Test Flashcards
What is the goal of the Sherman Act?
To ensure a competitive business climate by banning monopolies and contracts that restrain trade.
What is horizontal price fixing?
When competing retailers establish a fixed price for certain products, violating the Sherman Antitrust Act.
Example: All retailers in a trade area agree to sell eggnog at $2.49 a quart during Christmas.
What is vertical price fixing?
Collaboration between a retailer and manufacturer to resell an item at an agreed price, also known as resale price maintenance.
What is price discrimination?
When two retailers buy identical merchandise but pay different prices, potentially violating the Sherman Act if it occurs in interstate commerce and potential for a substantial lessening of competition as a result of the price difference.
What is deceptive pricing?
Advertising an item at a low price and then adding hidden charges, harming both customers and competitors.
What is predatory pricing?
Charging different prices in different geographic areas to eliminate competition.
What is deceitful diversion of patronage?
Publishing falsehoods about a competitor to divert their customers.
What is palming off?
Representing merchandise as made by a different firm than the true manufacturer.
What is deceptive advertising?
Making false or misleading claims about a product in advertising.
The FTC must prove the claim is deceptive and material.
What is bait-and-switch advertising?
Advertising a product at a low price to attract customers and then trying to switch them to a higher-priced product.
What are deceptive sales practices?
Illegal practices that involve dishonesty or omission of key facts in advertising or sales presentations.
What are warranties in retail?
Retailers are responsible for product safety and performance under expressed and implied warranties.
What are territorial restrictions?
Limitations on the geographic area for resale that violate the Sherman Antitrust Act.
What is dual distribution?
When a manufacturer sells to independent retailers and through its own outlets, affecting manufacturer-retailer relationships.
What is a one-way exclusive dealing arrangement?
A legal arrangement where a retailer has exclusive rights to merchandise in a trade area.
What is a two-way exclusive dealing agreement?
An agreement where a supplier offers exclusive distribution to a retailer, which can be illegal if it excludes competitive products.
What is a tying agreement?
When a seller requires a buyer to purchase a weak product to buy a strong product, deemed illegal if it affects substantial commerce.
What is ethics in retail?
A set of rules for human moral behavior.
What is an explicit code of ethics?
A written policy outlining ethical and unethical behavior.
What is an implicit code of ethics?
Unwritten but understood standards of moral responsibility.
What is market segmentation?
The method of breaking down consumer populations into smaller, homogeneous groups based on characteristics.
What is a market segment?
A group of customers that a retailer aims to serve.
What is a central business district (CBD)?
An unplanned shopping area around the point where public transportation converges, usually in the city center.
What is a shopping center?
A centrally managed shopping district that is planned and has balanced tenancy.
What is an anchor store?
A dominant large-scale store expected to draw customers to a shopping center.
What is a freestanding retailer?
A retailer located along major traffic arteries without adjacent competing retailers.
What are nontraditional locations for retailers?
Locations offering greater convenience, such as airport stores and campus pop-up stores.
What is a geographic information system (GIS)?
A computerized system combining physical and cultural geography, including population characteristics.
What are the three steps in selecting a retail location?
Identifying the best markets, performing site analysis, and selecting the best site based on demand and supply density.
What is retail gravity theory?
The concept that shopping behavior can be analyzed mathematically based on gravity.
What is saturation theory?
Examining how demand for goods is served by current retail establishments compared to potential markets.
What is the index of retail saturation (IRS)?
The ratio of demand for a product divided by available supply, calculated as IRS = (H × RE) / RF.
What is demand density?
The concentration of potential demand for a retailer’s goods in certain areas.
What is supply density?
The concentration of retailers in different areas of the market.
What is store compatibility?
When compatible businesses located near each other increase sales volume beyond separate locations.
What are retail clusters?
Groups of stores closely located that share similar characteristics.
What is merchandising?
The planning and control involved in buying and selling goods to achieve retailer objectives.
What is a merchandise budget?
A plan of projected sales for a season, detailing when and how much merchandise to purchase.
What is an income statement?
A summary of sales and expenses for a given period.
What are gross sales?
The retailer’s total sales, including cash and credit sales.
What are returns and allowances?
Reductions from gross sales for returned merchandise.
What are net sales?
Gross sales minus returns and allowances.
What is the cost of goods sold?
The cost of merchandise sold during a period.
What is gross margin?
The difference between net sales and cost of goods sold.
What are operating expenses?
Expenses incurred in running the business, excluding merchandise costs.
What is operating profit?
Gross margin minus operating expenses.
What is net profit?
Operating profit plus or minus other income or expenses.
What does a balance sheet show?
The financial condition of a retailer at a specific time, following the equation Assets = Liabilities + Net worth.
What are assets?
Anything of value owned by the retail firm.
What are current assets?
Assets easily converted to cash within a year.
What are total assets?
The sum of current assets, noncurrent assets, and goodwill.
What are accounts and/or notes receivable?
Amounts customers owe the retailer for goods and services.
What are prepaid expenses?
Items already paid for, but the service has not been completed.
What are retail inventories?
Merchandise available for sale in the store or storage.
What are noncurrent assets?
Assets that cannot be quickly converted to cash.
What is goodwill?
An intangible asset based on customer loyalty, paid for when buying an existing business.
What is a liability?
Any legitimate financial claim against the retailer’s assets.
What are current liabilities?
Short-term debts payable within a year.
What are total liabilities?
The sum of current and long-term liabilities.
What is accounts payable?
Amounts owed to vendors for goods and services.
What is a statement of cash flow?
Details the source and use of all revenue and expenditures for a given time period.
What is merchandise management?
The analysis, planning, acquisition, handling, and control of merchandise investments.
What is gross margin return on inventory (GMROI)?
A measure of how quickly inventory sells and profit, calculated as GMROI = Gross margin / average inventory at cost.
What is dollar merchandise planning?
Planning the merchandise assortment using an open to buy figure for the upcoming selling season.
What is the basic stock method (BSM)?
A method allowing for a base stock level plus variable inventory that changes with expected sales.
What is the percentage variation method (PVM)?
Assumes monthly stock fluctuations should be half as great as monthly sales fluctuations.
What is the weeks’ supply method (WSM)?
Setting inventory levels equal to a predetermined number of weeks’ supply related to stock turnover.
What is the stock-to-sales method (SSM)?
Planning inventory for the month based on a stock-to-sales ratio from historical records.
What is the optimal merchandise mix?
The ideal assortment of merchandise that meets the target market’s needs.
What is a merchandise line?
A group of products closely related by end use, customer group, or price range.
What is category management?
Managing price, shelf space, promotions, and other elements within a merchandise category.
What is variety in retail?
The number of different merchandise lines stocked in a store.
What is breadth in retail?
The number of brands within a single merchandise line.
What is depth in retail?
The average number of stock keeping units (SKUs) within each brand of the merchandise line.
What is a battle of the brands?
When a retailer’s own brands compete with manufacturer’s brands for shelf space.
What are constraining factors?
Limitations affecting the optimal merchandise mix, such as space constraints.
What is a sell-through report?
Lists the percentage of stock sold from each vendor during the prior merchandise season.
What is a vendor profitability analysis statement?
A tool evaluating vendors, showing purchases, discounts, transportation charges, and gross margin.
What is a confidential vendor analysis?
Similar to vendor profitability analysis but includes a three-year financial summary and vendor sales staff details.
What is shrinkage?
Loss of inventory due to theft or damage.
What is vendor collusion?
When vendors secretly agree to set prices or terms to their advantage.
What is employee theft?
The act of employees stealing merchandise, cash, or assets from their workplace.
What is customer theft?
Also known as shoplifting, it is the act of customers stealing merchandise from a store.
What is organized crime theft?
Theft executed by groups planning larger-scale thefts targeting retailers.
What is pricing in retail?
An interactive decision made in conjunction with the firm’s mission, goals, and management.
What are profit-oriented objectives?
Objectives aimed at achieving a certain return or maximizing profits.
What is a target return objective?
Setting a specific profit level as a percentage of sales or capital investment.
What is profit maximization?
Seeking to obtain the highest possible profit.
What is skimming in pricing?
Selling at the highest price possible before lowering it to a competitive level.
What is penetration pricing?
Entering the market with a low price to establish a loyal customer base.
What are sales-oriented objectives?
Objectives focused on unit sales, dollar sales, or market share without guaranteeing profit increases.
What are status quo objectives?
Pricing policies adopted by retailers satisfied with their market share and profits.
What is a below-market pricing policy?
Discounting merchandise from the market price to build traffic and discourage competitors.
What is pricing at market levels?
Setting competitive prices within a price zone appealing to a specific demographic.
What is an above-market pricing policy?
Achieving higher prices through outstanding service or unique merchandise.
What is customary pricing?
Setting prices based on established norms for goods and services.
What is the purpose of a discount policy?
Discounts merchandise from the established market price to build store traffic, generate high sales and gross margin dollars per square foot, and discourage competitors.
What does pricing at market levels involve?
Most merchants want to be competitive with one another, involving a price zone, a range of prices for a particular merchandise line that appeals to customers in a certain demographic group.
What is above-market pricing policy?
Some retailers achieve this through outstanding service, unique merchandise, convenient locations, or extended hours, despite higher costs or low sales volume.
What is customary pricing?
Occurs when a retailer sets prices for goods and services and seeks to maintain those prices over an extended period of time.
What is variable pricing?
Is used when differences in demand and cost force the retailer to change prices in a fairly predictable manner.
What does flexible pricing mean?
Means offering the same products and quantities to different customers at different prices, generally used in situations calling for personal selling.
What is a one-price policy?
The retailer charges all customers the same price for an item.
What is odd pricing?
The practice of setting retail prices that end in the digits 5, 8, or 9—such as $29.95, $49.98, or $9.99.
What is multiple-unit pricing?
The price of each unit in a multiple-unit package is less than the price of each unit if it were sold individually.
What is bundle pricing?
Generally involves selling distinct multiple items offered together at a special price.
What is bait-and-switch pricing?
The practice of advertising a low-priced model of a shopping good merely to lure shoppers into a store.
What is leader pricing?
A high-demand item is priced low and advertised heavily in an effort to build store traffic. National brands of convenience goods are often designated as leader items.
What is a loss leader?
An item sold below a retailer’s cost.
What is high-low pricing?
Involves the use of high everyday prices and low leader specials.
What is markup?
Not explicitly defined in this chapter excerpt.
A potential definition from outside the sources: Markup is the difference between the selling price of an item and its cost, expressed as a dollar amount or a percentage. You should verify this definition independently.
What is markdown?
Not explicitly defined in this chapter excerpt.
A potential definition from outside the sources: Markdown is a reduction in the original selling price of an item. You should verify this definition independently.
