Retail Management 2


Select the best answer to each question. Note that a question and its answers may be split across a page break, so be sure that you have seen the entire question and all the answers before choosing an answer.

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1. Melanie’s Bead Shoppe has total assets of $45,000, accounts receivable of $2,000, accounts payable of $3,100 and inventory valued at $20,000. Last year, her net sales were $29,000 and her net profit equaled $14,000. What is her return on assets? A. 22.0 percent

B. 12.5 percent

C. 31.1 percent

D. 7.0 percent


2. Which of the following statements about the Huff Gravity Model is false? A. It is assumed that a larger size is generally more attractive in consumers’ eyes because it means more merchandise assortment and variety.

B. The greater travel time or distance for the consumer, compared with that of competing locations, the higher probability that the consumer will shop at the location.

C. It predicts the probability of a customer going to a specific store location.

D. The formula indicates that the larger the size of the store compared with competing stores’ sizes, the greater the probability that a customer will shop at the location.


3. Which of the following does not describe a retailer’s strategic advantage gained through the efficient supply chain and information system? A. The effective use of supply chain and information systems requires the coordinated effort of employees and functional areas throughout the company.

B. The competitive advantage from information and supply chain systems is easy to be duplicated by competitors.

C. All retailers can develop a competitive advantage from their information and supply chain systems.

D. All retailers can increase sales, and reduce costs, by using high performance information systems.


4. When Benjamin purchased a camera at Best Buy, the cashier asked him for his home ZIP code. Best Buy was attempting to identify the trade area for the store by what approach? A. Customer spotting

B. Residential research

C. Customer clustering

D. Geographic research


5. Country Homes is a store for people who collect country arts and crafts and use them to decorate their homes. Last year its net sales totaled $120,500. The cost value of the items it sold was $72,300. Taxes for



the year were $7,680. The only expenses that the operation had were (1) rent for $3000, (2) salaries to the owner and one part-time assistant for $27,000, (3) utilities at $1,200 and (4) advertising of $500. Calculate the gross margin percentage for Country Homes. A. 60.2 percent

B. 9.6 percent

C. 40 percent

D. 26.3 percent


6. For fashion merchandise where there is only one shipment of the product or collection, the best supply chain method to use is the _______ strategy. A. pull supply chain

B. cross check logistic

C. cost efficient logistic

D. push supply chain


7. You’re about to loan a friend $10,000 to start a candy store in a central business district. Where can you find information about how he plans to build a sustainable advantage? A. The organizational mission statement

B. The objective part of the retail plan

C. The organizational chart

D. The retail market strategy


8. Schnuck’s Grocery Store is located in St. Louis, Missouri. The owner has taken a map and has drawn three different sized shapes around the store’s location. Those people that are located in only the largest shape being beyond a 15-minute drive radius of the store are in what’s referred to as the store’s A. market trading area.

B. tertiary trading area.

C. geographic market.

D. delineated market.


9. Which of the following statements is false? A. It is important to have the strategic fit of the areas’ population with the retailer’s target market.

B. The best areas for locating stores are those that generate the highest return on investment in the short term.

C. It is important to examine an area’s level and growth of population and employment and how long such growth will continue and how it will affect demand for merchandise sold in its stores.

D. It is important to consider local and state legal and regulatory environments affecting operating costs.


10. Fingerhut, a catalog and Internet retailer, sells a variety of merchandise. Their reach is over 500 million homes with a target market of households with annual incomes between $15,000 and $35,000. Fingerhut offers a unique payment plans in order to meet their customers’ needs. They also have a sophisticated database management technique which targets marketing activities and minimizes credit risks. This is an example of a A. mission statement.

B. retail classification.



C. merchandise assortment pan.

D. retail strategy.


11. A retailer can work to retain employees and build a mutual commitment best by A. empowering employees.

B. promoting the company.

C. treating employees all the same.

D. reducing its fixed costs.


12. Which of the following is not a benefit of using RFID over traditional bar codes? A. Reduced inventory turn

B. Reduced theft

C. Reduced point of sale labor costs

D. Reduced warehouse and distribution labor costs


13. Why have some vendors and retailers chosen not to adopt RFID tagging? A. They’re concerned about the potential health risk of radio frequency.

B. They believe the additional costs do not benefit the return on investment.

C. They don’t want to replace people with the devices.

D. They’re concerned about the data storage falling into the wrong hands.


14. What is wrong with a CRM program that encourages repeat buying by offering price discounts? A. These CRM programs are very successful and make the retailer an unreasonable amount of profit.

B. These CRM programs can be easily copied by competitors and they encourage customers to always be looking for the best deal rather than encouraging a relationship with one retailer.

C. These CRM programs actually cost the customer more and can damage the relationship between the retailer and the customer.

D. These CRM programs encourage the customer to shop with the competitors.


15. Which of the following statements regarding the customer pyramid is true? A. Customers in the Iron segment in the customer pyramid need special attention from the retailer to grow their potential to be better customers.

B. All customers regardless of their segment must receive equitable promotional benefits.

C. Customers in the Lead segment may actually cost the retailer money to serve them.

D. Customers in the Gold segment are the most profitable and loyal customers.


16. Good human resource management is important to retailers because A. management isn’t trained in labor laws.

B. management doesn’t have the time to develop training programs because of their other responsibilities.

C. employees manipulate the system when there is no training.

D. employees who are motivated and feel a part of a culture are more likely to build customer loyalty.


17. Goodwill Industries frequently hires disabled people as part of the community thrift store personnel.



End of exam

Which objective does Goodwill Industries value by this practice? A. Financial

B. Administrative

C. Personal

D. Societal


18. The design of organizational structure needs to match the firm’s strategy. Which of the following shows mismatch? A. Best Buy built a competitive advantage based on low cost by allowing decision-making at the local store level.

B. Costco with a competitive advantage of low cost tries to minimize the number of employees by assigning decisions to a few people at corporate headquarters.

C. Walmart targeting price-sensitive customers centralizes organization structures.

D. Retailers targeting high-fashion clothing customers have more managers.


19. ESRI and other GIS suppliers have developed schemes for classifying geographic areas. The ESRI Community Tapestry segmentation scheme classifies neighborhoods into 65 categories. How would you classify the following person? Thomas is a recent college graduate who accepted an assistant buying position with Macy’s in New York City. After six months, his commitment to the company led him to a promotion, and a raise! Thomas rents an apartment with his girlfriend Grace, who works as a stockbroker. Together they spend weekends shopping and meeting friends, and sometimes they travel to Boston for a change in scenery. Thomas can be described as A. Metro spender.

B. Metro renter.

C. Metron.

D. Generation X.


20. Which of the following describes the market expansion growth strategy? A. Displaying merchandise to increase impulse purchases and training salespeople to cross-sell.

B. Realizing growth by directing efforts toward existing customers using the retailer’s present retailing format.

C. Keeping existing stores open for longer hours.

D. Opening stores of the same retail format in new market segments.