Retail Management 3



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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.


1. Why do department stores organize some of their private label products near national brands? A. The known national brands attract customers into the department.

B. It is only ethical for retailers to balance their assortment with both national and private label merchandise.

C. Vendors require department stores to merchandise their products this way.

D. National brands are much more profitable for the retailer than the private brands.


2. An appliance store wants to get customers who are buying an upright freezer to trade up to the more expensive self-defrosting model with a special section for ice cream. Which of the following practices can be used by the store to achieve this goal? A. Price lining

B. Horizontal price fixing

C. Price bundling

D. Odd pricing


3. Which of the following statements about category management is false? A. Managing merchandise within a category by brand can lead to inefficiencies because it fails to consider the interdependencies between SKUs in the category.

B. A category manager ensures that the store’s assortment includes the “best” combination of sizes and vendors.

C. The category management approach to managing breakfast cereals in supermarkets should have one buyer or category manager who oversees all merchandising activities for the entire category.

D. A category manager is also called a category captain, and they work with vendors to get the most profit from collaborative relationships.


4. Father Christmas is a retail store in Georgia that sells one-of-a-kind Santas made from fur, wool, and tapestry. That is all the store sells. The store has no product breadth, also called A. variety.

B. merchandise mixtures.

C. category.

D. medley.


5. Which of the following statements would be the best reason for a retailer to source products within North America? A. Retailers don’t have to concern themselves with building strategic partnerships.



B. Lead times are shorter.

C. Quality control is no longer an issue for retailers because the labor is better educated.

D. Retailers don’t have to concern themselves with human rights and child labor violations.


6. In the late 1990s, Sears spent much of its communication budget advertising the “Softer Side of Sears” campaign since it felt the customer knew very little of Sears’ apparel assortments and thus there would be a substantial return from advertising apparel versus advertising the more known appliances. What principle for budget allocation was Sears potentially using? A. High-assay principle

B. Rule of thumb method

C. Percentage of sales method

D. Asset principle


7. Which of the following analyses compares actual to planned sales so buyers know to buy more merchandise or markdown existing merchandise? A. GMROI

B. Inventory turnover analysis

C. ABC analysis

D. Sell-through analysis


8. Janessa prefers high-end cosmetics but also likes a good deal. She only purchases her make-up at department stores when they have a gift with purchase. Today she saw at Macy’s that if she buys $35 worth of Lancôme cosmetics she would receive a gift with purchase. This gift with purchase is a form of what kind of sales promotion? A. Rebate

B. Sample

C. Premium

D. Special event


9. Charging each individual customer a different price based on their willingness to pay is called A. self-selected variable pricing.

B. price bundling.

C. second-degree price discrimination.

D. first-degree price discrimination.


10. The _______ is a method of rank-ordering SKUs based on performance measures, to make inventory stocking decisions. A. product rating system

B. sell-through analysis

C. ABC analysis

D. inventory turnover ranking


11. When given a choice between a national brand of costume jewelry, and a private-label brand, the buyer for a chain of mall specialty stores might choose the private-label brand to



A. prevent its customers from comparison shopping.

B. increase its nonaffluent customers.

C. increase its merchandising flexibility.

D. limit its store traffic to qualified buyers.


12. Which of the following statements about the merchandise classification scheme is false? A. A SKU is the basic unit of analysis for making merchandising management decisions.

B. In soft goods, a SKU usually means a particular size, color, and style.

C. The highest classification level is the merchandise group.

D. A Stocking-Keeping Unit (SKU) is the smallest unit available for inventory control.


13. When Whitney took over her father’s sporting goods store, she evaluated some of her father’s vendor relationships. She found that Rodney’s Exercise Wear wasn’t particularly profitable for the store. Although committed, his products were expensive and he seemed inflexible. Whitney tried to work out a more amicable relationship with him by discussing her sales goals and new ideas for the coming year, but Rodney seemed uninterested. Which of the following is most likely lacking from the development of this relationship? A. Fulfilled obligations

B. Long-term gains

C. Poor leadership

D. Open communication


14. The Macy’s buyer is considering increasing selling space at their stores for one of many different vendors in her category. Which of the following would have the least impact on the buyer’s decision as to which vendor to grant the additional space to? A. The past gross margin performance of the vendor.

B. The arrangements for exclusive products.

C. The amount of slotting allowances the vendor pays.

D. The amount of gifts and entertainment the vendors offer.


15. Which of the following is a drawback for a retailer when offering national brands? A. National brands aren’t good quality and give retailers bad reputations with customers.

B. Significant investment is needed to develop relationships with national brands’ vendors.

C. Retailers view national brands as a threat to private labels.

D. Retailers must discount some national brands to attract customers to their stores.


16. Because of markdowns, discounts to employees and customers, and merchandise reductions, A. there will be a shortage.

B. the value of average inventory at cost is less than its receipt value.

C. the maintained markup is always less than the gross margin.

D. the initial markup is usually higher than the maintained margin.


17. Best Buy originally priced a private-label portable DVD player at $99, and then sold 1,200 units per week. After raising the price to $120, sales dropped to 1,000 units per week. What would the item’s price



End of exam

elasticity be? A. –2.4005

B. 2.4005

C. –3

D. –0.7855


18. Which of the following statements does not describe trade-offs that buyers should consider for merchandise assortment planning? A. Increasing breadth and depth can increase the need to put more merchandise on sale and thus negatively affect the gross margin.

B. Multichannel retailers offer a greater variety through their Internet channels than they do in their stores.

C. Increasing sales by offering more breadth and depth can potentially reduce inventory turnover.

D. Increasing sales by offering more breadth and depth can potentially reduce GMROI by stocking more SKUs.


19. Retailers often say they are “going to market.” What does “market” mean in this context? A. A shopping center in which the firm plans to open a new store.

B. The target consumers at whom a line of merchandise will be aimed.

C. A geographic location where the retailer anticipates remarkably good prospects for above average levels of sales.

D. A concentrated area where vendors are permanently located and show new merchandise during certain times of the year.


20. Which of the following statements about markdowns is false? A. A buyer’s objective is to minimize markdowns.

B. Buyers set the initial markup price high enough that, even after markdowns and other reductions have been taken, the planned maintained markup is still achieved.

C. Buyers employ markdowns to promote merchandise and increase sales.

D. Markdowns are part of the cost of doing business, and thus, buyers plan for them.