CH-16 Managing Retailing, Wholesaling, and Logistics – Marketing Management: A South Asian Perspective : Exam Guide

Chapter 16 Managing Retailing, Wholesaling, and Logistics 1) ________ includes all the activities in selling goods or services directly to final consumers for personal, nonbusiness use. A) Wholesaling B) Retailing C) Procurement D) Promoting E) Warehousing Answer: B 2) Which of the following is true for retailing? A) Manufacturers are not considered to be retailers as they are engaged in producing the product. B) Vending machines are considered to be retailing only if they are located within stores. C) Retailing deals only with goods; it does not include services. D) Selling from a consumer's home is direct selling, but not retailing. E) Wholesalers are only considered to be retailers if they are selling to final consumers. Answer: E 3) Which of the following is an example of retailing? A) Dylan's sends catalogs to retail, industrial, and institutional customers. B) SEZ U Inc. sells a limited line of fast-moving goods to small retailers for cash. C) BEL Inc. sells FMCG goods to merchant wholesalers and distributors. D) Praxis International sells products to consumers directly through the Internet. E) Hub Styles procures its raw materials directly from farmers in the region. Answer: D 4) Discount stores that try to keep prices as low as possible are more likely to function using ________ operations. A) limited service B) self-selection C) full-service D) self-service E) limited-selection Answer: D 5) Reynold's is a supermarket chain that has always catered to mid-market customers. However, the owner, Mal, has noticed that an influx of new residents are buying mostly the lower-cost products and products on discount. To attract customers, Mal decides to make a gradual switch to the discount store format, but to do this, he will have to cut costs wherever possible. Which of the following types of service should Mal avoid in order to lower costs? A) limited service B) self-selection C) full-service D) self-service E) limited-selection Answer: C 6) A large staff, along with a higher proportion of specialty goods and slower-moving items and many services, are usually features of ________ retailing. A) self-service B) self-selection C) limited service D) full-service E) limited-selection Answer: D 7) In ________ retailing, salespeople are ready to assist in every phase of the “locate-compare-select” process. A) self-service B) self-selection C) full-service D) limited service E) limited-selection Answer: C 8) In the ________ type of retailing, customers usually find their own goods, although they can ask salespeople for assistance. A) self-service B) self-selection C) full-service D) limited service E) limited-selection Answer: B 9) Which of the following is true for self-service retailing? A) These retailers carry more shopping goods and services such as credit and merchandise-return privileges. B) This service model is favored by discount stores and customers who want to save money. C) It results in high staffing costs compared to other forms of retailing. D) Salespeople are ready to assist in every phase of the “locate-compare-select” process. E) Customers need more information and assistance than in other forms of retailing. Answer: B 10) Which of the following types of retailing generally entails the highest costs? A) full-service B) self-service C) limited-selection D) limited service E) self-selection Answer: A 11) Which of the following is an example of a limited-service retailer? A) Customers at Daiso pick out the products they want and pay at the checkout counter. B) Salespeople at Nubox are always on hand to offer shoppers advice and assistance in choosing products. C) Cold Storage allows customers to checkout their own purchases in order to reduce the staff count. D) As CLO’s offers a number of merchandise-return privileges, customers need information and assistance while shopping. E) Alison's stocks a number of specialty products and the store's salespeople generally help shoppers with all their needs. Answer: D 12) Bill and Josh are considering opening a retail store. They have identified their target market and location and are finalizing the details of the merchandise they will carry. Since the neighborhood is rundown and the customers in the area are very price-conscious, Bill and Josh want to offer goods from well-known brands, but at lower rates than the full retail prices of the products. They choose to stock excess production from manufacturers or goods that have remained unsold at other retailers. This is a description of a(n) ________ retailer. A) off-price B) specialty C) discount D) department E) catalog Answer: A 13) _____________ is the cornerstone of all discount operations. A) Full-service B) Self-service C) Limited-selection D) Limited service E) Self-selection Answer: C 14) E&OE produces and markets its own brand of skincare products using herbal remedies and natural ingredients through standalone stores as well as an online portal. E&OE is a(n) ________ retailer. A) off-price B) specialty C) discount D) department E) extreme value Answer: B 15) A factory outlet is an example of a(n) ________ retailer. A) off-price B) specialty C) discount D) department E) catalog Answer: A 16) Companies who sell products door-to-door or at home sales parties are engaging in ________. A) franchising B) network marketing C) direct-response marketing D) corporate selling E) direct marketing Answer: B 17) Which of the following is an example of direct selling? A) E&OE sells its herbal skincare products exclusively through its stand-alone stores. B) TCJ is a telemarketing firm that sells products from a number of different suppliers. C) Jayne's sells most of its products to customers through home sales parties. D) J3 is an online shopping portal where customers can buy directly from manufacturers. E) Reynold's tries to minimize its staff costs by installing vending machines in its stores. Answer: C 18) Which of the following is an example of direct marketing? A) E&OE sells its herbal skincare products exclusively through its stand-alone stores. B) TCJ is a telemarketing firm that sells products from a number of different suppliers. C) Jayne's sells most of its products to customers through home sales parties. D) J3 is a storeless retailer that organizes the retail activity of the employees of four firms. E) Reynold's tries to minimize its staff costs by installing vending machines in its stores. Answer: B 19) The ________ marketing sales system works by recruiting independent businesspeople who act as distributors. A) catalog B) multilevel C) direct-response D) corporate E) direct Answer: B 20) In ________, a salesperson goes to the home of a host who has invited friends, demonstrates the products and takes orders. A) catalog marketing B) franchising C) direct-response selling D) network marketing E) direct marketing Answer: D 21) Telemarketing is a type of ________. A) direct selling B) network marketing C) multilevel selling D) close-range marketing E) direct marketing Answer: E 22) Electronic shopping is a type of ________. A) direct selling B) network marketing C) multilevel selling D) corporate selling E) direct marketing Answer: E 23) Which of the following is true of store retailers? A) A hard-discount store offers a wider merchandise mix than discount stores at higher prices. B) A discount store offers leftover goods, overruns, and irregular merchandise sold at less than retail. C) A specialty store generally stocks a very narrow product line. D) An extreme value store generally has a broad selection of high-markup, brand-name goods. E) A catalog showroom is a large, low-cost, low-margin, high-volume, self-service store. Answer: C 24) A ________ is a storeless retailer serving a specific clientele—usually employees of large organizations—who are authorized to buy from a list of retailers that have agreed to give discounts in return for inclusion on the list. A) direct-selling vendor B) direct marketing vendor C) buying service D) automatic vendor E) corporate retailer Answer: C 25) An independent retailer using a central buying organization and joint promotion efforts with other retailers is part of a ________. A) corporate chain store B) voluntary chain C) retailer cooperative D) merchandising conglomerate E) franchise organization Answer: C 26) A ________ is a retail firm owned by its customers. Members contribute money to open their own store, vote on its policies, elect a group to manage it, and receive dividends. A) retailer cooperative B) voluntary chain C) consumer cooperative D) merchandising conglomerate E) franchise organization Answer: C 27) A ________ is wholesaler-sponsored group of independent retailers engaged in bulk buying and common merchandising. A) retailer cooperative B) voluntary chain C) consumer cooperative D) merchandising conglomerate E) franchise organization Answer: B 28) Which of the following is true for franchisors? A) The franchisor has to pay the franchisee to be part of the franchise system. B) The franchisor licenses the trade mark from the franchisee. C) The franchisor must change its operations to suit those of the franchisee’s. D) The franchisor collects royalty payments from the franchisee. E) The franchisor pays start-up costs for the franchisee. Answer: D 29) Which of the following is true for franchisees? A) The franchisee is paid by the franchisor to be part of the franchise system. B) The franchisee licenses a trade mark to the franchisor. C) The franchisee must change its operations to suit those of the franchisor’s. D) The franchisee collects royalty payments from the franchisor. E) The franchisee owns the trade or service mark. Answer: C 30) Which of the following is a benefit of franchising for franchisees? A) The franchisee finds it easier to borrow money from financial institutions. B) The franchisee receives ownership of the franchisor's trade mark. C) The franchisee must change its operations to suit those of the franchisor’s. D) The franchisee collects royalty payments from the franchisor. E) The franchisee is paid by the franchisor for being part of the system. Answer: A 31) Jake wants to open a Subway franchise in his small town. To do this, he must pay the company a ________ fee. A) slotting B) title C) royalty D) merchandising E) residual Answer: C 32) Which of the following is true for the retail industry? A) Discount stores and catalog showrooms are competing for the same customers. B) Upscale retailers see a decline in sales as middle-market retailers thrive. C) Small, specialized retailers are crowding out larger, more diverse retailers. D) Store retailing sees no competition from non-store retailing. E) Discount stores are not doing as well as middle-market retailers. Answer: A 33) Electronic shelf labeling allows retailers to ________. A) check inventory levels instantaneously B) order electronically from suppliers C) run continual promotional messages D) advertise sales and special offers E) change price levels instantaneously Answer: E 34) Staples is a giant retailer that concentrates on selling office supplies. Staples is an example of a(n) ________. A) ambush marketer B) supercenter C) mega-marketer D) category killer E) guerilla marketer Answer: D 35) In the corporate headquarters of a supermarket chain, ________ are responsible for developing brand assortments and listening to salespersons’ presentations. A) central buyers B) brokers C) specialist buyers D) agents E) specialized wholesalers Answer: C 36) In supermarkets and other retail outlets, RFID is used to ________. A) change prices instantaneously B) check for spoilage or damage to goods C) advertise special offers and discounts D) run continual promotional messages E) monitor inventory and track goods Answer: E 37) Which of the following is true for direct product profitability analysis? A) It is highly correlated with the gross margin on a product. B) It is negligible compared to the gross margin on a product. C) It bears little relation to the gross margin on a product. D) It is significantly lower than the gross margin on a product. E) It is exactly the same as the gross margin on a product. Answer: C 38) Mass merchandisers and discount stores typically fall into the ________ group with respect to margins and volume. A) mixed markup, high-volume B) low-volume, mixed markup C) low-volume, low-markup D) high-volume, low-markup E) high-markup, lower-volume Answer: D 39) A store selling expensive artwork and luxury goods typically falls into the ________ group with respect to margins and volume. A) mixed markup, high-volume B) low-volume, mixed markup C) low-volume, low-markup D) high-volume, low-markup E) high-markup, low-volume Answer: E 40) Most retailers will put low prices on some items in order to increase traffic to the store. These low-priced products are known as ________. A) loss leaders B) price ceilings C) price skimmers D) price floors E) cold calls Answer: A 41) American businessman King Gillette pioneered the sales model in which razor handles were given away for free or sold at a loss, but sales of disposable razor blades were very profitable. This is known as the _______ model. A) two-tiered pricing B) predatory pricing C) cross selling D) loss leading E) product churning Answer: D 42) Which of the following is a prepurchase service offered by retailers? A) accepting orders over the telephone B) shipping the product C) delivery to the customer's doorstep D) general information E) interior decoration of the retail outlet Answer: A 43) Which of the following is a post purchase service offered by retailers? A) accepting orders over the telephone B) advertising and window displays C) delivery to the customer's doorstep D) general information E) interior decoration of the retail outlet Answer: C 44) Which of the following is an ancillary service offered by retailers? A) accepting orders over the telephone B) advertising and window displays C) delivery to the customer's doorstep D) general information E) alterations and tailoring Answer: D 45) In your neighborhood there is a small men's store that has a limited selection of clothing, but the selection that is carried is of very high quality and price. Services include free alterations and tailoring, personalized record keeping, and free dry cleaning. The inside of the store has deep leather chairs and couches and thick pile carpet. Upon entering the store, a customer feels “special and rich.” In terms of differentiation, what is this retailer trying to communicate by its decorations and service level? A) differentiation based on services mix and atmosphere B) differentiation based on prepurchase services C) differentiation based on post purchase services and atmosphere D) differentiation based on ancillary services and atmosphere E) differentiation based on prepurchase and post purchase services Answer: A 46) Which of the following is the strongest differentiator for brick-and-mortar stores who want to emphasize their superiority over online retailers? A) product quality B) the shopping experience C) product range D) pricing E) the retailer's reputation Answer: B 47) A brand developed by a retailer and/or wholesaler that is available only in selected retail outlets is called a ________ brand. A) generic B) franchisee C) marque D) national E) private label Answer: E 48) The Body Shop and Giordano carry mostly own-brand merchandise. These are examples of ________. A) generic product B) national brand C) franchise D) copy-cat brand E) private labels Answer: E 49) ________ are unbranded, plainly packaged, less expensive versions of common products such as soy sauce, paper towels, and canned fruits. A) Generics B) National brands C) Franchisees D) Copy-cat brands E) Private labels Answer: D 50) ________ offer standard or lower quality at a price that may be as much as 20–40 percent lower than nationally advertised brands and 10–20 percent lower than retailer private label brands. A) Common carriers B) Shills C) Generics D) Copy-cat brands E) Marques Answer: C 51) In addition to its store brands and nationally well-known brands of detergents, Reynold's also carries much cheaper varieties of detergents that are not advertised and have little-known names. They are often manufactured from lower-quality ingredients and save on packaging and advertising costs. These are known as ________. A) common carriers B) shills C) generics D) private labels E) marques Answer: C 52) Because shelf space is scarce, many supermarkets now charge a ________ for accepting a new brand, to cover the cost of listing and stocking it. A) retainer B) slotting fee C) residual fee D) contingent fee E) royalty Answer: B 53) ________ includes all the activities in selling goods or services to those who buy for resale or business use. A) Retailing B) Wholesaling C) Procurement D) Promoting E) Warehousing Answer: B 54) ___________ often help retailers improve their operations by training sales clerks, helping with store layouts and displays, and setting up accounting and inventory-control systems. A) Retailers B) Wholesalers C) Producers D) Manufacturers E) Farmers Answer: B 55) Through ______________, wholesalers’ sales forces help manufacturers reach many small business customers at a relatively low cost. A) selling and promoting B) buying and assortment building C) warehousing D) risk bearing E) transportation Answer: A 56) Through ______________, wholesalers are able to select items and build the assortments their customers need, saving the customers considerable work. A) selling and promoting B) buying and assortment building C) warehousing D) risk bearing E) transportation Answer: B 57) Through ______________, wholesalers hold inventories, thereby reducing inventory costs and risks to suppliers and customers. A) selling and promoting B) buying and assortment building C) warehousing D) risk bearing E) transportation Answer: C 58) Through ______________, wholesalers absorb some risk by taking title and bearing the cost of theft, damage, spoilage, and obsolescence. A) selling and promoting B) buying and assortment building C) warehousing D) risk bearing E) transportation Answer: D 59) Through ______________, wholesalers finance customers by granting credit, and finance suppliers by ordering early and paying bills on time. A) selling and promoting B) buying and assortment building C) financing D) risk bearing E) transportation Answer: C 60) Through ______________, wholesalers help retailers improve their operations by training sales clerks, helping with store layouts and displays, and setting up accounting and inventory-control systems. A) selling and promoting B) buying and assortment building C) warehousing D) risk bearing E) management services and counseling Answer: D 61) ________ refers to buying large carload lots and dividing them into smaller units before shipping them out to consumers. A) Bulk breaking B) Containerization C) Wholesaling D) Warehousing E) Broking Answer: A 62) ________ encompass sales forecasting, production planning, and inbound materials transportation. A) Market logistics B) Containerization C) Transportation D) Non-store retailing E) Wholesaling Answer: A 63) The elapsed time between an order's receipt, delivery, and payment is called the ________. A) variable-costs-to-payment cycle B) product-to-payment cycle C) inventory-to-sale cycle D) order-to-inventory cycle E) order-to-payment cycle Answer: E 64) ________ costs for a manufacturer consist of setup costs and running costs. A) Inventory-carrying B) Containerization C) Wholesaling D) Order-processing E) Transportation Answer: D 65) As inventory draws down, management must know at what stock level to request additional stock. This stock level is called the ________. A) reorder point B) least fixed point C) point of divergence D) inflection point E) critical point Answer: A 66) A stock order point of 10 means ordering the product ________. A) every 10 days B) when stock falls to 10 units C) every 10 units D) when stock falls to 9 units E) in batches of 10 items Answer: B 67) The ________________ can be determined by observing how order-processing costs and inventory-carrying costs sum up at different order levels. A) order quantity B) right order quantity C) optimal order quantity D) inventory-carrying costs E) near-zero inventory Answer: C 68) E&OE is trying to minimize its inventory costs, which are extremely high. The company has realized that it can achieve this by maintaining a near-zero inventory and producing more only once a product is ordered. Which of the following is true for E&OE? A) Inventory costs are lower than order-processing costs. B) Running costs are higher than inventory-carrying costs. C) Setup costs for the products are low. D) Order-processing costs are high. E) Order-processing costs are lower than setup costs. Answer: C 69) E&OE is trying to minimize its inventory costs, which are extremely high. The company has realized that it can achieve this by maintaining a near-zero inventory and producing only once a product is ordered. Which of the following will be true for E&OE? A) Short production runs will be more expensive than longer ones. B) Setup and order-processing costs will be high. C) The order point will be high. D) Order-processing costs will be lower than the inventory-carrying costs. E) E&OE can reduce the average cost per unit by producing a long run. Answer: D 70) Beyond the optimal order quantity, total cost per unit increases because ________. A) inventory-carrying cost per unit increases B) inventory-carrying cost per unit decreases C) order-processing cost per unit increases D) order-processing cost per unit increases though inventory cost decreases E) inventory-processing cost per unit falls slowly Answer: A 71) Companies are reducing their inventory costs by treating inventory items differently, positioning them according to risk and opportunity. High-risk, low-opportunity items are known as ________. A) nuisance items B) bottleneck items C) variable items D) critical items E) commodities Answer: B 72) HCN recently introduced a product that the distributor considers a “bottleneck” item. What is the risk/opportunity relationship for bottleneck items? A) low risk, mediocre opportunity B) low risk, high opportunity C) low risk, low opportunity D) high risk, mediocre opportunity E) high risk, low opportunity Answer: E 73) An item described as low-risk and low-opportunity is a ________. A) nuisance item B) bottleneck item C) variable item D) critical item E) commodity Answer: A 74) ________ consists of putting goods in boxes or trailers that are easy to transfer between two transportation modes. A) Containerization B) Haulage C) Inventory carrying D) Order processing E) Warehousing Answer: A 75) Which of the following is an example of a private carrier? A) MET is a transporter that operates only in the Southeast Asian region and charges fixed prices. B) BCL is a family firm that owns only three trucks, but takes small orders for transport. C) VTV owns a fleet of trucks and transports goods for any client for a fee. D) COM is a shipping firm that transports goods by road and rail across Malaysia. E) BEL Inc. manufactures parts for cars and transports its products to customers itself. Answer: E 76) The trucking firm hired by your transportation manager provides a trucking service between the city of Bangkok and the surrounding towns on a regular schedule and at fixed prices. The trucking firm saves transportation costs by transporting the goods using trains as well as trucks, instead of trucks alone. Your transportation manager has hired a(n) ________. A) airship carrier B) air-truck carrier C) train-ship carrier D) fishy-back carrier E) piggyback carrier Answer: E 77) If the shipper owns its own truck or air fleet, it becomes a ________. A) containerized carrier B) private carrier C) contract carrier D) common carrier E) diversified carrier Answer: B 78) Retailing includes all the activities involved in selling goods or services directly to final consumers. Answer: True 79) Full-service retailers generally have the lowest costs of all retail types. Answer: False 80) Discount stores usually stock leftover goods, overruns, and irregular merchandise, sold at less than retail. Answer: False 81) The network marketing sales system works by recruiting independent businesspeople who act as distributors. Answer: True 82) Electronic shopping is a form of direct marketing. Answer: True 83) A superstore is a store-less retailer serving a specific clientele who are entitled to buy from a list of retailers that have agreed to give discounts in return for membership. Answer: False 84) A retailer cooperative is a retail firm that is owned by its customers. Answer: False 85) A franchise organization is a corporate retail organization. Answer: True 86) The franchisor owns a trade or service mark and licenses it to franchisees in return for royalty payments. Answer: True 87) “Pop-up” stores let retailers promote brands to seasonal shoppers for a limited time. Answer: True 88) Department stores only face competition from other department stores as other retailing forms are not a threat to their sales and profitability. Answer: False 89) Consumers now receive sales offers through direct-mail letters and catalogs, television, cell phones, and the Internet. The non-store based retailers are taking business away from store-based retailers. Answer: True 90) Supercenters retail grocery items as well as a huge selection of non-food merchandise. Answer: True 91) Modern retailers use technology to produce better forecasts, control inventory costs, and order electronically from suppliers. Technology is also affecting what happens inside the store. Answer: True 92) Larger Asian department stores have established their own hypermarkets and discount outlets as a defensive strategy against foreign chains. Answer: True 93) Electronic shelf labeling allows retailers to check inventory levels instantaneously. Answer: False 94) Some retailers have not only defined their target markets quite well, but are also slicing the market into finer segments and introducing new lines of stores to provide a more relevant set of offerings to exploit niche markets. Answer: True 95) A retailer or retail store is any business enterprise whose sales volume comes primarily from wholesaling. Answer: False 96) Featuring exclusive national brands that are not available at competing retailers is a way of generating consumer interest in a retailer. Answer: True 97) In order to clearly differentiate themselves from competitors, retailers must keep merchandise and prices always consistent. Answer: False 98) The gross margin on a product bears a direct relation to the direct product profit. Answer: False 99) Some high-volume products may have such high handling costs that they are less profitable and deserve less shelf space than low-volume products. Answer: True 100) Mass merchandisers are usually high-markup, lower-volume stores. Answer: False 101) Low prices on some items serve as traffic builders or loss leaders for retailers. Answer: True 102) EDLP can lead to lower advertising costs and higher retail profits. Answer: True 103) Accepting telephone and mail orders is an example of the ancillary services that a retailer offers. Answer: False 104) Post purchase services include shipping and delivery, gift wrapping, adjustments and returns. Answer: True 105) Private label or store brands are also known as generics. Answer: False 106) The lower price of generics is made possible by lower-cost labeling and packaging and minimal advertising, and sometimes lower-quality ingredients. Answer: True 107) Wholesaling includes all the activities in selling goods or services to those who buy for resale or business use. Answer: True 108) Wholesalers exclude manufacturers and farmers because they are engaged primarily in production, but include retailers, as they are selling to the end consumer. Answer: False 109) Wholesalers pay less attention to promotion, atmosphere, and location because they are dealing with business customers rather than final consumers. Answer: True 110) Most companies today are trying to increase the order-to-payment cycle. Answer: False 111) More stocking locations mean goods can be delivered to customers more quickly, and warehousing and inventory costs are lower. Answer: False 112) Inventory cost increases at an accelerating rate as the customer-service level approaches 100 percent. Answer: True 113) If setup costs are high, the manufacturer can produce the item often, and the average cost per item is stable and equal to the running costs. Answer: False 114) Order-processing costs must be compared with inventory-carrying costs because the larger the average stock carried, the higher the inventory-carrying costs. Answer: True 115) As inventory draws down, management must know at what stock level to place a new order. This stock level is called the order point. Answer: True 116) The order-processing cost per unit increases with the number of units ordered because the order costs are spread over more units. Answer: False 117) Companies who want to carry near-zero inventory should build for order, not for stock. Answer: True 118) List and explain the four service levels offered by retailers. Answer: Retailers meet widely different consumer preferences for service levels and specific services. The four levels of service usually offered by retailers are: (1) self-service, (2) self-selection, (3) limited service, and (4) full service. • Self-service: Self-service is the cornerstone of all discount operations. Many customers are willing to carry out their own “locate-compare-select” process to save money. • Self-selection: Customers find their own goods, although they can ask for assistance. • Limited service: These retailers carry more shopping goods and services such as credit and merchandise-return privileges. Customers need more information and assistance. • Full-service: Salespeople are ready to assist in every phase of the “locate-compare-select” process. Customers who like to be waited on prefer this type of store. The high staffing cost, along with the higher proportion of specialty goods and slower-moving items and the many services, result in high-cost retailing. 119) List the four categories of non-store retailing and briefly explain each. Answer: Although the overwhelming bulk of goods and services are sold through stores, non-store retailing has been growing much faster than store retailing. Non-store retailing falls into four major categories: Direct selling, also called multilevel selling and network marketing, is a multibillion-dollar industry, with hundreds of companies selling door-to-door or at home sales parties. A salesperson goes to the home of a host who has invited friends; the salesperson demonstrates the products and takes orders. Pioneered by Amway, the multilevel (network) marketing sales system works by recruiting independent businesspeople who act as distributors. The distributor's compensation includes a percentage of sales made by those he or she recruits, as well as earnings on direct sales to customers. These direct-selling firms, now finding fewer consumers at home, are developing multi-distribution strategies. Direct marketing has roots in direct-mail and catalog marketing. It includes telemarketing, television direct-response marketing, and electronic shopping. As people become more accustomed to shopping on the Internet, they are ordering a greater variety of goods and services from a wider range of web sites. Automatic vending offers a variety of merchandise, including impulse goods such as soft drinks, coffee, candy, newspapers, magazines, and other products such as hosiery, cosmetics, hot food, and paperbacks. Vending machines are found in factories, offices, large retail stores, gasoline stations, hotels, restaurants, and many other places. They offer 24-hour selling, self-service, and merchandise that is stocked to be fresh. Buying service is a storeless retailer serving a specific clientele, usually employees of large organizations, who are entitled to buy from a list of retailers that have agreed to give discounts in return for membership. 120) In what ways does franchising benefit the franchisor? In what ways does it benefit the franchisee? Answer: Franchising benefits both the franchisor and the franchisee. Franchisors gain the motivation and hard work of employees who are entrepreneurs rather than “hired hands,” the franchisees' familiarity with local communities and conditions, and the enormous purchasing power of being a franchisor. Franchisees benefit from buying into a business with a well-known and accepted brand name. They find it easier to borrow money for their business from financial institutions, and they receive support in areas ranging from marketing and advertising to site selection and staffing. 121) List some recent trends in retailing. Answer: The recent trends in retail include the following: New retail forms and combinations Growth of intertype competition Competition between store-based and non-store-based retailing Growth of giant retailers Decline of middle-market retailers Growing investment in technology Global profile of major retailers Upgrading of Asian retailers Growth of factory outlets 122) List some differentiation strategies retailers can use to compete successfully in the market. Answer: To better differentiate themselves and generate consumer interest, retailers can use the following strategies: (1) Feature exclusive national brands that are not available at competing retailers; (2) feature mostly private branded merchandise; (3) feature blockbuster distinctive merchandise events; (4) feature surprise or ever-changing merchandise; (5) feature the latest or newest merchandise first; (6) offer merchandise-customizing services; and (7) offer a highly targeted assortment. 123) What benefits do intermediaries receive from sponsoring their own private label brands? Answer: A private label brand (also called a reseller, store, house, or distributor brand) is a brand that retailers and wholesalers develop. These brands can be more profitable. Intermediaries search for manufacturers with excess capacity that will produce private label goods at low cost. Other costs, such as research and development, advertising, sales promotion, and physical distribution, are also much lower, so private labels can generate a higher profit margin. Retailers also develop exclusive store brands to differentiate themselves from competitors. Many price-sensitive consumers prefer store brands in certain categories. These preferences give retailers increased bargaining power with marketers of national brands. 124) Explain how wholesalers differ from retailers. Answer: First, wholesalers pay less attention to promotion, atmosphere, and location because they are dealing with business customers rather than final consumers. Second, wholesale transactions are usually larger than retail transactions, and wholesalers usually cover a larger trade area than retailers. Third, the government deals with wholesalers and retailers differently in terms of legal regulations and taxes. 125) Why do retailers prefer to deal with wholesalers rather than directly with manufacturers? Answer: In general, retailers prefer to deal with wholesalers rather than directly with manufacturers (and vice versa) as wholesalers are better at performing the following functions: Selling and promoting: Wholesalers’ sales forces help manufacturers reach many small business customers at a relatively low cost. They have more contacts, and buyers often trust them more than they trust a distant manufacturer. Buying and assortment building: Wholesalers are able to select items and build the assortments their customers need, saving them considerable work. Bulk breaking: Wholesalers achieve savings for their customers by buying large carload lots and breaking the bulk into smaller units. Warehousing: Wholesalers hold inventories, thereby reducing inventory costs and risks to suppliers and customers. Transportation: Wholesalers can often provide quicker delivery to buyers because they are closer to the buyers. Financing: Wholesalers finance customers by granting credit, and finance suppliers by ordering early and paying bills on time. Risk bearing: Wholesalers absorb some risk by taking title and bearing the cost of theft, damage, spoilage, and obsolescence. Market information: Wholesalers supply information to suppliers and customers regarding competitors' activities, new products, price developments, and so on. Management services and counseling: Wholesalers often help retailers improve their operations by training sales clerks, helping with store layouts and displays, and setting up accounting and inventory-control systems. They may help industrial customers by offering training and technical services. 126) Describe the four steps in market logistics planning. Answer: Market logistics includes planning the infrastructure to meet demand, then implementing and controlling the physical flows of materials and final goods from points of origin to points of use, to meet customer requirements at a profit. Market logistics planning has four steps: Deciding on the company's value proposition to its customers. (What on-time delivery standard should we offer? What levels should we attain in ordering and billing accuracy?). Selecting the best channel design and network strategy for reaching the customers. (Should the company serve customers directly or through intermediaries? What products should we source from which manufacturing facilities? How many warehouses should we maintain and where should we locate them?). Developing operational excellence in sales forecasting, warehouse management, transportation management, and materials management. Implementing the solution with the best information systems, equipment, policies, and procedures. 127) Explain the several activities of market logistics. Answer: The first is sales forecasting, on the basis of which the company schedules distribution, production, and inventory levels. Production plans indicate the materials the purchasing department must order. These materials arrive through inbound transportation, enter the receiving area, and are stored in raw-material inventory. Raw materials are converted into finished goods. Finished-goods inventory is the link between customer orders and manufacturing activity. Customers’ orders draw down the finished-goods inventory level, and manufacturing activity builds it up. Finished goods flow off the assembly line and pass through packaging, in-plant warehousing, shipping room processing, outbound transportation, field warehousing, and customer delivery and servicing. 128) Sandy's Stores is a small chain of grocery stores located in a few neighboring towns. The stores have always been largely self-service, but the company is considering making a switch to full-service stores. Offer reasons why Sandy's should stick with its current system. Answer: Student answers may vary. As Sandy’s is primarily a grocery chain, it is unlikely that customers will need much help in locating products. The high staffing cost of full-service retailing will only increase operational costs for Sandy’s, without conferring any benefit. Sandy's Stores should stick with its current self-service system because it promotes cost efficiency by reducing labor expenses and allows customers to shop at their own pace, potentially increasing overall customer satisfaction. 129) Sandy’s Stores is a small chain of grocery stores located in a few neighboring towns. The stores have always been largely self-service, but the company is considering making a switch to full-service stores. What can Sandy’s do to justify this move? Answer: Student answers may vary. To justify the increased staff costs of full-service retailing, Sandy’s can add higher-value products to its line-up. The company can begin carrying a higher proportion of specialty goods. Sandy's Stores can justify switching to full-service stores by offering a differentiated shopping experience with personalized customer service, potentially attracting more customers who value convenience and assistance during their shopping trips. 130) Sandy’s Stores is a small chain of grocery stores located in a few neighboring towns. The stores have always been largely self-service, but the company is considering making a switch to full-service stores. Offer one possible reason why this move is justified. Answer: Student answers may vary. Full-service retailing is preferred by customers who like to be waited upon. If most of Sandy’s customers show a preference for being waited upon, this can justify the costs of full-service retailing. If Sandy’s has a number of products or services for which customers need information or guidance, or stocks high-value or specialized product, full-service retailing will be justified. Switching to full-service stores can be justified by appealing to an aging population that may prefer or require assistance with shopping, thereby enhancing customer satisfaction and loyalty among this demographic. 131) Skincare company E&OE has realized that its customers are very loyal to the brand and play a large part in popularizing it by word of mouth. E&OE wants to leverage this customer loyalty by using it to generate sales outside its store format. How can E&OE achieve this? Answer: Student answers may vary. E&OE can opt for the direct selling method, using multilevel or network marketing. A salesperson can go to the home of a loyal customer who has invited friends; the salesperson demonstrates the products and takes orders. The company can also recruit independent customers who act as distributors. The distributor's compensation includes a percentage of sales made by those he or she recruits, as well as earnings on direct sales to customers. E&OE can achieve this by implementing a referral program where loyal customers earn rewards for referring friends and family. Additionally, they can encourage user-generated content on social media platforms to amplify positive word-of-mouth and attract new customers. 132) Mal's father and grandfather ran Reynold’s, a general store. When Mal inherited the store, the town was expanding rapidly and a number of multinational franchisors showed interest in entering the town. Mal wants to turn Reynold’s into a franchise of Blue Sun, a fast-food chain. What benefits can Mal gain from this move? Answer: Student answers may vary. As the franchisor's brand is usually well-known, Mal obtains the benefit of a brand name that has already been accepted by customers. He could find it easier to get loans and financial help from banks on the basis of the well-known brand name. As the franchisor will provide everything from operational processes to marketing assistance, Mal need not spend time and effort beginning the process from scratch. By franchising Reynold’s with Blue Sun, Mal can leverage the brand recognition and operational support of an established fast-food chain, potentially increasing profitability and market competitiveness in the expanding town. 133) Mal’s father and grandfather ran Reynold’s, a general store. When Mal inherited the store, the town was expanding rapidly and a number of multinational franchisors showed interest in entering the town. Mal wants to turn Reynold's into a franchise of Blue Sun, a fast-food chain. Why shouldn't Mal go the franchise route? Answer: Student answers may vary. Most franchises offer franchisees limits or negligible independence in the questions of staffing, pricing, store decor, sourcing and processes. Mal may have to make changes that he does not agree with. He may not have the freedom to run the business as he thinks best. By aligning with Blue Sun, Mal can benefit from standardized processes, marketing support, and access to a proven business model, which can expedite Reynold’s growth and customer base in the rapidly expanding market. 134) Skincare company E&OE retails its products through standalone stores or through its own stores within malls. The management uses this method so that customers are sure of finding only E&OE products at the stores and the brand image remains strong. In this scenario, what can E&OE do to generate consumer interest while retaining its exclusivity? Answer: Student answers may vary. E&OE can do any or all of the following: • Feature blockbuster distinctive merchandise events. • Feature surprise or ever-changing merchandise. • Feature the latest or newest merchandise first. • Offer merchandise-customizing services. • Offer a highly targeted assortment. E&OE can host exclusive product launch events or VIP shopping experiences for loyal customers to maintain exclusivity while fostering consumer interest. Additionally, offering limited edition products or collaborating with influencers can create buzz and attract new customers without compromising brand integrity. 135) Over the past three years, skincare products retailer E&OE has realized that it is losing sales to competitors who sell products online. E&OE has always cultivated an exclusive upscale image, and the management feels that shifting to the online route will only harm the brand image and sales in the long run. How can E&OE encourage customers to frequent its stores? Answer: Student answers may vary. E&OE can offer more in-store services for its customers. It can offer information about the products, consultation and advice about the kinds of products to choose and allow customers to test or experience the products themselves. The retailer can also revamp the store atmosphere to be more inviting to customers, using music and fragrances and store design to create a pleasurable experience. E&OE can also increase the number of activities and experiences that customers can participate in. E&OE can differentiate itself by offering personalized skincare consultations and demonstrations in-store, emphasizing the expertise and luxury experience that online retailers may lack. Additionally, hosting exclusive in-store events and promotions can incentivize customers to visit and experience the brand's upscale atmosphere firsthand. 136) Imagine that you are in charge of creating a distinctive store atmosphere at a clothing retailer. What can you do to make your store stand out in the customer experience? Answer: Student answers may vary. Answers can include the use of fragrances, music, store design and layout, and activities. To create a distinctive store atmosphere, I would focus on unique interior design elements, such as interactive displays or themed sections, and incorporate sensory elements like pleasant scents and curated music playlists that align with the brand's identity and target audience. 137) Give one example of a retailer that uses stand-alone stores as opposed to stores located in malls. Why do you think retailers opt for this channel? Answer: Student answers may vary. Retailers may opt for stand-alone stores so that they are not associated with other retailers. It can avoid competition from conflicting attractions in a mall. Customers will be less motivated to check other options available at other retailers. Stand-alone stores may give a retailer an upscale image and prevent dilution of the brand identity. Apple Inc. utilizes stand-alone stores for its retail locations. Retailers opt for stand-alone stores to maintain full control over the customer experience, showcase their brand identity more prominently, and attract foot traffic in high-visibility locations. 138) Supermarket chain Reynold’s is considering making a switch to stocking almost exclusively private-label products in order to offer customers the lowest prices. Offer reasons why Reynold’s should think twice before opting to stock exclusively private-label products. Answer: Student answers may vary. Reynold’s should think twice about opting for private-label products because consumers prefer certain national brands, and many product categories are not feasible or attractive on a private-label basis. Reynold’s should reconsider stocking exclusively private-label products because it risks reducing product variety and potentially alienating customers who prefer brand-name goods. Additionally, relying solely on private-label products may impact perceived quality and customer trust compared to well-known brands. 139) Supermarket chain Reynold’s is considering stocking a number of private-label products in order to offer customers the lowest possible prices. Explain how this strategy could benefit the company. Answer: Student answers may vary. Private brands can be more profitable for Reynold’s if it searches for manufacturers with excess capacity that will produce private label goods at low cost. Other costs, such as research and development, advertising, sales promotion, and physical distribution, are also much lower, so private labels can generate a higher profit margin. Exclusive store brands can also help Reynold’s differentiate itself from competitors. Many price-sensitive consumers prefer store brands in certain categories. These preferences could give Reynold’s increased bargaining power with marketers of national brands. Stocking private-label products can benefit Reynold’s by increasing profit margins through reduced supplier costs and enhancing customer loyalty by offering competitive pricing without relying on brand-name markups. 140) JGB manufactures the K-Nine brand of dog food that is carried in supermarkets across the country. The company has always used wholesalers instead of selling directly to the retailers. However, recently, the sales team at JGB has noticed that wholesalers don't aggressively promote JGB's product line. They often don't carry enough inventory and therefore don't fill customers' orders fast enough. However, the marketing team insists that the wholesaling route is the best. What reasons can the marketing team offer to justify this? Answer: Student answers may vary. Wholesalers’ sales forces help JGB reach many small business customers at a relatively low cost. They have more contacts, and the buyers often trust them more than they trust JGB. Wholesalers can often provide quicker delivery to buyers because they are closer to the buyers. Wholesalers absorb some risk by taking title and bearing the cost of theft, damage, spoilage, and obsolescence. Wholesalers supply information regarding competitors' activities, new products, price developments, and so on. The marketing team can justify using wholesalers by highlighting cost savings on distribution and logistics, as well as the wholesalers' established networks that provide broader market reach and convenience for retailers. 141) Reynold’s, a supermarket chain, carries the K-Nine range of dog food manufactured by JGB. However, the chain does not interact directly with JGB, but obtains stocks from wholesalers. It has been suggested that Reynold’s save costs by sourcing products directly from JGB. However, Mal, the CEO of the Reynold’s, insists that wholesalers are the most hassle-free option for Reynold’s. What can Mal say to justify this? Answer: Student answers may vary. Mal can justify this using any or all of the following reasons: Wholesalers are able to select items and build the assortments Reynold’s needs, saving Reynold’s considerable work. Wholesalers achieve savings for Reynold’s by buying large carload lots and breaking the bulk into smaller units. Wholesalers hold inventories, thereby reducing inventory costs and risks for Reynold’s, who needn't hold the inventory for itself. Wholesalers finance Reynold’s by granting credit. Wholesalers supply information regarding competitors' activities, new products, price developments, and so on. Mal can justify using wholesalers by emphasizing that wholesalers manage inventory, logistics, and distribution efficiently, allowing Reynold’s to focus on core operations and customer service without the complexities 142) What pressures are wholesaler-distributors facing? Answer: Wholesaler-distributors are facing pressures from new sources of competition, demanding customers, new technologies, and more direct-buying programs by large industrial, institutional, and retail buyers. 143) Jane runs a small grocery store. As there are only few customers, the store does not require to stock goods in large quantities. Explain why sourcing products from a wholesaler will be beneficial for Jane. Answer: Student answers may vary. Wholesalers are able to select items and build the assortments Jane needs, saving considerable work. Wholesalers achieve savings for Jane by buying large carload lots and breaking the bulk into smaller units. Thus, Jane can benefit from lower bulk prices while buying only as much as the store can sell. Wholesalers also hold inventories, thereby reducing inventory costs and risks for Jane. Sourcing products from a wholesaler benefits Jane by allowing her to purchase smaller quantities at competitive prices, reducing inventory costs and ensuring she can meet customer demand without overstocking. 144) HCN is a wholesaler that supplies consumer goods products to a number of retailers. HCN has witnessed the worrying trend of its competitors losing out on suppliers, who approach retailers directly. How can HCN strengthen its relationship with manufacturers and prevent this? Answer: Student answers may vary. HCN can work to reach a clear agreement with their manufacturers about their expected functions in the marketing channel. It can gain insight into the manufacturers' requirements by visiting their plants and attending manufacturer association conventions and trade shows. HCN must also fulfill its commitments to the manufacturer by meeting the volume targets, paying bills promptly, and feeding back customer information to the manufacturers. It can also identify and offer value-added services to its suppliers. HCN can strengthen its relationship with manufacturers by offering value-added services such as efficient logistics, inventory management solutions, and market insights, demonstrating its value as a strategic partner that enhances manufacturers' distribution reach and operational efficiency. 145) ShoeZone is a shoe retailer with outlets across the country. The company is trying to reduce its inventory and warehousing costs, but needs to keep delivery speeds as short as possible. What can ShoeZone do to achieve this? Answer: More stocking locations mean goods can be delivered to customers more quickly, but warehousing and inventory costs are higher. To reduce these costs, ShoeZone might centralize its inventory in one place and use fast transportation to fill orders. 146) E&OE is looking to reduce its inventory costs for all its products. The company realizes that its inventory depends on the setup costs of its various products. How do setup costs affect E&OE's inventory costs? Answer: As inventory draws down, management must know at what stock level to place a new order. The company needs to balance order-processing costs and inventory-carrying costs. Order-processing costs for E&OE consist of setup costs and running costs (operating costs when production is running) for the item. If setup costs are low, E&OE can produce the item often, and the average cost per item is stable and equal to the running costs. If setup costs are high, E&OE can reduce the average cost per unit by producing a long run and carrying more inventory. The larger the average stock carried, the higher the inventory-carrying costs. 147) E&OE wants to minimize inventory costs as far as possible. Explain one way by which it can achieve a near-zero inventory. Answer: Student answers may vary. Manufacturers can achieve a near-zero inventory by building for order, not for stock, i.e., manufacturing a product only when it receives an order. However, this system will work only when the customers do not need a product immediately. E&OE can implement a Just-in-Time (JIT) inventory system where products are ordered and received only as they are needed for production or sales, minimizing the need for holding large inventories. Test Bank for Marketing Management: A South Asian Perspective Philip Kotler, Kevin Lane Keller, Abraham Koshy, Mithileshwar Jha 9789810687977, 9780132102926