MK465 Final Exam

Free-form Layout

(Boutique Layout): Arranges fixtures and aisles in an asymmetric pattern oProvides an intimate, relaxing environment that facilitates shopping and browsing •Appears most commonly in specialty stores or as departments within department stores •Creating this pleasing shopping environment is costly •Consumers aren't naturally drawn around the store or department so personal selling becomes more important to encourage customers to explore merchandise offered in the store oThe layout reduces the amount of merchandise that can be displayed

Racetrack Layout

(Loop): A store layout that provides a major aisle that loops around the store to guide customer traffic around different departments within the store. Point of sale terminals are typically located in each department bordering the racetrack o i.e. a department store o The racetrack is usually wider than other aisles and defined by a change in flooring surface and color

National Brands

(Manufacturer's brands): products designed, produced, and marketed by a vendor and sold to many different retailers

Strategic Relationships

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

Store Brands

(Private label brands, house brands, own brands): Products developed by retailers - Retailers develop the design and specifications for their store-brand products, then contract with manufacturers to produce those products

Buybacks

(Stocklifts, lift outs): Activities engaged in by vendors and retailers to get old products of retail stores and new products in their place o Either a retailer allows a vendor to create space for its merchandise by "buying back" a competitor's inventory and removing it from the retailer's system, or the retailer forces a vendor to buy back slow-moving merchandise

Strip Shopping Centers

(aka convenience, neighborhood, and community shopping centers) Attached rows of open-air stores, with onsite parking, usually located in front of the stores -Linear, L-Shaped, and inverted U-Shaped - Anchored by at least one big-box store such a discount department store, an off-price retailer, or a category specialist ADV: Offers convenient locations and easy parking, relatively low occupancy costs DISADV: Smaller centers have a limited trade area due to their size, lack of entertainment or restaurants to keep customers in their center for a longer time

Gray-market goods

(parallel imports): the flow of merchandise through distribution channels, usually across international borders, other than those authorized or intended by the manufacturer or producer

Types of Signage

- Call-to-Action - Category -Promotional - Point-of-Sale - Digital

Types of Urban Locations

- Central Business District (CBD) - Inner City - Gentrified Residential Areas - Main Street

Presentation Techniques

- Idea-Oriented - Item and Size - Color

Two paths to achieving high GMROI

- Improve inventory turnover (sales-to-stock ratio) - Increase Gross Margin

Why is ROA not a good measure for evaluating the performance of merchandise managers?

- Merchandise managers do not have control over all of the retailer's assets or all the expenses that the retailer incurs - Buyers usually have control over the gross margin but not operating expenses, such as store operations, HR, Real Estate, and logistics and information systems

Types of Planned Locations

- Shopping Center - Strip Shopping Center - Power Center - Enclosed Shopping Mall - Lifestyle Centers - Mixed-Use Developments - Outlet Centers - Theme/Festival Centers - Omnicenters - Pop-Up Store - Store-Within-A-Store -Merchandise Kiosks - Airports

Fixtures

- Straight Rack - Rounder - Four-way fixture - Gondola

Lighting

- highlight merchandise - mood creation - energy-efficient lighting

Exclusive Brands

A brand that is developed by a national-brand vendor, often in conjunction with a retailer, and sold exclusively by the retailer - A national-brand manufacturer assigns different model numbers and has different exterior features for the same basic product sold by different retailers - A manufacturer develops an exclusive product of product category for the retailers and markets it under a brand name that is exclusive to the retailer i.e. Estee Lauder selling two brands of cosmetics exclusively at Kohl's

Wholesale Market

A concentration of vendors within a specific geographic locations, perhaps even under one roof or over the internet

Tonnage Merchandising

A display technique in which large quantities of merchandise are displayed together - Consumer equate tonnage with low prices - The merchandise itself is the display

Density of Target Market

A good location has many people in the target market who are drawn to it - It is not important to have high customer density near a store that sells specialty merchandise because people are willing to search out this type of merchandise (i.e. a Porsche dealership)

Shopping Centers

A group of retail and other commercial establishments that are planned, developed, owned and managed as a single property - Developments attract more consumers to the shopping center than would be the case if the stores were at separate locations - Select a set of retailers that are complementary to provide consumers with a comprehensive shopping experience at one convenient location

Unplanned Locations

A location that does not have centralized management that determines what stores will be in the development, where the specific stores will be located, and how they will be operated

Frontal Merchandising

A method of displaying merchandise in which the retailer exposes as much of the product as possible to catch the consumer's eye

Cross-Shop

A pattern of buying both premium and low-priced merchandise or patronizing expensive, status-oriented retailers and price-oriented retailers, as occurs when a customer shops at both Walmart and Nordstrom

Chargebacks

A practice used by retailers in which they deduct money from the amount they owe to a vendor o Especially difficult for vendors because once the money is deducted from an invoice and the invoice is marked as paid, it is difficult to dispute the claim and get the amount back

Store-Within-A-Store

An agreement in which a retailer rents a part of the retail space in a store operated by another independent retailer - i.e. Starbucks operating cafes in many retail stores, grocery stores having banks, coffee bars, film processors, medical clinics - Can be mutually beneficial to the store within the host retailer - The host or store within could have conflicting, rather than synergenistic, target markets and/or brand images

Feature Areas

Areas within a store that are designed to get customer's attention -windows - entrances - freestanding displays - mannequins - end caps - promotional aisles or areas - walls - dressing rooms - cash wraps

Category Management

Assigns one buyer or category manager to oversee all merchandising activities for the entire category

Theme/Festival Centers

Attract a multitude of tourists and local visitors by being more fun and interesting than a basic suburban mall (Faneuil Hall)

Staple Merchandise

Basic merchandise categories, those that are in continuous demand over an extended period of time - most categories in supermarkets, white paint, copy paper, basic casual apparel

Backup Stock

Buffer or safety stock: the number of units in the model stock plan which determined product availability

Wholesale Market Centers

Buyers regularly visit with vendors in established market centers with permanent showrooms that retailers can visit throughout the year

Call-to-Action Signage

Can convey how, where, and why to engage with the retailer via QR codes on customers cellphones, via email, short-message services, Facebook, or other digital channels

Omnicenters

Combine enclosed malls, lifestyle centers, and power centers - Reflect the growing tendency of consumers to cross-shop

Sell-through Analysis

Compares actual and planned sales to determine whether more merchandise is needed to satisfy demand and whether price reductions are required

Comparison Shopping

Consumer has a general idea about the type of product or service they want, but they do not have the well-developed preference for a brand or model - They seek information and are willing to expend effort to compare alternatives - Furniture, appliances, apparel, consumer electronics, hand tools

Specialty Shopping

Consumers know what they want and will not accept a substitute - Brand and/or retailer loyal and will pay a premium or expend extra effort if necessary to get exactly what they want - Organic vegetables, luxury cars, high-end bikes - willing to travel to inconvenient locations

Uniqueness of Retail Offering

Convenience of location is less important for retailers with unique, differentiated offerings than for retailers with an offering similar to other retailers

Promotional Signage

Described special offers and found within the store or displayed in windows to entice the customer into the store

Tariffs

Duties: taxes collected by a government on imports. Import tariffs have been used to shield domestic manufacturers from foreign competition

Enclosed Shopping Malls

Enclosed, climate controlled, lighted shopping centers with retail stores on one or both sides of an enclosed walkway ADV: attract many shoppers and have a large trade area because of the number of stores and the opportunity to combine shopping with an inexpensive form of entertainment, generate significant pedestrian traffic inside the mall, customers don't have to worry about the weather, level of consistency that benefits all the tenants (enforce uniform hours of operation) DISADV: Mall occupancy costs are higher than those of strip centers, freestanding sites, and most central business districts, some retailers might not like the mall management's control of their operations and strict rules governing window displays and signage, competition within the mall can be intense

Merchandise Managing Process

Forecasting sales, developing an assortment plan, determine the appropriate inventory levels for the store

Outparcels

Freestanding stores that are not connected to other stores in a shopping center, but are located on the premises of a shopping center, typically in a parking area (i.e. fast-food restaurants and banks)

Markdown Money

Funds vendors give retailers to cover lost gross margin dollars due to markdowns needed to sell unpopular merchandise

GMROI

Gross Margin Return on Investments - Measures how many gross dollars are earned on every dollar of investment made by the buyer - Combines gross margin percentage and the sales-to-stock ratio, which is related to inventory turnover - Gross Margin/ Average Inventory at cost

Market Weeks

Hosted by wholesale market centers, during which buyers make appointments to visit the various vendor showrooms

Copycat Brands

Imitate the manufacturer's brand in appearance and packaging, generally perceived as lower-quality, and are offered at lower prices - Found a lot in supermarkets and drugstores

Fashion Merchandise

In demand for only a relatively short period of time. New products are continuously introduced in these categories, making the existing products obsolete

Gentrified Residential Areas

Inner city areas that are going through gentrification (the renewal and rebuilding of offices, housing, and retailers in deteriorating areas, coupled with an influx of more affluent people that displaces the former, lower-income residents) - Young Professionals and retired empty-nesters move here to enjoy the convenience of shopping, restaurants, and entertainment near where they live

Season Merchandise

Items whose sales fluctuate dramatically depending on the time of year

Umbrella/ Family Brands and Subbrands

Kellogg's (family brand) and Frosted Flakes (subbrand) OR Ford (family brand) and F-Series trucks (subbrand)

The Buying Organization

LEVEL 1: Merchandise Group LEVEL 2: Department LEVEL 3: Classification LEVEL 4: SKU

Generic Brands

Labeled with the name of the commodity and thus actually have no brand name distinguishing them - Targeting a price-sensitive segment by offering a no-frills product at a discount price (Commodities like milk and eggs)

Product Availability

Level of support or service level: the percentage of the demand for a particular SKU that is satisfied

Inner City

Low income residential areas within a larger city

Anchors

Major retailers (Macy's, Walmart, Kroger) courted by the center's developer because they attract a significant number of consumers and consequently make the center more appealing for other retailers

Vertical Merchandising

Merchandise is presented vertically using wall and high gondolas - National brands are put at eye level while store brands are put on lower shelves because customers can from eye level down

Black Market

Occurs when consumers goods are scarce, such as water or gasoline after a natural disaster, heavily taxed like cigarettes or alcohol, or illegal like drugs and arms

Premium Store Brands

Offer the consumer a product that is comparable to a manufacturer's brand quality, sometimes with modest price savings i.e. "The Men's Collection" at Saks Fifth Avenue

Mixed-Use Developments

One complex that includes retail, office, residential, hotel, recreation, or other functions - Pedestrian-oriented and facilitate live-work-play environment - Attract people looking for a lifestyle that gives them more time for the things they enjoy and an opportunity to live in a genuine community

Resident Buying Offices

Organizations located in major market centers that provide services to help retailers buy merchandise

Grid Layout

Parallel aisles with merchandise on shelves on both sides of the aisles. Cash registers are located at the entrances and exits of the stores o Well suited for customers who are primarily interested in the utilitarian benefits offered by the store o Supermarkets and full-line discount stores o Cost- efficient •Layout does not encourage unplanned purchases

Point-of-Sale Signage

Placed near the merchandise they refer to so that customers know its price and other detailer information

Destination Stores

Places where consumers will go even if it is inconvenient, just like enclosed malls are destination locations for fashionable-apparel comparison shopping

Robinson-Patman Act

Restricts the prices and terms that vendors can offer to retailers. The act makes it illegal for vendors to offer different terms and conditions to different retailers for the same merchandise and quantity

Freestanding Sites

Retail locations for an individual, isolated store unconnected to other stores ADV: easy access and parking and convenience for customers, high vehicular traffic and visibility to attract customers driving by, modest occupancy costs, fewer restrictions on signs, hours, or merchandise that might be imposed by management of planned locations DISADV: limited trade area (typically no other nearby retailers to attract customers interested in conveniently shopping for multiple categories), higher occupancy costs than shopping centers because they do not have other retailers to share the common area maintenance costs, little pedestrian traffic, limiting the number of customers who might just drop in because they are walking by

Co-op Advertising

Retailers often share the cost of advertising through a program undertaken by a vendor in which the vendor offers to pay for all or part of a pricing promotion

Power Centers

Shopping centers that consist primarily of collections of big-box retail stores, such as full-line discount stores (Target), off-price stores (Marshalls), warehouse clubs (Costco), and category specialists (Barnes and Noble, Staples) - Often consist of a collection of freestanding "anchor" stores and only a minimum number of smaller specialty store tenants - Usually located near an enclosed shopping mall ADV: low occupancy costs, modest levels of consumer convenience and vehicular and pedestrian traffic

Outlet Centers

Shopping centers that contain mostly manufacturers' and retailers' outlet stores - Usually in remote locations - Lower costs and reduced competition between the outlet stores and department and specialty stores offering the branded merchandise at full price - Many are located with convenient interstate access and close to popular tourist attractions

Lifestyle Centers

Shopping centers that have an open-air configuration of specialty stores, entertainment, and restaurants, with design ambience and amenities such as fountains and street furniture - Resemble the main street in small towns ADV: ease of parking, convenient for shoppers, low occupancy costs DISADV: Less retail space than enclosed malls and may attract fewer customers than enclosed mall, weather permitted

Digital Signage

Signs whose visual content is delivered electronically through a centrally managed and controlled network, distributed to services in stores, and displayed on flat panel screens. Can range from entertain video clips to simple price displays o More effective in attracting the attention of customers and helping them recall the messages displayed • Offers the opportunity to chance the store's environment by displaying complex graphics and videos to provide an atmosphere that customers find appealing • Can easily be tailored to a store's market and remain consistent in every store, displayed at the right time and the right place

Diverted Goods

Similar to gray market goods except there need not be distribution across international borders

Merchandise Kiosks

Small selling spaces, typically located in the walkways of enclosed malls, airports, college campuses, or office building lobbies - An opportunity to generate rental income in otherwise vacant space and offer a broad assortment or merchandise for visitors - Can also generate excitement from retailers like national cell phone providers as well as niche products - Can be changed quickly to match seasonal demands

Pop-Up Stores

Stores in temporary locations that focus on new products or a limited group of products - Welcomed because they bring people and money to areas, creating excitement - Used to revitalize urban neighborhoods in cities

Merchandise Category

The basic unit of analysis for making merchandising decisions: an assortment of items that customers see as substitutes for one another i.e. offering a wide variety of dresses in different colors, styles, and bran names

Airports

The best-selling products are those that make good gifts, necessities, and easy-to-pack items

Convenience Shopping

The consumer minimizes their effort to get the product or service they want - Relatively insensitive to price and indifferent about which brands to buy - i.e. getting a cup of coffee during a work break, buying gas for a car, buying milk - Retailers locate their stores close to where the consumers are and make it easy for them to access the location, park, and find what they want (usually located in strip centers and freestanding locations)

How exciting should a store be?

The impacts of the store's environment depends on the customer's shopping goals - Task completion (utilitarian): prefer a soothing and calming environment with slow music and dimmer lighting and blue green colors - Hedonic: want an exciting environment with a fast tempo, invigorating smells, bright lighting, and red and yellow colors

Model Stock Plan

The number of each SKU in the assortment plan the buyer wants to have available for purchase in store - Usually have different model stock plans for different store sizes in a chain

Visual Merchandising

The presentation of a store and its merchandise in ways that will attract the attention of potential consumers

Merchandise Management

The process by which a retailer attempts to offer the appropriate quantity of the right merchandise, in the right place and at the right time, so that it can meet the company's financial goals

Reverse Auctions

The retailer buyer provides a specification for what it wants to a group of potential vendors and the competing vendors bid on the price at which they are willing to sell until the auction is over.

Assortment Plan

The set of SKUs that a retailer will offer in a merchandise category in each of its store and form its website - Reflects the breadth and depth that the retailer plans to offer in a merchandise category

Planned Locations

The shopping center developer and/or manager makes and enforces policies that govern store operations, such as the hours that a store must be open

Main Street

The traditional downtown shopping area in small towns and secondary shopping areas in larger cities and their suburbs - Redevelopment efforts focus on providing a better shopping experience than big-box retailers - Occupancy costs are generally lower - Do not draw as much attention as the CBD because fewer people work in the area and the fewer stores generally mean a small overall draw to the area

Central Business District (CBD)

Traditional downtown financial and business area in a city or town - Due to it's daily activity it draws many people and employees into the area during business hours but is slow on the weekends and in the evenings - High level of pedestrian traffic - Limited vehicular traffic because of the congestion in urban areas

Category Signage

Used within a particular department or sector of the store to identify types of products offered - Usually located near the goods with which they refer

Trade Shows

Vendors display their merchandise in designated areas and have sales representatives, company executives, and sometimes celebrities available to talk with buyers as they walk through the exhibit area

Commercial Bribery

When a vendor or its agent offers or a buyer asks for "something of value" to influence purchase decisions o Fancy lunches, ski weekends, gifts

Tying Contract

When a vendor requires that a retailer take a product it doesn't necessarily desire (the tied product) to ensure that it can buy a product that it does desire (the tying product) o Illegal is they substantially lessen competition or tend to create a monopoly

Exclusive Dealing Agreements

When a vendor restricts a retailer to carrying only its products and nothing from competing vendors

Price lining

When retailers offer a limited number of pre-determined price points and/or price categories within another classification that are merchandised together - i.e. men's shirts organized for $49, $69, and $99

Category Captain

Works with the retailer to develop a better understanding of consumer shopping behaviors, create assortments that satisfy customer needs, and improve the profitability of the merchandise category

Building Partnership Relationships

o Awareness: No transactions have taken place, might begin with the buyer seeing some interesting merchandise at a retail market or an ad in a trade magazine o Exploration: The buyer and vendor begin to explore the potential benefits and costs of a partnership. The buyer may make a small purchase and try to test the demand for the merchandise in several stores o Expansion: The buyer and vendor determine if there is a potential for a win-win relationship. They begin to work on joint promotional programs, and the amount of merchandise sold increases o Commitment: Becomes a strategic relationship. The buyer and vendor then make significant investments in the relationship and develop a long term perspective toward it

Maintaining Strategic Relationships

o Mutual Trust: The belief that a partner is honest and benevolent o Common Goals o Open Communication o Credible Commitments: Tangible investments in the relationship i.e. products or services and taking mutual steps to improve

Color

warm colors produce emotional, vibrant, hot and active responses while cool colors have a peaceful, gentle, and calming effect and appear to induce abstract thinking