Explanation: A) B) C) D) E) Diff: 1 Topic: Forecasting Sales

Transcription

1 Chapter 10 Merchandise Management 1) Factors that impact sales forecasts, merchandise plans, and budgets include all of the following EXCEPT: A) The price the product is offered at Seasonality of the item and timing of the promotional event Whether advertising complements the product Shelf placement All of these impact sales forecasts, merchandise plans, and budgets Topic: Product availability LO: Explore merchandise budget plans and open-to-buy systems, and how they are prepared. 2) Some sources of information that retailers use to develop forecasts for fashion merchandise categories include: A) market research fashion and trend services vendors previous sales data All of these Topic: Forecasting Sales LO: Determine what trade-offs retailers must make to ensure that stores carry the appropriate type and amount of merchandise. Page 370

2 3) What is the process by which a retailer attempts to offer the right quantity of the right merchandise at the right time while meeting the company's financial goals? A) Category management Quick response inventory management Merchandise management Inventory control Materials procurement and handling Answer: C Topic: Merchandise category: the planning unit 4) Which of the following is true about the way most retailers operate? A) Work to achieve adequate return on investment to the owners. The primary goal is to sell merchandise. Merchandise management is selling the right merchandise at the right time. After financial objectives are set, buying decisions are made. All of these are true. Topic: Developing an Assortment Plan LO: Review how retailers plan their assortments. Page 371

3 5) A(n) is an assortment of items that a customer sees as reasonable substitutes for each other. A) inventory unit assortment plan category SKU classification Answer: C Topic: Merchandise category: the planning unit 6) Housewares, boys' apparel, and Liz Claiborne brand women's apparel would be examples of: A) inventory investment categories SKUs variety breadth of merchandise Answer: B Topic: Merchandise category: the planning unit Page 372

4 7) Which of the following best describes a category? A) The smallest unit available for keeping inventory An assortment of SKUs that the customer sees as reasonable substitutes for each other The unit of inventory least affected by seasonal trends The largest unit available for keeping inventory An assortment of complementary SKUs Answer: B Topic: Merchandise category: the planning unit 8) The is the basic unit of analysis for making merchandise decisions. A) assortment SKU classification category variety Answer: D Topic: Merchandise category: the planning unit Page 373

5 9) Which of the following is an example of a reasonable category for The Stork Helper, a retail chain that specializes in items needed for infants? A) Wooden and plastic high chairs from a variety of different vendors Infant toys Lighting fixtures (lamps and ceiling) for baby rooms Baby cribs and cradles All of these are examples of categories Explanation: A) A category is a group of items that the customers see as reasonable substitutes for each other. A category is a group of items that the customers see as reasonable substitutes for each other. A category is a group of items that the customers see as reasonable substitutes for each other. A category is a group of items that the customers see as reasonable substitutes for each other. A category is a group of items that the customers see as reasonable substitutes for each other. Topic: Merchandise category: the planning unit Comprehension 10) Which of the following are an example of a reasonable category of merchandise for a garden centre? A) Mowers Hand tools Fertilizer and lawn chemicals Perennials All of these Topic: Merchandise category: the planning unit Comprehension Page 374

6 11) Which of the following statements is true about the basic unit of analysis for making merchandise decisions? A) For a pet storeowner, books on the care and feeding of birds would be an example of a category Retailers and their vendors typically use the same methods for identifying categories The composition of a category must be determined by the manufacturer in order to be logical Custom wheels would not be a category for a tire retailer Categories are never defined by brand names Answer: A Explanation: A) The composition of a category is best determined by the consumer, which is why consumer brands are often treated as individual categories. Vendors and retailers often may not use the same method for identifying categories. The composition of a category is best determined by the consumer, which is why consumer brands are often treated as individual categories. Vendors and retailers often may not use the same method for identifying categories. The composition of a category is best determined by the consumer, which is why consumer brands are often treated as individual categories. Vendors and retailers often may not use the same method for identifying categories. The composition of a category is best determined by the consumer, which is why consumer brands are often treated as individual categories. Vendors and retailers often may not use the same method for identifying categories. The composition of a category is best determined by the consumer, which is why consumer brands are often treated as individual categories. Vendors and retailers often may not use the same method for identifying categories. Topic: The buying organization Comprehension 12) During the maturity stage of the category life cycle,: A) the target market is middle-income adopters the promotion is informative in nature the level of variety is probably the greatest distribution intensity is limited a penetration or skimming pricing strategy is implemented Answer: C Diff: 3 Topic: Category life cycles Comprehension LO: Determine what trade-offs retailers must make to ensure that stores carry the appropriate type and amount of merchandise. Page 375

7 13) Which of the following best describes a fad? A) A merchandise category that generates a lot of sales for a short time A merchandise category that typically lasts several seasons Merchandise that is in continuous demand over an extended period Inventory whose sales fluctuate dramatically according to the time of the year Inventory that can be described as basic merchandise Answer: A Topic: Which brands and items do customers really value? LO: Determine what trade-offs retailers must make to ensure that stores carry the appropriate type and amount of merchandise. 14) Pokemon cards were as popular as the Rubick's Cube, the Chia Pet, and the Cabbage Patch dolls, but also declined rapidly, with little following from its once loyal fans. Pokemon cards could best be described as what type of merchandise? A) Staple Fashion Basic Fad Seasonal Answer: D Topic: Which brands and items do customers really value? LO: Determine what trade-offs retailers must make to ensure that stores carry the appropriate type and amount of merchandise. Page 376

8 15) The producers of the Spiderman movies hoped that merchandise made with the superhero would have a period of great popularity. But they also realized that such merchandise would not be popular for long because they are: A) styles fashions fads staples cycles Answer: C Topic: Which brands and items do customers really value? LO: Determine what trade-offs retailers must make to ensure that stores carry the appropriate type and amount of merchandise. 16) Which of the following items is an example of fashion merchandise? A) Floor-length evening gowns Louis XVI style furniture London Fog raincoats Matching sheets and pillowcases covered with flowers All of these Explanation: A) All of the alternatives are categories of merchandise that can last several seasons and do have an unpredictable selling life. All of the alternatives are categories of merchandise that can last several seasons and do have an unpredictable selling life. All of the alternatives are categories of merchandise that can last several seasons and do have an unpredictable selling life. All of the alternatives are categories of merchandise that can last several seasons and do have an unpredictable selling life. All of the alternatives are categories of merchandise that can last several seasons and do have an unpredictable selling life. Topic: Merchandise management process LO: Examine the types of merchandise management planning processes retailers use to manage merchandise categories. Page 377

9 17) Which of the following are an example of staple merchandise? A) Low-rise hipster jeans Men's black socks Justin Bieber CDs Platform shoes in the 1970s "Fish net" stockings Answer: B Topic: Merchandise management process LO: Examine the types of merchandise management planning processes retailers use to manage merchandise categories. 18) is inventory that is in continuous demand by customers. A) Stock merchandise Staple merchandise Style merchandise Essential merchandise Fashion merchandise Answer: B Topic: Merchandise management process LO: Examine the types of merchandise management planning processes retailers use to manage merchandise categories. Page 378

10 19) Where are you most likely to find staple merchandise? A) Computer software Department store Manufacturer's outlet Superstore fashion boutiques Grocery Stores Topic: Merchandise management process LO: Examine the types of merchandise management planning processes retailers use to manage merchandise categories. 20) An example of seasonal merchandise is: A) wool sweaters boxed milk thank-you notes antique armoires chewing gum Answer: A Explanation: A) Customers would only need wool sweaters during the cold months of winter. Customers would only need wool sweaters during the cold months of winter. Customers would only need wool sweaters during the cold months of winter. Customers would only need wool sweaters during the cold months of winter. Customers would only need wool sweaters during the cold months of winter. Topic: Merchandise management process LO: Examine the types of merchandise management planning processes retailers use to manage merchandise categories. Page 379

11 21) A source of information for making category-level sales forecasts is: A) previous store sales observation of competition vendors trade publications all of these Topic: Forecasting Sales LO: Determine what trade-offs retailers must make to ensure that stores carry the appropriate type and amount of merchandise. 22) Which of the following is a vendor who forms an alliance with a retailer to help gain consumer insight, satisfy customer needs, and improve performance and profit across a category? A) Assortment supervisor Category manager Category captain Category specialist Consumer advocate Answer: C Topic: Merchandise category: the planning unit Page 380

12 23) Procter and Gamble hired Lyle to work with Walmart to help better satisfy the consumers' cleaning supply needs and balance assortments for the category. Which of the following could best describe Lyle's position? A) Assortment manager Category captain Category manager Category vendor Product supervisor Answer: B Topic: Merchandise category: the planning unit 24) What is a drawback of utilizing a category captain? A) Vendors could take advantage of their position and maximize their own sales Retailers tend to ignore best practices advice Retailers take advantage of the information and test legal limits Retailers can take advantage of their position and minimize competing brands There are no drawbacks to utilizing a category captain Answer: A Topic: Merchandise category: the planning unit Page 381

13 25) The highest classification level in the buying organization is called the: A) category group buying group merchandise group retail group division managers Answer: C Topic: The buying organization 26) Which of the following is an example of a SKU? A) Secret pantyhose Purses Timex Sports Watches Dockers pants Liz Claiborne dress, size 4, red with long sleeves, silk Topic: The buying organization Page 382

14 27) Which of the following is not an example of a SKU? A) Secret pantyhose size B, navy, reinforced toe Teen necklaces with matching bracelets and rings No-ad sunscreen, SPF 50 in 220 ml bottle PC ginger ale in 355 ml can Queen size Sealy mattress, beige, with extra back support and Scotch Guard Answer: B Explanation: A) An SKU is the smallest unit available for keeping inventory control. Teen necklaces with matching bracelets and rings is not descriptive enough to qualify as the smallest unit. There could be many necklaces under the description. An SKU is the smallest unit available for keeping inventory control. Teen necklaces with matching bracelets and rings is not descriptive enough to qualify as the smallest unit. There could be many necklaces under the description. An SKU is the smallest unit available for keeping inventory control. Teen necklaces with matching bracelets and rings is not descriptive enough to qualify as the smallest unit. There could be many necklaces under the description. An SKU is the smallest unit available for keeping inventory control. Teen necklaces with matching bracelets and rings is not descriptive enough to qualify as the smallest unit. There could be many necklaces under the description. An SKU is the smallest unit available for keeping inventory control. Teen necklaces with matching bracelets and rings is not descriptive enough to qualify as the smallest unit. There could be many necklaces under the description. Topic: The buying organization Comprehension 28) Top management sets the merchandise direction for the company by: A) defining the target market establishing the performance goals deciding which merchandise classifications deserve more emphasis deciding which merchandise classifications deserve less emphasis all of these Topic: Determining breadth and depth LO: Review how retailers plan their assortments. Page 383

15 29) Which of the following persons studies a category's past performance, considers trends in the market, and makes projections for assortments? A) Buyers Top management The customer The vice presidents of the merchandise groups The chief financial officer Answer: A Topic: Developing an Assortment Plan LO: Review how retailers plan their assortments. 30) Which of the following best describes variety? A) The number of SKUs in a store The number of different merchandising categories within a store The percentage of demand for a particular SKU that is satisfied Product availability Inventory that results from a replenishment process Answer: B Topic: Developing an Assortment Plan LO: Review how retailers plan their assortments. Page 384

16 31) Father Christmas is a retail store that sells one-of-a-kind Santa Claus figures made from fur, wool, and tapestry. That is all the store sells. In terms of, the store has no product breadth. A) variety horizontal integration product mix merchandise depth assortment Answer: A Topic: Category breadth and depth LO: Review how retailers plan their assortments. 32) is the number of SKUs within a category. A) Merchandise breadth Horizontal integration Variety Assortment Merchandise mixture Answer: D Topic: Developing an Assortment Plan LO: Review how retailers plan their assortments. Page 385

17 33) Monty's Men's Wear sells ties made of silk, wool, cotton, and linen, in many colours, styles, and lengths. In terms of, the store has tremendous depth. A) variety horizontal integration merchandise mixture service level assortment Topic: Developing an Assortment Plan LO: Review how retailers plan their assortments. 34) Which of the following is defined as the percentage of demand for a particular SKU that is satisfied? A) Assortment Economic order quantity Merchandise mix Product availability Variety Answer: D Topic: Setting Inventory and Product Availability Levels LO: Explore merchandise budget plans and open-to-buy systems, and how they are prepared. Page 386

18 35) Father Christmas is a retail store in Winnipeg that sells one-of-a-kind Santas made from fur, wool, and tapestry. The store has 5 cash registers and a total "operating liability ratio" of 100. If 150 customers wish to buy Santas from this store, and it sells only 120 before running out of stock, what is its service level? A) 125 percent 20 percent 80 percent 66.7 percent 150 percent Answer: C Product availability = 120/150 = 80%. Product availability = 120/150 = 80%. Product availability = 120/150 = 80%. Product availability = 120/150 = 80%. Product availability = 120/150 = 80%. Topic: Allocating Merchandise to Stores Comprehension LO: Review how multistore retailers allocate merchandise to stores. 36) Which of the following must a buyer consider when determining an assortment for a category like lawn mowers? A) The profitability of the merchandise mix The corporate philosophy toward the assortment Physical characteristics of the store The degree to which it complements other categories in the store All of these Topic: Establishing a Control System for Managing Inventory LO: Explore merchandise budget plans and open-to-buy systems, and how they are prepared. Page 387

19 37) Which of the following is inventory that results from the replenishment process and is required to meet demand when the retailer can predict demand and replenishment times? A) Cycle stock Fashion stock Seasonal stock Safety stock Lead stock Answer: A Topic: Allocating Merchandise to Stores LO: Review how multistore retailers allocate merchandise to stores. 38) is used as a cushion for cycle stock so the retailer will not run out before the next order arrives. A) Base stock Core stock Cycle stock Seasonal stock Safety stock Topic: Type of merchandise allocated LO: Review how multistore retailers allocate merchandise to stores. Page 388

20 39) A retailer that sells 10-pound bags of senior dog food has found that some weeks he sells thirty 10-pound bags and other weeks he sells none. A reorder can take up to three weeks. The probability of running out of that size bag of dog food and alienating his customers can be alleviated by maintaining: A) cycle stock base stock seasonal stock safety stock staple stock Answer: D Topic: Type of merchandise allocated LO: Review how multistore retailers allocate merchandise to stores. 40) The amount of safety stock a retailer holds is dependent on: A) the variability of lead time the vendor's level of product availability demand fluctuations the retailer's level of product availability all of these Topic: Type of merchandise allocated LO: Review how multistore retailers allocate merchandise to stores. Page 389

21 41) What is lead time? A) The amount of time it takes for a vendor to negotiate price with buyers The time it takes for a new product to progress through the life cycle The time from recognizing that an order needs to be placed and the point it arrives in the store ready for sale The amount of time it takes to develop product assortment in the assortment planning process The time it takes retailers to gain customer loyalty Answer: C Topic: Control system for managing inventory of staple merchandise LO: Explore merchandise budget plans and open-to-buy systems, and how they are prepared. 42) The period from the time the grocer realized she was out of lettuce until the produce shipment arrived and the lettuce was marked for the sales floor is called: A) lead time ordering time cycle time safety time stocking time Answer: A Topic: Control system for managing inventory of staple merchandise LO: Explore merchandise budget plans and open-to-buy systems, and how they are prepared. Page 390

22 43) Shrinkage can: A) be inventory's recorded value based on merchandise bought and received be inventory reduction caused by poor bookkeeping be physical inventory in stores and distribution not be caused by shoplifting not be caused by damaged goods Answer: B Topic: Product availability LO: Explore merchandise budget plans and open-to-buy systems, and how they are prepared. 44) Compare and contrast broad and shallow assortment planning with that of narrow and deep assortment planning. Answer: Broad and shallow assortment planning is typical of the fashion retailer Club Monaco, which will stock a broad assortment of styles to satisfy the style-conscious consumer but does not carry depth in any particular item. The fashion customer is more selective about style, size, and colour, and will change with the newest trends. Narrow and deep assortment planning is an assortment strategy typical of the mass merchandisers, such as Walmart and Target. The assortment mix has only a few choices in a particular category, but it is stocked in considerable depth so as to be seldom out of stock within that product group. There may be, for example, three brands. Topic: Developing an Assortment Plan Comprehension LO: Review how retailers plan their assortments. 45) In terms of merchandise, what is the difference between a classification and a category? Answer: A classification is a group of items (SKUs) for the same type of merchandise supplied by different vendors. A category is an assortment of items (SKUs) that the customer sees as reasonable substitutes for each other. Typically, a buyer is in charge of one classification, such as men's shirts, that encompass several categories, such as long-sleeve dress shirts, sport shirts, knit shirts, etc. Diff: 3 Topic: The buying organization Page 391

23 46) What is a potential problem with establishing a category captain? Answer: Vendors could take advantage of their position of being a category captain by maximizing their own sales at the expense of competition, by colluding to fix prices with retailers, or blocking other brands to gain shelf space exposure. Topic: Merchandise management process LO: Examine the types of merchandise management planning processes retailers use to manage merchandise categories. 47) Imagine a retail chain that sells CDs that has four buyers for its country & Western music division. Each one deals with one of the following recording companies: RCA, EMI, Warner Music, and Atlantic. Why might this approach to merchandise planning be thought as inefficient? Answer: The four buyers are in essence competing with each other. Also, smaller recording studios appealing to special target markets would not be available at the store. Since no one individual is totally responsible for the success or failure of the country & Western music category, it is difficult to identify the source of a problem and solve it. Putting one buyer or category manager in charge of the country & Western division would be advisable. Topic: Merchandise category: the planning unit Comprehension 48) How does top management set the merchandising direction for the retail company? Answer: Top management sets the merchandising direction for the company by (1) defining the target market, (2) establishing performance goals, and (3) deciding which merchandise classifications based on general trends in the market place deserve more or less emphasis. Topic: Forecasting Sales Comprehension LO: Determine what trade-offs retailers must make to ensure that stores carry the appropriate type and amount of merchandise. 49) Of variety, assortment, and product availability, which is the most strategic? Explain your answer. Answer: Variety is the most strategic because it is most important in defining the retailer in the customer's eyes. It defines the retailer's vendor structure. Decisions regarding variety are typically made less often and at higher levels than decisions regarding assortment or product availability. Topic: Developing an Assortment Plan Comprehension LO: Review how retailers plan their assortments. Page 392

24 50) How can increasing assortment adversely affect customers? Answer: By increasing assortment a retailer may confuse a customer and lose sales. Also, a diluted product selection may cause customers to lose sight of what the retailer is all about. Topic: Developing an Assortment Plan LO: Review how retailers plan their assortments. 51) What are the different assortment balance issues exclusive to the electronic channel? Answer: First, the electronic channel is not constrained by the physical space of the stores. Second, the electronic channel does not have to stock every item that they sell. They can have their best selling items in distribution centres and have other items shipped directly from wholesalers or manufacturers. Third, since the size of the store and level of inventory investments are relaxed, the Internet business can provide a wider variety, deeper assortment, and higher level of product availability than their bricks and mortar counterparts. Topic: Determining breadth and depth LO: Review how retailers plan their assortments. 52) How does the service level requested by the buyer impact the inventory investment? Explain your answer. Answer: Typically, a higher service level (product availability) requires a higher inventory investment. This is because as a store tries to stay in stock on a particular SKU, they have to carry increasingly higher levels of backup stock to assure that they won't run out. Topic: Determining breadth and depth LO: Review how retailers plan their assortments. 53) What does 70 percent product availability mean from a practical point of view? Answer: 70 percent product availability means that for every 100 customers who asked for a particular item, it was available 70 times. This means the retailer was out of the item 30 times. Topic: Product availability LO: Explore merchandise budget plans and open-to-buy systems, and how they are prepared. Page 393

25 54) What is the difference between merchandise management and category management? Answer: Merchandise management is the process by which a retailer attempts to offer the right quantity of the right merchandise in the right place at the right time while meeting the company's financial goals. Category management is the process of managing a segment of the retail business with the objective of maximizing the sales and profits of a category. Topic: Merchandise Management Overview 55) What is a category life cycle? Answer: A category life cycle is the category's sales pattern over time beginning with an introduction stage, a growth stage, a maturity stage, and a decline. Topic: Category life cycles LO: Determine what trade-offs retailers must make to ensure that stores carry the appropriate type and amount of merchandise. 56) List the classification levels of the standard merchandise classification scheme. Answer: The highest classification level is the merchandise group, followed by the department, classification, category, and SKUs. Topic: The buying organization 57) Why is it disadvantageous to forecast sales at an aggregate level for the chain rather than on a store-by-store basis? Answer: The main disadvantage is that store-level variability gets averaged or summed out of the data making it difficult for the store to meet the needs of smaller market segments. Diff: 3 Topic: Forecasting Sales LO: Determine what trade-offs retailers must make to ensure that stores carry the appropriate type and amount of merchandise. 58) What is the difference between variety and assortment? Answer: Variety is the number of different merchandising categories within a store or a department. Assortment is the number of SKUs within a category. Topic: Category breadth and depth LO: Review how retailers plan their assortments. Page 394

26 Page ) Why is it more difficult to manage cycle and safety stock for fashion merchandise than for staple merchandise? Answer: There are not enough accurate historical sales data to predict sales for specific SKUs. Topic: Category life cycles LO: Determine what trade-offs retailers must make to ensure that stores carry the appropriate type and amount of merchandise.