Retail Merchandising

The total number of members in a channel is called

• channel length.

• distribution intensity

• distribution pattern

• channel width

Answer explanation

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Channel length. The total number of members in a channel is called channel length. Channel length may be long or short depending on what makes the most economic sense. Distribution intensity and patterns have to do with intensive, selective, or exclusive distribution. Channel width refers to the number of middlemen available at the same level of a channel.

For which of the following markets would producers use a short channel of distribution:

• Baby boomers

• Generation X

• Local consumers

• Senior citizens

Answer explanation

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Local consumers. A short channel can be used when the potential customers are few and/or located close together. The baby boomer, senior citizen, and Generation X markets have many potential customers who are widely dispersed.

Which of the following is a reason for a business to offer a deep product mix:

• To ensure similar methods of distribution

• To specialize in a product line

• To compete effectively

• To control costs

Answer explanation

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To compete effectively. The business with a deep product mix offers a great many items in the product line. This allows the business to meet the needs of a variety of consumers, use a range of prices, and compete effectively. A shallow product mix helps a business to control its costs. The use of a narrow product mix enables a business to specialize in a product line. The use of similar methods of distribution relates to the consistency of a company's product lines.

Encouraging customers to buy products that they might not otherwise want to buy is one reason why some businesses __________ products.

• display

• promote

• market

• bundle

Answer explanation

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Product bundling involves combining several products and selling them for one all-inclusive price. Businesses often bundle products to encourage customers to buy products that they might not otherwise want to buy. The price of the bundled products is usually lower than the combined price of the products sold separately. The lower price is an incentive to buy. As a result, customers buy the total package, which may include products that they ordinarily would not purchase. Businesses routinely promote, market, and display products. However, these activities usually are not very effective in encouraging customers to buy products that they do not want.

Co-branding works best when two brands are

• in the same industry segment

• complementary and more or less equal in stature

• owned by the same parent company

• fierce competitors

Answer explanation

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Two brands join forces as "co-brands" for the purpose of increasing sales and market share for both. Each benefits from the other's brand equity. Co-branding works best when the two brands "go together," or are complementary, serve similar markets, and are essentially equal. The co-branding arrangement of Starbucks and Barnes & Noble exemplifies cobranding principles and has been extremely successful. Successful co-branding does not require that the brands be in the same industry segment. The two brands should actually not be competitors, nor must they be owned by the same parent company.

Why is it important for a business to maintain an adequate stock level?

• To handle expected sales

• To sell the most trendy items

• To fill available space

• To organize new inventory

Answer explanation

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. Businesses try to maintain an adequate stock level in order to have sufficient goods available to handle expected sales. It is important to businesses to stock the amount and assortment of goods that they anticipate will meet customers' demands. If customers want to buy and businesses do not have the goods in stock, the businesses might lose sales to competitors. Businesses do not maintain an adequate stock level in order to fill available space or to organize new inventory. Not all businesses sell trendy items.

Retailers often stock generic brands because they want to appeal to __________ customers.

• quality-conscious

• status-oriented

• high-income

• price-oriented

Answer explanation

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Generic brands are often found in supermarkets or drug stores and include items such as packaged macaroni and cheese and pain relievers. Generic brands do not have a significant identity attached to them. Most often, generic products are plainly packaged and list minimal information on labels. These items are generally priced lower than name brands. Therefore, generic items are often targeted to price-conscious shoppers. People who are interested in high-quality or status-oriented items tend to buy designer or brand-name items. These items tend to be more expensive and appeal to customers who have more discretionary income.

Which of the following is a method of presenting merchandise based on a specific idea or image of the store?

• Frontal presentation

• Tonnage merchandising

• Vertical merchandising

• None of these

Answer explanation

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The right answer is "idea-oriented" or "themed" presentation.

Which of the following is the practice of selling merchandise at a rate that is double its wholesale price?

• Keystone pricing

• Prestige pricing

• Tribetailing

• Loss leading

Answer explanation

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Keystone pricing is a product pricing strategy retailers use as an easy rule of thumb. Essentially, it’s when a retailer determines a retail price by simply doubling the wholesale cost they paid for a product to set a healthy profit margin. Prestige pricing uses benchmark competition but consciously price their own products above the competition to make themselves seem more luxurious, prestigious, or exclusive. This term refers to the retail practice of tailoring everything you do–from your store design, to your ads, to your employees–for a specific tribe or group of people. With Tribetailing, you’re not trying to please the public or the masses. Instead, you’re zeroing in on a particular niche and are catering to them and only them. Loss-leading strategy, retailers attract customers with a desirable discounted product and then encourage them to buy additional items.

While the original item might be sold at a loss, the retailer can benefit from having an upsell/cross-sell strategy in place to help nudge more sales. Loss-leading usually happens for products that buyers are already looking for, where demand for the product is high, driving more customers in the door. 

The function performed by retailers or wholesalers in which they receive large quantities of merchandise and sell them in small quantities is called -------.

• bulk breaking

• dumping

• cross merchandising

• Dropshipping

Answer explanation

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Bulk breaking is buying large quantities of goods and then reselling them in smaller lots, reflecting some of the cost savings made through bulk buying in the resale price. A prime function of intermediaries. Dumping occurs when a country or company exports a product at a price that is lower in the foreign importing market than the price in the exporter's domestic market. The biggest advantage of dumping is the ability to flood a market with product prices that are often considered unfair. Cross merchandising is a visual merchandising strategy that involves displaying complementary products next to each other. It’s also known as secondary product placement. 

Cross merchandising makes the shopping experience more convenient for your customers and may inspire ideas or remind them of additional items they need. When done effectively, cross merchandising can result in increased sales and average order value (AOV). Dropshipping involves forwarding sales orders and shipments as a request to your vendor or manufacturer. They will then be responsible for sending the items to your customers on your behalf, usually with your branding, so the customer is unaware you’ve even used a dropshipping company.

By adopting this approach, you’ll typically have lower overheads as you’re not physically storing products, maintaining a dispatch process and likely won’t have to pay for inventory upfront. There’s much less asset management involved – handling inventory levels is not your responsibility! This is the “anti” part we referred to earlier.