Exam 1 Flashcards
Retailing
is the set of business activities that adds value to products and service sold to consumers
for their personal or family use.
How retailers add value?
- Provide assortment
- Break Bulk
- Hold inventory
- Offer services
Breaking bulk
offer products in smaller quantities tailored to individual consumers and household consumption patterns.
Holding inventory
consumers can keep a smaller inventory of products at home because they know local retailers will have the products available when they need them.
Forward integrations
manufacturers undertake wholesaling and retailing activities e,g,Nike
Backward integrations
when retailers perform some wholesaling and manufacturing activities E.g Macy
Providing service
make it easier for customer to buy and use products
Providing an assortment of products and services
enables customers to choose from a wide selection of products brands,sizes,and prices at one location
Vertical integration
firms performs more than one set of activities in the channel e.g Gap,Ralph Lauren, Nike,Macy
What is NAICS?
Six digit code assigned to every business .Codes developed by the U.S,Canada and Mexico
What is SEC?
A u.s government oversight agency responsible for regulating the
Securities markets and protecting investors. ( Four digital codes )
codes for retail
5600,5621,5651,5661
Variety (Breadth of merchandise)
the number of merchandise categories
Assortment(Depth of merchandise)
The number of items in a category (SKUs
Department stores
carry broad variety and deep assortment
Offer customer service
E.g neiman marcus,saks fifth ave
Discount Stores
Offer a broad variety of merchandise,limited service and lower prices
Offer both private labels and national brands
E.g walmart,target
Extreme Value Retailer
*Small discount stores that offer a limited merchandise assortment at very low prices
*offer a broad variety but shallow assortment of household goods,health and beauty
aids and groceries
*Dollar general,family dollars
Specialty stores
focus on a limited number of complementary merchandise categories
Provides a high level of service
E.g. victoria secret,sephora,zara, and H&M
Category Stores
offer Narrow but deep assortment
Barnes and noble,best buy,Ikea
Difficult to differentiate themselves (provide similar assortments)
Provide the same level of service
Off-price retailer
aka closeout retailer
Offer inconsistent assortment of brand name merchandise at a significant discount off the
MSRP
*opportunistic buying
*T.J Maxx,Marshall,Home goods,Ross stores,Burlington
Retail Strategy?
*types of merchandise
*variety and assortment of merchandise
*target market
*sustainable competitive advantage : an advantage over competition that can be maintained over a
long time
Sustainable competitive advantage?
Sustainable competitive advantage?
10-K
A corporate report to the shareholders documenting companies financial condition and operations
Over the previous year.
10-Q
The standard calendar quarters that make up the year
Income statement
summarize all income and expenses over given period (revenues,expenses,and profit)
Balance sheet
reports company assets,liabilities and equity
Cash flow
summarizes the amount of cash and cash equivalents entering and leaving a company
ROI(Return on Investment)
appropriate financial performance (Investment & Profit)
ROA(Return of Assets)
appropriate financial performance measure for retailers,profit return on all
The assets possessed by a firm (assets & Profit)
What are the two integral parts of return on assets?
net profit margin
asset turnover
Net Profit Margin %
- The profits generated from each dollar of sales
- If a retailer’s net profit margin is 5 percent, it generates income of $.05 (5 cents) for every dollar of merchandise or services it sells.
Asset Turnover
This financial measure assesses the productivity of a firm’s investment in its assets and indicates how many sales dollars are generated by each dollar of assets.
*if a retailer’s asset turnover is 3.0, it generates $3 in sales for each dollar invested in the firm’s assets.
What is strategic profit model?
Summarizes factors affecting a firms ROA
Inventory turnover
*is a measure of the productivity of inventory:It is used to evaluate how effectively retailers utilize their investment in inventory
*Shows how many times, on average, inventory cycles through the store during a specific period of time(usually a year)
Type input measures
assess the amount of resources or money used by the retailer to achieve outputs such as
Sales
Type Output measures
assess the results of a retailers investment decisions
Ex. sales revenues,gross margin and net profit margin
Type productivity measures
ratios of outputs to inputs
Determines hoe effectively retailers use their resources
financial risk.
The ability to manage debt and fulfill it’s financial obligation
How to assess the financial risks Of retailers?
*cash flow analysis
*current ratio
*quick ratio
What is cash flow analysis?
= (cash and cash equivalents at end of period) reflects a company’s financial health- typically the more cash
that available for business operations the better.
*if the net income is much larger than cash flow the companies earnings quality is questionable,if cash
Flow exceeds the company and may be much healthier.
current ratio
*Measure a company’s ability to pay short term obligations or those due within one year
quick ratio
*Current assets less inventory divided by current liabilities
*The higher the ratio result the better financial health , the lower the ratio the more ikely the company
Will struggle with paying debts .
