AESHM 275 Final Exam Study Guide Part 1
AESHM 275 Final Exam Study Guide Part 1 AESHM 275
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This 9 page Study Guide was uploaded by Clare Schubert on Monday January 25, 2016. The Study Guide belongs to AESHM 275 at Iowa State University taught by Amrut in Spring 2016. Since its upload, it has received 275 views. For similar materials see Retailing Management in General at Iowa State University.
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AESHM 275 FINAL EXAM Part 1 Chapter 12 What is 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 nancial goals Sense Market trends analyze sales data make appropriate adjustments and pricesinventory levels Merchandise group highest classi cation level each group is managed by a general merchandise manage GMM senior VP women s apparel men s children s intimate cosmetcs shoes Department managed by divisional merchandise manager DMM Classi cation a group of items targeting the same customer type such as girls sizes 46 SKU the smallest unit available for inventory control size color style What is An assortment of items that customers see as substitutes for each other Vendors might assign products to different categories based on differences in product attributes Retailers might assign two products to the same category based upon common consumers and buying behavior What is and Why is it important Gross Margin Return on Investment GMROI Gross Margin Percent X salestostock ratio gross margin X net sales net sales avg inventory at cost gross margin avg inventory at cost Salestostock ratio is used because GMROI is a type of ROI measure so the investment in inventory is expressed at cost Inventory Turnover l Gross Margin Percent X salestostock ratio What is salestostock ratio Net SalesAverage Inventory at Cost Retailers report on an annual basis If the salestostock ratio for a threemonth season is 23 the annual salestostock ratio will be 92 Estimation of average inventory Use information system averaging the inventory in stores and distribution centers at the end of each day Divide the sum of the endofmonth EOM inventories for several months by the number of months What are the two types of merchandise planning systems 1 STAPLE basic categories that are in continuous demand over an extended period of time limited of new products easy to forecast demand replenished quickly ex paint paper basic casual apparel supermarket supplies 2 FASHION MERCHANDISE categories are in demand only for a relatively short period of time new products are continually introduced into these categories making existing products obsolete ex athletic shoes laptops women s apparel How to develop forecast for category sales Understanding the nature of the product life cycle Collecting data on sales of product and comparable products Using statistical techniques to project sales Work with vendors to coordinate manufacturing and merchandise delivery with forecasted demand CPFR What is a focus group Small group of respondents interviewed by a moderator using a loosely structure format Encouraged to express their views and comment on the views of others in the group What is an assortment plan A list of the SKUs that a retailer will offer in a merchandise category and re ects the variety and assortment that the retailer plans to offer in a merchandise category Re ects the breadth and depth of merchandise that the retailer plans to offer in a merchandise category Variety breadth is the number of different merchandising categories within a store or department Assortment depth is the number of SKUs within a category Product availability defines the percentage of demand for a particular SKU that is satisfied What is a model stock plan How are they developed of each SKU in the assortment plan that buyer wants to have available for purchase in each store Backup Stock also called as Buffer or Safety Stock Determines product availability Choosing an appropriate amount of backup stock is critical to successful assortment planning If the backup stock is too low 9 loose sales and customers If the backup stock is too high 9 scare nancial resources will be wasted on needless inventory that could be more pro tably invested in more variety or assortment What is cycle stock or base stock Cycle base stock Inventory that goes up and down due to the replenishment process Backup buffer safety stock Inventory needed to avoid stockout Product Availability The percentage of demand for a particular SKU that is satisfied Level of support or service level The higher product availability the higher the amount of backup stock necessary to ensure that the retailer won t be out of stock on a particular SKU when consumers demand it ABC Classification of merchandise inventory A higher product availability B medium product availability C lower product availability is acceptable Fluctuations in demand Lead time for deliver from the vendor Frequency of store deliveries What is leadtime Why is it important in terms of fashiontrendy goods Amount of time between the recognition that an order needs to be placed and the point at which the merchandise arrives in the store and is ready for sale Lower level of backup stock required to maintain the same level of product availability What is an M The point at which inventory available should not go below or else we will run out of stock before the next order arrives Order point salesday lead time review time buffer stock Assume Lead time 3 weeks review time 1 week demand 100 units per week Order point 100 31 400 Assume Buffer stock 50 units then Order point 100 31 50 450 We will order something when order point gets below 450 units What is merchandise budget plan Specifies the amount of merchandise in dollars not units that needs to be delivered during each month based on 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 Specifies how much money can be spent each month to achieve the sales margin inventory turnover and GMROI objectives Not a complete buying plandoesn t indicate what speci c SKUs to buy or in what quantities What is Open to Buy OTB system The OTB system is used after the merchandise is purchased Monitors Merchandise Flow Determines How Much Was Spent and How Much is Left to Spend Present inventory levels when purchased merchandise is scheduled for delivery how much has been sold to customers How to analyze merchandise management performance Ordering moreless merchandise lowering prices to increase sales allocating different assortments to specific stores changing the assortment and model stock plans Three types of analyses related to the monitoring and adjustment step are Sell through analysis ABC analysis of assortments Multiattribute analysis of vendors What is a salethrough analysis Compares actual and planned sales to determine whether more merchandise is needed to satisfy demand or whether price reductions are required An ABC analysis identifies the performance of individual SKUs in the assortment plan Rank orders merchandise by some performance measure determine which items should never be out of stock should be allowed to be out of stock occasionally should be deleted from the stock selection A items 5 of SKUs represent 70 of sales B items 10 of SKUs represent 20 of sales C items 65 of SKUs represent 10 of sales D items 20 of SKUs represent 10 of sales Know how to calculate Gross Margin Salestostock ratio and GMROI Chapter 13 Advantages and Disadvantages of store brands vs national brands in a retailer National Advantages Help retailers build their image and traffic ow Reduces selling and promotional expenses More desired by customers Customers patronize retailers selling the branded merchandise Push some of the nancial risk onto the vendor National Disadvantages 0 Lower margins o Vulnerable to competitive pressures 0 Limit retailer s exibility Store Brand private label house own Advantages o Offered at a better value New innovative product that isn t being offered by national brand vendors Multiple price tiers value premium Possible lower quality Unique merchandise not available at competitive outlets Exclusivity boosts store loyalty Diff1cult for customers to compare price with competitors Higher margins OOOOOOO Store Brand Disadvantages o Require significant investments in design global manufacturing sourcing 0 Need to develop expertise in developing and promoting brand 0 Unable to sell excess merchandise 0 Typically less desirable for customers What are the different types of privatelabel brands Be able to provide an example of each Premium Store Brands offer consumer a product that is comparable to a manufacturer s brand quality sometimes with modest price savings Kroger Tesco Bloomindale s Aqua Exclusive Brands brand that is developed by a nationalbrand vendor often in conjunction with a retailer and sold exclusively by the retailer American Rag Macy s Copycat Brands imitate the manufacturer s brand in appearance and packaging generally are perceived as lowerquality and are offered at lower prices drugstores grocery stores CVS or Walgreens next to manufacturer brands Trade Show provide another opportunity for buyers to see the latest products and styles and interact with vendors Vendors display their merchandise in designated areas have sales representatives company executives and sometimes celebrities Market Week buyers make appointments to visit the various vendor showrooms Vendors that don t have permanent showrooms at the market center lease temporary space to participate in market weeks Tariffs duties taxes collected by a government on imports Shield domestic manufacturers from foreign competition Reverse Auctions auctions conducted by retailer buyers of private label merchandise 1 buyer retailer many potential sellers manufacturing firms Retail buyer provides specification for what it wants to a group of potential vendors Competing vendors then bid on the price retailer not required to to place an order with the lowest bidder Slotting fees slotting allowances charges imposed by a retailer to stock a new item Tips for Effective Negotiation Choose a good place to negotiate Be aware of real deadlines Separate people from problem Insist on objective Information Invent options for mutual gain Let the other party do the talking Know how far to go Don t burn bridges Don t assume Why are strategic relationships important Retailer and vendor committed to maintaining relationships over the longterm and investing in mutually beneficial opportunities Mutual trust open communication common goals credible commitments Be able to identify legalethical issues in buying Counterfeit Merchandise goods made sold without the permission of the owner of a trademark copyright or patented invention that is legally protected in the country where it is marketed Gray Markets and Diverted Merchandise parallel imports involve the ow of merchandise through distribution channels international borders other than those authorized intended by the manufacturer or producer Possesses a valid US registered trademark and is made by a foreign manufacturer but is imported into the United States without permission of the US trademark owner not counterfeit is legal Exclusive Dealing Agreements occur when a vendor restricts a retailer to carrying only its products and nothing from competing vendors Tying Contract vendor requires that a retailer take a product it doesn t necessarily desire tied product to ensure that it can buy a product it does desire tying product Purchase Terms and Conditions The RobinsonPatman Act AntiChainStore Act restricts the pricesterms that vendors can offer to retailers for same merchandise Restricts the prices and terms that vendors can offer to retailers Forbids vendors from offering different terms and conditions to different retailers for the same merchandise and quantity Different prices can be offered if The costs of manufacturing selling and delivery are different The retailers are providing different functions e g distribution store service etc Resale Price Maintenance Commercial Bribery A vendor or its agent offers to give or pay a retail buyer something of value to in uence purchasing decisions A fine line between the social courtesy of a free lunch and an elaborate free vacation Some retailers with a zero tolerance policy Some retailers accept only limited entertainment or token gifts Chargeback practice used by retailers in which they deduct money from the amount they owe a vendor When a vendor doesn t meet the agreed upon terms Buybacks stocklifts lifeouts activities engaged in by vendors and retailers to get old products out of retail stores and new products in their place CSR Corporate Social Responsibility the voluntary actions taken by a company to address the ethical social and environmental impacts of its business operations ex fair trade Chapter 14 What is value and why is it important Ratio of what customers receive the perceived benefit of the products and services offered by the retailer to what they pay for it Value perceived benefitsprice Retailers can increase value stimulate more sales by increasing perceived benefits offered or reducing the price What are the two Give examples of retailers or service providers who utilize these strategies HighLow Pricing used frequently sales promotions o Increases profits 0 Creates excitement o Sells slow moving merchandise 0 Disadvantages train people to buy on dealwait have an adverse effect on profits Everyday Low Pricing emphasizes the continuity of retail prices at a level somewhere between the regular nonsale price and the deepdiscount sale price of highlow retailers o Assures customers of low prices 0 Reduces advertising and operating expenses 0 Reduces stockouts and improves inventory management What is price elasticity Commonly used measure of price sensitivity Elasticity percent change in quantity sold percent change in price Mark p difference between the retail price and the cost of an item The appropriate markup is the amount that covers all of the retailer s operating expenses labor costs rent utilities advertising Markup percentage markup as a percentage of the retail price Markup Percentage Retail Price Cost of MerchandiseRetail Price Keystoning method of setting retail prices in which retailers simply double the cost of the merchandise to obtain the original retail selling price Initial markup retail selling price initially set for the merchandise minus the cost of the merchandise Maintained markup actual sales realized for the merchandise minus its costs It is the amount of pro t realized from merchandising decisions What is breakeven analysis and why is it used On the basis of xedvariable costs determines how much merchandise needs to be sold to achieve a break even zero pro t To generate a target pro t volumedollars to justify introducing a new product change needed to cover a price change What is a markdown Are they goodbad and why Percentage reduction in the initial retail price Buyers plan for them to dispose of unwanted merchandise What are different ways of liquidating markdown merchandise Sell the merchandise to another retailer Consolidate the unsold merchandise Place merchandise on lntemet auction site Donate merchandise to charity Carry the merchandise over to the next season Price Discrimination lSt Degre charging each individual customer a different price based on their willingness to pay 211d Degre offer the same multiple price schedule to all customers encourages price sensitive customer to take advantage of the lower price promotionalclearance markdowns 3rd Degree retailers often charge different prices to different demographic market segments What is a lossleader Why are they used Leader pricing is the practice of pricing certain items lower than normal to increase customers traffic ow or boost sales of complementary products Some retailers call these products loss leaders Loss leaders are sold below cost and would therefore be considered predatory pricing What is odd pricing Is it effective Refers to the practice of using a price that ends in an odd number typically 9 When price sensitivity of the market is high advantageous to raise or lower prices When price sensitivity of the market is low risk to the retailer s image of using 9 endings are likely to outweigh the benefits Know legal and ethical issues in pricing Predatory pricing arises when a dominant retailer sets prices below its costs to drive competitive retailers out of business predator hopes to raise prices when the competition is eliminated and earn back enough profits to compensate for its losses Bait and switch an unlawful deceptive practice that lures customers into a store by advertising a product at a lower than normal price the bait once they are in the store induces them to purchase a higher priced model the switch Reference price price against which buyers compare the actual selling price of the product and it facilitates their evaluation process Know how to calculate pricing at retail and at cost markup and markup Retail price cost of merchandise markup Markup retail price cost of merchandiseretail price Chapter 15 Integrated Marketing Communication Program Integrate a variety of communication elements to deliver a comprehensive consistent message to all customers over time across all elements of a retail mix and across all delivery channels Providing a consistent image can be challenging for multichannel retailers Need to consider the needs of all channels early in the planning of its communication program
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