatically depending on the time of the year.

seasonal

Retailers use _______ when they offer promotional and clearance markdowns, coupons, pricing bundling, and multi-unit pricing

second-degree price discrimination

approach offers the same multiple-price schedule to all customers, which encourages price-sensitive customers to take advantage of the lower price.

second-degree price discrimination

Retailers use ______ when they offer promotional and clearance markdowns, coupons, price bundling, and multi-unit pricing.

second-degree price discrimnation

When a retailer increases the number of SKUs in its assortment plan

the chances of breaking sizes are greater

Merchandise planning systems for staple merchandise categories often involve continuous replenishment systems because

the demand patterns for staple merchandise are very predictable

Which of the following is a feature of a target market that is price-sensitive?

the price elasticity is more negative than -1

editing the assortment

the process of determining the variety and assortment of a category

Fair _____ refers to a socially responsible movement that ensures that producers receive fair prices for their products

trade

shows, vendors display their merchandise in designated areas and have sales representatives, company executives, and sometime even celebrities available to talk with buyers as they walk through their exhibit area.

trade

pricing is the practice of charging different prices in different stores, markets, or regions

zone