Chapter 1: Retail Structure Exam 1

Retailers are the final phase of a distribution channel that link manufacturers to consumers.
True False
TRUE
Scrambled merchandising increases intertype competition, which occurs between retailers that sell similar merchandise using different formats, such as specialty and discount stores.
True False
TRUE
Food retailers experience better financial performance than retailers that focus on hard and soft line products.
True False
FALSE
As part of their strategy, the supermarket chain, Whole Foods, utilizes local producers and offers private-label products.
True False
TRUE
Ethical principles can change over time.
True False
TRUE
Drycleaners, hair salons and auto repair businesses are considered retailers.
True False
TRUE
Since J.Crew and Victoria’s Secret design the merchandise they sell and contract with manufacturers to produce the product for them, they would be considered horizontally integrated.
True False
FALSE
Costco and Home Depot are both retailers and wholesalers.
True False
TRUE
There are no laws that dictate what is ethical and what is not.
True False
FALSE
What is retailing?
A. It is the merchandising component of the retail mix.
B. It is the set of business activities that adds value to the products and services sold to consumers for their personal use.
C. It is the strategy retailers and vendors use to get products into the stores.
D. It is the process of offering products in smaller quantities for consumer consumption patterns.
E. It is the ability to offer enough variety in a store to encourage one-stop shopping.
B.
Which of the following businesses would NOT be considered a retailer?
A. a hot dog cart at the Highland Games
B. Delta Airlines
C. University bookstore
D. Priceline.com
E. Procter and Gamble
E.
Why is it imperative that manufacturers like HP and Procter and Gamble understand how retailers operate?
A. Manufacturers will be able to sell directly on-line.
B. Manufacturers will understand how to get their products on the shelves and sold to the customer.
C. Manufacturers can better sell merchandise without retailers.
D. Retailers can expect fewer buyouts to occur.
E. Manufacturers can limit multi-channel integration.
B.
A ______________ is a business that sells products and/or services to consumers for their personal or family use.
A. manufacturer
B. wholesaler
C. retailer
D. distributor
E. None of the above
C.
A(n) ______________ is a set of firms that make and deliver a given set of goods and services to the ultimate consumer.
A. supply chain
B. buying network
C. trade association
D. integrated wholesale network
E. network
A.
A retailer’s role in a supply chain is to:
A. act as the liaison between manufacturers and wholesalers
B. buy merchandise exclusively from the manufacturers
C. negotiate with manufacturers to eliminate a wholesaler
D. satisfy the needs of the consumers
E. sell to wholesalers
D.
______________ is when a firm performs more than one set of activities in a marketing channel or supply chain.
A. Channel diversification
B. Horizontal development
C. Horizontal integration
D. Vertical development
E. Vertical integration
E.
If a chain of florist shops opened a plant nursery to provide gift plants and cut flowers to all of its stores within a 300-mile radius, the chain would be practicing
A. vertical integration.
B. channel expansion.
C. horizontal expansion.
D. opportunity incrementing.
E. service marketing.
A.
Victoria’s Secret, a popular retail chain in women’s lingerie and perfume, designs the merchandise they sell, and then contracts with manufacturers to produce it exclusively for them. Victoria’s Secret is practicing:
A. globalization
B. product-related marketing
C. vertical integration
D. horizontal integration
E. product diversification
C.
Why is it advantageous for retailers to be vertically integrated?
A. Retailers have the greatest control over its supply chain.
B. Retailers can expand their services easily to the Internet because they can direct orders to the manufacturer.
C. Retailers have realized that to stay competitive, they must become vertically integrated.
D. Customers prefer retailers who are vertically integrated.
E. There is no advantage to being vertically integrated.
A.
A retailer that is vertically integrated:
A. concentrates on selling to businesses only
B. does not have frequent communication between buyers and managers
C. has an excellent vertical relationship between corporate and stores
D. performs more than one function in the chain from manufacturing to sales to end user
E. performs only the function to serve the end user
D.
__________________ arises when a retailer performs some distribution and manufacturing activities, such as operating warehouses or designing private-label merchandise.
A. Globalization
B. Product-related marketing
C. Backward integration
D. Horizontal integration
E. Forward integration
C.
_______________ occurs when a manufacturer undertakes retailing activities.
A. Globalization
B. Product-related marketing
C. Backward integration
D. Horizontal integration
E. Forward integration
E.
Retailers provide important functions that increase the value of the products and services they sell to consumers. Which of the following does NOT include value function created by a retailer?
A. Providing an assortment of products and services
B. Reducing production costs with innovative design
C. Breaking bulk
D. Holding inventory
E. Providing services
B.
Which of the following statements about retailers holding inventory is FALSE?
A. By having inventory held in the store, consumers can hold less merchandise at home.
B. By holding inventory, retailers can decrease the visual merchandising expenditure.
C. Holding inventory in a store helps serve the customer’s needs.
D. Retailers keep inventory so products are available when consumers want them.
E. Holding inventory reduces consumer’s cost of storing products.
B.
Grocers purchase pineapples from several different tropical countries. When pineapples arrive in the distribution centers across the United States, containers are reduced to amounts that are appropriate for store delivery. Once delivered to the stores, associates open the cartons and arrange the pineapples for the consumer to select. Grocers are performing what function?
A. adaptive selling
B. breaking bulk
C. acclimating
D. distribution
E. transferring
B.
Providing assortments is an advantageous business activity because:
A. it enables the company to create a more informational and entertaining environment that would promote more sales.
B. it enables the company to reinvest for the future of the business.
C. it enables the customer to choose from a wide selection of brands, designs, sizes and prices all in one store.
D. it enables the customer to try more products.
E. it enables the customer to stock up on the assortments because of bulk availability.
C.
One of the functions retailers undertake to increase the customer’s perception of value is providing services. Which of the following is NOT an example of that activity?
A. clean restrooms
B. displaying merchandise
C. having trained salespeople available to answer questions
D. parking lot with a lot of lighting
E. having crisp dollar bills for change
E.
A credit union holds and maintains detailed records of the banking activities of its members. Each quarter, the credit union provides its members a printout of banking activities, information about low rate loans and pre-owned automobiles. By contacting and telling its members about its offers on a regular basis, the credit union is engaging in the business function of:
A. breaking bulk
B. holding inventory
C. providing assortments
D. financing
E. providing services
E.
Retailing is one of the nation’s largest industries in terms of:
A. community involvement
B. employment
C. competition
D. promotions
E. variety
B.
When considering the largest retailers worldwide, ___________ retailers continue to dominate among them.
A. food
B. apparel
C. drug
D. home-improvement
E. Internet
A.
Which of the following statements about the U.S. distribution system is TRUE?
A. Many people think the United States is under-stored.
B. Many U.S. retailers are large enough to have their own warehouses and have eliminated their need for wholesalers.
C. When compared to retail density in Europe, the United States is very low.
D. The small specialty store is the fastest growing type of U.S. retailer.
E. Most U.S. retail stores are less than 20,000 square feet.
B.
The Chinese distribution system:
A. has a smaller percentage of people employed in distribution than the U.S.
B. is characterized by small stores with a large wholesale industry.
C. is more efficient than the distribution system in the U.S.
D. is more similar to U.S. distribution systems than Europe’s systems.
B.
A _____________ is a set of businesses that move products from the point of production to the point of sale to the ultimate consumer.
A. manufacturers group
B. wholesaler network
C. retailer
D. supply chain
E. distributor
D.
When the specialty store Hollister designs and develops merchandise as well as sells the merchandise in their stores, _________ is occurring.
A. vertical integration
B. globalization
C. product-related marketing
D. horizontal integration
E. forward integration
A
Which of the following is NOT TRUE in describing distribution systems within major international markets?
A. The U.S. distribution system has the greatest retail density and the greatest concentration of large retail firms.
B. The Indian distribution systems are characterized by small stores operated by small firms and a large independent wholesale industry.
C. In the Chinese distribution system, the merchandise often passes through several levels of distribution to make the daily deliveries to the small retailers efficient.
D. Northern European retailing is similar to efficient distribution systems in the U.S.
E. With the population density in France, most stores throughout France are open 24 hours 7 days a week.
E
. The competition between the same types of retailers is called:
A. intertype competition
B. indirect competition
C. intratype competition
D. scrambled merchandising
E. vertical integration
C.
CVS, Walgreens and Rite Aid are _________ competitors.
A. indirect
B. intratype
C. intertype
D. vertical
E. horizontal
B.
Macy’s, JCPenney and Nordstrom engage in ___________ competition.
A. indirect
B. intratype
C. intertype
D. vertical
E. horizontal
B.
Nike selling products to sporting goods retailers plus having their own Nike Town store, _________ is occurring.
A. forward integration
B. vertical integration
C. backward integration
D. horizontal integration
E. crossselling
A.
When Austin saw pastries and coffee being sold at his local bookstore, he knew it was an example of _________, which is the juxtaposition of unrelated merchandise in the store.
A. scrambled merchandising
B. intratype competition
C. product diversification
D. channel conflict
E. vertical differentiation
A.
Dillards sells Godiva chocolates and coffees in their stores. By selling such products, Dillards is:
A. offering a good merchandise mix.
B. offering what the market demands.
C. offering deep product assortments.
D. practicing scrambled merchandising.
E. practicing intratype competition.
D.
The offering of merchandise NOT typically associated with the store type is called:
A. scrambled merchandising.
B. intratype competition.
C. product diversification.
D. channel conflict.
E. vertical differentiation.
A.
While vacationing at the beach, Delia was delighted to see that the local Walgreens carried milk, bread, apples and bananas. Walgreens is exhibiting:
A. a deep product assortment.
B. an acceptable merchandising mix.
C. a retail mix.
D. scrambled merchandising.
E. this type of intratype competition.
D.
Scrambled merchandising increases:
A. vertical integration.
B. intertype competition.
C. concentric diversification.
D. horizontal integration.
E. intratype competition.
B
Which of the following would NOT BE an example of intertype competition?
A. A supermarket and a fresh flower stand.
B. A Starbuck’s coffee store and a fast food restaurant.
C. A supercenter and a pharmacy.
D. An American Eagle store and a Macy’s store.
E. A Target store and a Walmart store.
E.
The Aeropostale website, the Hollister mall store, and Victoria Secret’s PINK pop-up shop are all in ____________ competition.
A. channel
B. horizontal
C. indirect
D. intertype
E. intratype
D.
. Increasing intertype competition has made it harder for retailers to identify their:
A. competition.
B. target market.
C. merchandise mix.
D. retail mix.
E. price points.
A.
The intensity of competition is greatest among retailers when:
A. price dominates the retail mix.
B. they are located near each other and offer similar retail offerings.
C. they are located near each other and have different target customers.
D. they are located far from each other and offer similar retail offerings.
E. they are located far from each other and target the same customer.
B.
Since convenience of location is important in store choice, a store’s proximity to other retailers is a critical factor in identifying:
A. competition.
B. ethical standards.
C. real estate negotiations.
D. the target market.
E. which merchandise to scramble.
A.
Once a retailer understands its environment, it needs to develop and implement a:
A. viable customer base.
B. advertising plan.
C. retail strategy.
D. competitive strategy.
E. functional strategy.
C.
The retail strategy helps a retailer to identify the following EXCEPT:
A. The target market toward which the retailer will direct its efforts.
B. The nature of the merchandise and services the retailer will offer to satisfy the needs of the target market.
C. How the retailer will build a long-term advantage over its competitors.
D. Determine the break-even point for making profits.
D.
When developing the _________________ for his new barber shop, Theo decided to obtain a long-term competitive advantage over other salons by offering longer hours, better prices, a well trained staff and half-price perm day every Wednesday to attract customers.
A. selling concept
B. business cycle
C. retail strategy
D. focal point orientation
E. marketing concept
C.
As the owner of a store specializing in men’s suits, Isabella can use a retail strategy statement to identify all of the following EXCEPT:
A. the advertising campaign developed to sell last season’s merchandise.
B. the store’s target market.
C. how the store will build a competitive advantage over other similar retailers.
D. what services the store will offer its customers.
E. what types of suits the store will stock.
A.
Which of the following strategies has JCPenney implemented to compete effectively with the competition?
A. Reorganized with a decentralized merchandise management now in place.
B. Reorganized and streamlined its multichannel offerings.
C. Redesigned the stores to offer more checkouts within each department.
D. Developed a faster vendor to floor strategy by drop shipping merchandise directly to each store.
E. Upgraded merchandise offering with the addition of France’s cosmetics line, Lancôme.
B
To implement a retail strategy, a retailer must develop a _____ that satisfies the needs of its target market better than its competitors.
A. production orientation
B. horizontal integration
C. sales orientation
D. retail mix
E. situation analysis
D.
Once a well-articulated retail strategy has been developed, the next step is to:
A. override the control mechanism.
B. evaluate the results of the strategy.
C. forecast future environmental trends.
D. confirm that environmental conditions have not changed.
E. implement the strategy.
E.
The combination of factors retailers use to satisfy customer needs and influence their purchase decisions is called the firm’s:
A. retailing conglomerate.
B. retail mix.
C. marketing strategy.
D. target group.
B.
_______________ describes the voluntary actions taken by a company to address the ethical, social, and environmental impacts of its business operations and the concerns of its stakeholders.
A. Forward integration
B. Corporate social responsibility
C. Investor response
D. Competitive reactions
E. Multi-attribute engagements
B.
Which of the following is NOT an element in the retail mix?
A. competitive response
B. merchandise assortments
C. location
D. customer service
E. advertising and promotion
A.
Best Buy purchases many of the DVDs, Wii games, and players by the truckload then sells them in smaller quantities to its stores where consumers are allowed to buy them individually. What business function is Best Buy performing?
A. Providing assortments
B. Breaking bulk
C. Holding inventory
D. Providing services
B.
_________ are the principles governing the behavior of individuals and companies.
A. Ethics
B. Retail strategies
C. Training guidelines
D. Company traditions
E. Civil Rights Act of 1964
A.
Belinda is a swimwear buyer for a major department store. She will allow vendors to purchase her lunch at the local coffee shop when they visit. One October, she dined with a new vendor to discuss a progressive line of men’s swimwear that is popular in resorts throughout the Caribbean. Belinda’s goal was to assess the assortments for her company in order to see if the product was a good fit for the company brand. During lunch, the vendor invited Belinda for an all-expense paid weekend trip to Jamaica to see the popularity of the merchandise. His goal was to enable her to make a more educated decision when buying the product. Belinda hesitated to accept because of:
A. personal and professional ethics.
B. the scheduling of the buy for the spring season.
C. the price of the exclusive merchandise would not match the income level of her target market.
D. the manufacturer would be unable to develop the line in time for next spring.
A.
What is the world’s largest corporation?
A. Nike
B. Coca-cola
C. Apple Inc.
D. Walmart
E. Macy’s
D.
One of the value-providing activities that retailers perform is _____________ where products will be available when consumers want them.
A. breaking bulk
B. holding inventory
C. production runs
D. possession stock
E. acquisition space
B.
A company that is in the second stage of corporate social responsibility:
A. only engages in CSR activities that are required of them by law.
B. engages in CSR activities that provide a short-term financial benefit.
C. engages in CSR activities because they believe it is the right thing to do.
D. engages in CSR activities for the well being of everyone.
B.
A retailer that asks their customers to bring their own shopping bags or charges 5¢ per bag, but does not engage in any other corporate social responsibilities unless required by law, would be considered in what stage in their strategy?
A. Initial stage
B. Second stage
C. Tertiary stage
D. Fourth stage
E. Acquisition stage
B.
Retailers that are building LEED-certified stores would be considered in what stage in their strategy?
A. Initial stage
B. Second stage
C. Tertiary stage
D. Fourth stage
E. Acquisition stage
D.
What percent does the total gross domestic product come from retailing?
A. 2%
B. 8%
C. 17%
D. 25%
B.
Approximately what percent of working people are employed in the retail industry?
A. 5%
B. 20%
C. 35%
D. 55%
B
Initially, Anita Roddick, the founder of The Body Shop, recycled bottles to save money when the company was in its infancy. What stage would this be considered in terms of Corporate Social Responsibility in their strategy?
A. Initial stage
B. Second stage
C. Tertiary stage
D. Fourth stage
E. Acquisition stage
B.
Ingvar Kamprad, the founder of the Swedish-based home furnishing retail chain, IKEA, discovered in his youth that he could make a profit by buying in bulk and selling the items individually at a low price. This concept is one of the activities retailers do:
A. to create value.
B. for integration.
C. to display corporate social responsibility.
D. to create a retail mix.
E. to be ethical.
A.
Early in JCPenney’s history, store managers determined the type of merchandise sold, the price of the merchandise, the promotion of the merchandise and the management of the store employees. This describes an organizational structure that is _______________.
A. centralized
B. decentralized
C. integrated
D. disengaged
E. incorporated
B.
A retailer’s primary competitors are other retailers that __________.
A. are next to or adjacent to the store location
B. use the same type of store format
C. have the same target market
D. sell online
B.
The ______________ identifies the target market, the merchandise and services that will be offered, and how the company will be competitive long-term.
A. retail strategy
B. corporate sustainability
C. retail mix
D. supply chain
E. retail integration
A.
The retail activity that is particularly important to consumers with small living quarters is who only buy what they need at the time they need it:
A. providing assortments
B. breaking bulk
C. holding inventory
D. providing services
C.
What is the retailer’s role in a supply chain?
The retailer’s role in the distribution channel is to link manufacturers with consumers by directing their efforts to satisfying the needs of the ultimate consumers.
List the four functions performed by retailers.
The four functions performed by retailers are (1) providing an assortment of products and services, (2) breaking bulk, (3) holding inventory, and (4) providing services.
With manufacturers legally able to sell direct from the factories, why should retailers exist?
In the retailing distribution channel, there are occasions when manufacturers sell directly to the ultimate consumer. While occasionally doing so, manufacturers mainly exist to manufacture products to satisfy the needs of a wholesaler or retailer. Retailers exist because they direct their efforts and specialize in satisfying only the customer’s needs. Retailers exist because they increase the value consumers receive.
Distinguish between intratype competition and intertype competition. Give an example of each.
Intratype competition refers to the competition between retailers with the same format. An example would be the competition between Publix and BiLo for sale of fresh salmon. Intertype competition refers to retailers that sell similar merchandise using different formats. An example would be the sale of Revlon Color-Stay Lipstick between CVS and Target.
Why would a Walgreens add novelty gifts, fresh bread, pre-wrapped sandwiches and milk to its product mix?
Walgreens is engaging in scrambled merchandising. They have added these products; and therefore, more to appeal to a broader group of customers, while providing one-stop shopping for a time-starved society.
In regards to customers, what aspects do retailers need to consider when developing a retail strategy?
Retailers need to understand customers and how they are changing so that they can better satisfy their needs. Retailers need to know and understand why customers shop, how they select stores and how they select from that store’s merchandise.
What are the three things identified by a retail strategy statement?
(1) The target market toward which the retailer will direct its efforts, (2) the nature of the merchandise and services the retailer will offer to satisfy the needs of the target market, and (3) how the retailer will build a long-term advantage over its competitors.
To compete effectively with the competition, JCPenney has made some strategic changes. Discuss four changes the company made and how JCPenney expects the changes to better satisfy its target market.
There are many different areas the student may choose as their four:

1) JCP has reorganized the store, catalog and Internet channels to provide a seamless multichannel offering making transactions most convenient for their customers.
2) JCP is reducing its distribution costs by shipping merchandise through its distribution centers rather than using direct delivery from vendors to stores.
3) JCP now has a centralized merchandise management. Rather than having store managers make merchandise decisions, merchandise decisions are made by JCP buyers in the corporate headquarters to save costs and respond quicker.
4) To increase customer convenience, JCPenney is building new stores in free-standing locations.
5) JCP has redesigned their stores to have centralized checkouts to best service their customers.
6) JCP is offering more fashionable merchandise with notable exclusive designer brands. This gives customers more exclusive and fashionable merchandise only found at JCP.

Ethics in business has become increasingly important. List four questions you can ask yourself to help assess whether or not a behavior or activity is unethical:
Students may have any four of these nine type of questions:

1) Would I be embarrassed if a customer found out about this behavior?
2) Would my supervisor disapprove of this behavior?
3) Would most coworkers feel that this behavior is unusual?
4) Am I about to do this because I think I can get away with it?
5) Would I be upset if a company did this to me?
6) Would my family or friends think less of me if I told them about engaging in this activity?
7) Am I concerned about the possible consequences of this behavior?
8) Would I be upset if this behavior or activity was public in a newspaper article?
9) Would society be worse off if everyone engaged in this behavior or activity?

Most retailers try to be socially responsible. Identify and discuss the four stages companies typically go through before they fully integrate corporate social responsibility (CSR) into their strategy.
Stage 1) Engagement in activities required by the law. Companies are not usually convinced at this stage of the importance of CSR.
Stage 2) Engagement of activities resulting in short-term financial benefits. Doing things that may be socially responsible, but only doing them because they save the company money.
Stage 3) Companies engage in social responsibility because they believe it is the right thing to do. Companies have in a sense, “turned the corner”.
Stage 4) Companies engage in social responsibility because they believe it must be done for the “well-being” of everyone. These companies have incorporated the concept of CSR into every aspect of their business.