Retail Management, Global Edition 13th Edition Solution Manual

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RETAIL MANAGEMENT: A STRATEGIC APPROACH , 13 ed.ONLINE INSTRUCTOR'S MANUALBarry BermanJoel R. EvansPatrali ChatterjeeHofstra UniversityHofstra UniversityMontclair StateUniversity

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Table of ContentsI.Answers to End ofChapter Questions for DiscussionII.Answers to Short Case QuestionsIII.Answers to Comprehensive Case QuestionsIV.Answers to Online Retail Math Problems

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Retail Management: A Strategic Approach, 13e(Berman/Evans/Chatterjee)Chapter 1An Introduction to Retailing1CHAPTER 1: ANSWERS TO QUESTIONSFOR DISCUSSION1.What is your favoriteconsumer electronicsretailer?Discuss the criteria you have used inmaking your selection. What can a competing firm do to lure you away from yourfavorite firm?This is a good stimulus-type question to use in an early lecture. There are a number ofpossible answers in a student’s choice of a favoriteconsumer electronics retailer. Criteriathat can be applied broadly include exclusive selection of merchandise, breadth and depthof merchandise, excellence in customer service, quality of atmospherics, high value, andspecial customer-service provider relationship.A competing firm can attempt to woo customers through very competitive pricing, anexcellent Web site (with product reviewsand product comparison information), excellentcustomer service (includingsalesperson assistance andfree software installation), andexclusive merchandise (including private labels).2.What kinds of information do retailers communicate to customers? To suppliers?Informationthatretailers communicate to customers includes prices, store hours, specialsales, the availability and characteristics of goods and services, warranty information, andexchange privileges. This information is communicated through ads, a Web site, salespersonnel, and in-store displays.Informationthatretailersneedtocommunicatetosuppliersincludesthesalesperformance of the supplier’s products, plans in terms of additional store openings,customer complaints, defective products, current inventory levels, inventory turnover,and so on.3.What are the pros and cons of a firm such asApplehaving its own retailstores andE-commerce Web site as well as selling through traditional retailers?The pros of Appleselling its products through its own retail stores, as well as its E-commerce Web site include increased overall sales through more intensive distribution.Apple canalso use its Web site to promote its store locations andtoserve as a sales outletin areas that have fewApplestores.The Web site also enables shoppers to gatherinformation about productsthatthey can then purchase in the Apple store.Lastly,Applecan sell excess inventoryand refurbished productsthrough its Web site.

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Retail Management: A Strategic Approach, 13e(Berman/Evans/Chatterjee)Chapter 1An Introduction to Retailing2The cons of this dual channels strategy include the need to manage multiplechannels,possible channel conflict with retailers (that view the Web site as competition,such asoutletsthatwould receive a style or color in short supply), and perhaps different levels ofcustomer support in each channel.4.Why would one retailer seek to be part of an exclusive distribution channel while anotherseeks to be part of an intensive distribution channel?With exclusive distribution, channel relations are generally smooth as suppliers enter intoagreements with only one or a few retailers. This lessens price competition for a retailer,enables a retailer to provide full service to its customers, and increases the cooperationbetween a retailer and its supplier.With intensive distribution, suppliers sell through as many retailers as possible. Thisenables retailers to offer their customers many different brands and product versions, toincrease total sales by carrying multiple brands, and to reduce their dependency on one ora few brands and suppliers.5.Describe how the special characteristics of retailing offer unique opportunities andproblems forlocalgift shops.Special CharacteristicsOpportunities and Problemsof Retailingfor LocalGift ShopsSmall average saleCostsmustbetightlycontrolled;searchforscrambledmerchandisingopportunitiessuchasgreeting cards, gift wrapping paper, chocolates andflowers.Unplanned or impulse purchasesUse of point-of-purchase displays, attractive storelayouts,andspecialpromotions.Inadditiontotraditionalgiftitems, the store may seek to increaseimpulse salesbyselling greeting cards, batteries,and so on.Retail customers normally visitLocation, store hours, parking, anda storeassortments of merchandiseare important.6.What is the purpose of developing a formal retail strategy? How could a strategic plan beused by a restaurant chain?Aretail strategy is the overall plan that guides the firm. It has an influence on theretailer’s business activities and its response to market forces.A restaurant chain can use a retail strategy to define its type of business; set long-andshort-run objectives (sales and profit); define the target market (breakfast, lunch, dinner,

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Retail Management: A Strategic Approach, 13e(Berman/Evans/Chatterjee)Chapter 1An Introduction to Retailing3in-store and catering); develop an overall, long-run plan; implement an integratedstrategy; and evaluate performance.7.On the basis of the chapter description ofthe Home Depot,present five suggestions that anew retailer should consider.Strategies used byHome DepotCorporationthat should be considered by new retailersincludethe following:•Growth-oriented objectives•Appeal tomultiple target markets•A distinctive company image•Focus on a discount store value-oriented niche•Strong customer service for its retail category•Multiple points of contact•Employee relations•Innovation•Commitment to technology•Community involvement•Constant monitoringofperformance8.Explain the retailing concept. Apply it to your school’s bookstore.The retailing concept has four elements: customer orientation, coordinated effort, value-driven, and goal orientation. A school bookstore can follow the retailing concept byunderstandingthe multiple target market(students, faculty, staff, alumni, and the generalpublic) and needsof its customers(speed of service requirements, books, logo apparel,computer repair), developing an integrated strategy (location, décor, selection, prices,hours, promotion), providing value-driven services (that are viewed as good value by itscustomers), and maintaining a goal orientation (setting goals based on sales, profits, andimage).9.Define the termtotal retail experience.Then describe a recent retail situation in whichyour expectations were surpassed and state why.The “total retail experience”comprisesall elements in a retail offering that encourage orinhibitcustomersduringtheircontactwitharetailer.Itincludesthenumberofsalespeople, displays, prices, brands, inventory levels, and parking facilities. Customerdissatisfaction can occur if any of these items are unsatisfactory to the consumer (forexample, lack of sales help, inadequate parking, little brand selection, or low inventorylevels).10.Do you believe that customer service in retailing is improving or declining? Why?

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Retail Management: A Strategic Approach, 13e(Berman/Evans/Chatterjee)Chapter 1An Introduction to Retailing4Arguments for improved customer service are the increased attention to this area in thebusiness literature, the recognition of the need for customer service to increase customerloyalty, and to reduce price-based competition. Customer service can also be used bybricks-and-mortar retailers to combat Web-based competitors that often compete basedon price.An argument for a decline in customer service in retailing could be justified by referencesto the trend away from personalized service(such aswhere Web sites and E-mailsreplacingtraditional face-to-face retailing).Another argument can state that customerservice has taken a back seat to price competition.This translates into fewer storepersonnel, and more self-service merchandising.11.How could a small Web-only retailer engage in relationship retailing?Relationship retailing occurs when retailers seek to establish long-term bonds withcustomers. Small Web-based retailers can engage in relationship marketing by greetingcustomers by name when they access the retailer’s Web site, reminding customers oftheir past purchases, suggesting special sales on items a customer generally purchases viaE-mail,maintaining an effectiveloyalty membership club,and surveying customers tomonitor satisfaction levels via E-mail.12.What checklist item(s) in Figure 1-11do you think would be most difficult forHomeDepot,theglobalhome improvement retailer, to address? Why?The most difficult item forHome Depotto address would be that of valuing customertime. It is difficult for retailers to assess customer perceptions.AlthoughHome Depotmay believe that it offers its customers shopping convenience and minimizes customerwaiting,itspatrons may feel otherwise. The size of the store, the huge selection, the needfor assemblyfor many items, and the lack of delivery service all may contribute to thisperception.AnotherdifficultitemstoaddressforHomeDepotistheneedtoavoidbeingconfrontational with customerswhocomplain,particularly thosewhoseek to return useditems or who are partially responsible for a product’s poor performance (due to poorassembly), and thosewhobroke an item while installing it (this is particularly difficult ifHome Depothasno recourse against its supplier).

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Retail Management: A Strategic Approach, 13e(Berman/Evans/Chatterjee)Chapter 2Building and Sustaining Relationships in Retailing1CHAPTER 2: ANSWERS TO QUESTIONSFOR DISCUSSION1.When a consumer shops at anupscaleapparel store, what factors determine whether theconsumer feels that he or she got a fair value? How does the perception of value differwhen that same consumer shops at alow-end apparel store?At an upscaleapparel store,price would be de-emphasized compared with the level ofpersonal service, but fair value would also be based on the selection,brands carried,quality of sales support, and availability of free alterations).At alow-end apparel store,theconsumer would evaluate fair value based mostly onprice, brands carried,selection,return policy,and quality of the products stocked.2.What are the expected and augmented value chain elements for each of these retailers?a.Home Depot.b.Ikea.c.Localfruit-and-vegetable store.a.Home DepotExpected: Ample parking, well-lit location at night,goods available in amplequantities,clean environment, fast service due to speedy staff, and short waitinglinesAugmented: Music throughout the store, expert advice from knowledgeable staffon product selection and installation, ability to determine location of goods andin-stock positions on its Web siteb.IkeaExpected: Ample parking, effective displays that provide decorating tipsAugmented: Staffwhoprovide decorating assistance, help in laying out rooms,andassistanceinloadingcar(especiallyimportantforpregnantshoppers,shoppers with young children, and senior citizens)c.Localfruit-and vegetable storeExpected: Ample parking, fairprices, availability of shopping cartsAugmented:Specialassistanceondeterminingproductripeness,assistingshoppers with heavypackages, home delivery, availability of ethnicand organicfoods

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Retail Management: A Strategic Approach, 13e(Berman/Evans/Chatterjee)Chapter 2Building and Sustaining Relationships in Retailing23.Why should a retailer devote special attention to its core customers? How should it doso?A retailer should devote special attention to its core customers because loyal, long-termcustomers may spend more money, use less company time, may be less price sensitive,and engage in positive word-of-mouthcommunication. It is generally much more costlyfor a firm to attract new customers than for it to keep its core customers content.A retailer can devote special attention to its core customers by first identifying thesecustomers. A firm should know which customers areits mostprofitable and loyalandwhich customers highly value the firm’s offerings.Special attention may consist ofadvance notice of all sales, access to special sales consultants and events, a loyalty clubwith extra discounts, special advice on product selection, and so on.4.What is the connection between customer service and employee empowerment? Isemployee empowerment always a good idea? Why or why not?Retailers have found that customer service can be improved if they empower retailpersonnel. Through empowerment, employees are given the discretion to do what theybelieve is necessary, within reason, to satisfy the customer, even if this means bendingsome rules.This strategy can be effective if this extra attention is not overdone. Examples ofoverdoneempowermentareemployeesnotbeingabletocompletetheirnormalresponsibilities, employees abusing empowerment to avoid unpleasant job-related tasks,and consumers complaining to get additional consideration.5.How would you measure the level of customer satisfaction with your favoriterestaurant?Objective criteria includeadherence to reservations, fast service, providing informationabout product ingredients for patrons on special diets (low salt, low cholesterol,lowcalories,and so on).Subjective criteria are based on consumer perceptions of a store’s cleanliness, adequacyof selection, friendliness/knowledge ofwait staff,and so on.6.Devise a consumer loyalty program forBarnes & Noble.A consumer loyalty program forBarnes &Noblewould reward the chain’s best customersin an attempt to create long-term relationships with them.Barnes & Noblecould offerspecial discounts based on purchases ina certain period (past month, per three months, orpast year). One modelfor a loyalty programcould be an extra 5 percent discount for newpurchases based on the purchase activity in the preceding six months. Another modelwould be providing discounts onrelateditems purchased by a customer. For example,

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Retail Management: A Strategic Approach, 13e(Berman/Evans/Chatterjee)Chapter 2Building and Sustaining Relationships in Retailing3purchasers ofa number of books in a given period couldreceive a special discount onbooksby the same author.Frequent customers could also be given special privileges,such as advance notice ofsales, access to a specialrestrictedWeb site for frequently asked questions, orspecialaccess toan author’s book signing session.7.What are the unique aspects of service retailing? Give an example of each.The unique features of service retailing are the intangible nature of many services, suchas the quality of a landscaper’s design; the inseparability of some service providers andtheir services, such as individual tutoring services; the perishability of many services,such as the sale of tickets to a live performance; and the variability in quality of manyservices due to the high labor content.8.What are the pros and cons of ATMs? As a retailer, would you want an ATM in yourstore? Why or why not?ATMs are a fast, convenient, and efficient way to perform financial transactions. Unliketraditional banks that have limited hours, ATMs enable 24/7 service. Some critics mayargue that ATMs pose a safety risk and may perform a transaction incorrectly (such asoccasionally swallowing a credit card). Another problemforsomecustomersis theabsence of personal contact.Having an ATM located in a retail store may increase sales by increasing transaction size(customers can easily get more money to pay their bills) and increasing store traffic (acustomer may enter the store to use the ATM and then make an impulse purchase in thestore). Possible detriments involve potential safety risks, as well as concern that storepersonnel will be involved with ATM customer complaints.9.Will the time come when most consumer purchases are made with self-scanners? Explainyour answer.Studentswhoargue“yes”could base their response on consumer convenience, costsavingsto retailers, time savingsto customers, and customer honesty. By using self-scanners, customer transactions are quicker,andretailercosts are lower.Those studentswhoargue“no”to this questioncould base their response on the difficultyingettingall consumerstousetheself-scannersproperly orconsumers having difficultyusing loyalty cards or manufacturer couponswith the scanners.10.Describe three unethical, but legal, acts on the part of retailers that you have encountered.How have you reacted in each case?Unethical, but legal, acts by retailers includethe following:

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Retail Management: A Strategic Approach, 13e(Berman/Evans/Chatterjee)Chapter 2Building and Sustaining Relationships in Retailing4•Marketingunsafeproducts (like cigarettes) to specific segments of the population.•Restaurants and supermarkets throwing away excess food rather than giving it tothe poor or homeless•Advertising items with low stock levels•Raising prices of needed supplies in short supply (such as flashlights and bottledwater) duringhurricanesor severe storms•Promoting the sale of goods with “promotional” items (with poor features, lowquality, and short and limited warranties) to generate store traffic•Defaming competitors•Selling or trading a listing of customers to other retailers•Giving consumers who return gifts without a receipt the markdown value of thegift (when the store personnel know the gift was purchased at full price)11.Differentiate between social responsibility and consumerism from the perspective of aretailer.A retailer exhibiting social responsibility acts in the best interests of society as well asinits own. Examples include recycling and conservation programs, sponsoring communityactivities such as a softball team, and hiring handicapped personnel.Consumerism, from the perspective of the retailer, entails implementing programs toprotect a consumer’s right to safety, to be informed, to be heard, and to make choices.These policies may include product-testing programs, policies for handling customercomplaints, reviewing the clarity of advertising messages, training retail personnel to behonestin suggesting products, and sponsoring consumer education programs.12.How would you deal with consumer concerns about privacy in their relationships withretailers?Retailers should be extremely considerate when providing information about consumersto other organizations or individuals. The advantage of providing marketing informationabout a consumer base may not outweigh the risk of violating customer privacy,especially when it involves private or sensitive information. Students may elect to “putthemselves in the shoes of their customers” when asked to make decisions about whatinformation about their customers could be revealed or sold.One way of handling the issue of privacy is to ask customers for permission to give theirname and general purchase history information to a select group of retailerswhowouldprovide appropriate goods and services.

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Retail Management: A Strategic Approach, 13e(Berman/Evans/Chatterjee)Chapter 3Strategic Planning in Retailing1CHAPTER 3: ANSWERS TO QUESTIONSFOR DISCUSSION1.Why is it necessaryfor a small retailer todevelop a thorough, well-integrated retailstrategy? What could happen if a firm does not develop such a strategy?Without a predefined and well-integrated strategy, asmallretailer cannot succeed in acompetitive environment.Small retailers have fewer resources (managerial as well asfinancial)compared tolarge firmsandcan less afford to make a mistake.A well-integrated retail strategy better enables asmallretailer to explore the environmentalopportunities that are available, seek a differential advantage, develop an appealingoffering, coordinate activities, and anticipate and overcome crises.2.How would situation analysis differ for ashoe storechain and an onlineshoeretailer?Situation analysis is the candid evaluation of the opportunities and potential problemsfacing a prospective or existing retailer.Ashoestorechainmayevaluateopportunitiesandproblemssuchasincreasedcompetition from department stores,new developments affecting a large number of storeunits(such as increased sales ofshoes to tourists in certain markets), and may exploresuchoverallcompetitive advantages as free delivery,and the like.Anonlineshoeretailer should devote more attention to global influences, other Web-based competitors, delivery arrangements over longer distances, the quality and ease ofuse of its Web site, and pricing comparisons with other Web-basedshoeretailers.Theonline shoe retailer may also need toexplore the possibility of freereturn shipping due toissues with fit and color accuracy.3.What are the pros and cons of starting a newhair salonversus buying an existing one?Starting a newhair salonoffers a greater flexibility in location, atmosphere, and choice ofconsumer market. It allows a strategy to be tailoredfullyto thenewowner’s desires andstrengths. However, starting a newhair salonentails construction or renovation costs, atime lag until the store is ready to open (and then until planned sales levels and profits areearned),anunknownnameandimage,andtheneedtoestablishnewsupplierrelationshipsBuying an existinghair salonallows a retailer to acquire an established name, customerfollowing, location, trained personnel, and facilities; to open faster; to generate ongoingsales and profits; and to possibly obtain good lease terms or financing from the seller.Onthe other hand,store fixtures may also be older; there is less flexibility in developing and

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Retail Management: A Strategic Approach, 13e(Berman/Evans/Chatterjee)Chapter 3Strategic Planning in Retailing2enacting a strategy tailored to the new owner’s desires and strengths; the seller’sinventoryof shampoos, hair conditioners, and nail polishmay have to be purchased; andcontractual obligations for alarmand otherservicesmay have to be continued.Last, thevalue of goodwill will also have to be determined.4.Develop a checklist to help a prospective service retailer choose the proper servicecategory in which to operate. Include personal abilities, financial resources, and timedemands.A checklist should include the following components:Personal AbilitiesFinancial ResourcesAptitudesInitial investment requiredEducationDrawing account needsExperienceRenovations/construction needsProfessional skillsWidth/depth of assortmentCredit capabilityTime DemandsAutomation capabilityDelegation of workDegree of involvement desiredOff-hours activitiesStabilityversusseasonality in sales5.Why do retailers frequently underestimate the financial and time requirements of abusiness?Retailers often underestimate capital investments, operating expenses, merchandise costs,and, most importantly, living expenses. In addition, retailers sometimes expect immediatesuccess and do not have the financial resources to continue in business during the periodwhen the firm is unprofitable.Time requirements areoftenunderestimated because some retailers have difficultiesdelegatingdutiestoemployees,automationmaynotbepossibleorhavelimitedapplications, and retailers are required to work during off-hours to make purchases, keeprecords, etc. Many retailers do not have sufficient funds to hire additional personnel.6.Draw and explain a positioning map showing the kinds of retailers sellingtablets such asthe iPad and Kindle Fire.Multiple types of retailerssell tablets,includingbig box stores(such as Best Buy), high-end electronics stores,traditionalelectronics retailers,phone-based outlets,and Web-based outlets(such as Amazon.com).

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Retail Management: A Strategic Approach, 13e(Berman/Evans/Chatterjee)Chapter 3Strategic Planning in Retailing3The positioning map could be based on attributessuchas low-price versus high-price,specialty versus larger stores, and limited service versus full serviceretailers.7.Discuss local examples of a retailer applying mass marketing, concentrated marketing,and differentiated marketing.Mass marketing—Sears, JCPenney, 7-Eleven, SafewayConcentratedmarketing—MercedesBenzcardealer,Frenchrestaurant,specialtyboutiqueDifferentiated marketing—Macy’s and Bloomingdale’s divisions of Macy’s Inc. andmultiscreen movie theaters8.Marsha Hill is the store manager at anapparelstore located three miles from a largeuniversity. She has saved $100,000 and wants to open her own store. Devise an overallstrategy for Marsha, including each of the controllable factors listed in Figure 3-9 in youranswer.Marsha Hill’s overall strategy needs to coordinate the controllable and uncontrollablevariables in order to achieve the objectives of the business. Marsha has to determine herobjectives, philosophy of business, and ownership alternatives before a strategy can bedeveloped.Store location choices should consider adjacent stores, nearby competitors, cost of rent orownership, size of the selling area, building and fixtures, storage,storehours, and others.In managing the business, Marsha will have to consider the retail organization and humanresource management, as well as operations management.Merchandising will vary relative to the width and depth of assortment Marshadesires.Inventory levels need to be determined. Measurements for success and failure need to beused. Pricing will vary according to Marsha’s target market(s) and the image desired. Sheshould plan special events appropriate for major holidays in advance.In communicating with the customer, Marsha must consider image and promotiontechniques, which will vary.Students should utilize an integrated strategy, which can beeitherlowend, middle-of-the-road, or highend.9.A competingbicyclestore has a better location than yours. It is in a modern shoppingcenter with a lot of customer traffic. Your store is in an older neighborhood and requirescustomers to travel further to reach you. How could you use a merchandising, pricing,and communications strategy to overcome your disadvantageous location?Merchandising decisions should be madethatincrease the width and depth of thegoods/services assortment. A better selection of goods/services or concentration on

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Retail Management: A Strategic Approach, 13e(Berman/Evans/Chatterjee)Chapter 3Strategic Planning in Retailing4special segments (suchasmountainbicycles,bicycles forenthusiasts,three-wheelbicycles for seniors, and folding bicycles for apartment dwellers) may attract morecustomers.Staffshouldalsoincludebicycleenthusiastswhoareespeciallyknowledgeable.The store can also offer to double the manufacturer's warranty at a lowcost and to provide a free bicycle tune-up within one year of the bicycle's purchase.Prices should be lower than those of the competitor but still allow a reasonable profit.The bicycle retailer should also match all local competitor price levels.Communications with customers can focus on the low prices, product selection, exclusivemerchandise,and personal service that may not be available from the competing retailer.Advertising can use slogans such as “We may be out of the way, but it’s worth the drive.”10.Describe how a retailercanuse fine-tuning in strategic planning.Fine-tuning is used to make adjustments in a retail strategy. Strategy and tactics need tobe constantly reviewed and modifications made when necessary, such as meeting the lowprice of a new competitor, opening for longer hours in the pre-Christmas rush season,seeking part-time personnel for a busy time period,having sidewalk sales of closeoutmerchandise,and so on.11.How are the control and feedback phases of retail strategy planning interrelated? Give anexample.The control phase involves a systematic review of the strategy. The strengths andweaknesses are analyzed and revisions are made where required. These revisions areconducted based on feedback. Feedback consists of signals and cuesthatdetermine thestrengths and weaknesses. If an automobile dealer’s sales follow-up calls indicate thatcustomers were dissatisfied with the cleanliness of their new car upon delivery, bettercontrol of the dealer preparation process could be implemented.12.Should a catalog-basedmen’s wearretaileruse the strategic planning process differentlyfrom an Internet retailer? Why or why not?The fundamental process of strategic planning is transparent to the type of retailing towhich it is applied.The catalog retailer may look more carefully at printing costs, mailing costs, and thetiming between designing a catalog and its actual mailing (especially when price levelsand style preferencesare changing rapidly). The Internet retailer may be more concernedwith obtaining traffic to its Web site, graphics, hot linkswith related sites, and the greatertransparency of Web-based pricing.

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Retail Management: A Strategic Approach, 13e(Berman/Evans/Chatterjee)Chapter 4Retail Institutions by Ownership1CHAPTER 4: ANSWERS TO QUESTIONSFOR DISCUSSION1.What are the characteristics of each of the ownership forms discussed in this chapter?Retail institutions can be classified by ownership: independent, chain, franchising, leaseddepartment, vertical marketing system,orconsumer cooperative.An independent owns only one retail unit.Becauseonly one store location is involved, adetailed list of specifications can be derived for the best location and a thorough searchcan be undertaken. The one store location also lowers investment costs for leases,fixtures, employees, and merchandise. An independent often has the image of a friendly,personalized retailer.Chains are multiple retail units under common ownership, which utilize centralizedpurchasinganddecisionmaking.Competitiveadvantagesforchainstoresincludebargainingpower,wholesalefunctionefficiencies,multiple-storeefficiencies,computerization, access to media, well-defined management, and long-run planning.Chains have a number of disadvantages: inflexibility, high investments, reduced control,and limited independence.Franchising is defined as a contractual arrangement between a franchisor and a retailfranchisee, which allows the franchisee to conduct a given form of business under anestablished name and according to a given pattern of business. A franchisor benefitsbecause control is acquired and growth is increased. A franchisee benefits because a well-known name and shared costs are achieved at a reasonable price.A leased department is a department in a retail store that is rented to an outside party. Theproprietor of a leased department is usually responsible for all aspects of its operations(including fixtures) and normally pays the store a percent of sales as rent. The storeimposes various requirements on the leased department to ensure overall consistency andcoordination.Vertical marketing systems occur when successive stages of production and distributionare owned by a manufacturer, wholesaler, or retailer or two of these categories. Avertically integrated firm can achieve many objectives such as self-sufficiency, lowercosts through elimination of middlemen, direct contact with the consumer, greaterbargainingpowerwhendealingwithoutsidesuppliersorretailers,asenseofachievement, and time efficiencies in orders and deliveries.

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Retail Management: A Strategic Approach, 13e(Berman/Evans/Chatterjee)Chapter 4Retail Institutions by Ownership2A consumer cooperative is a retail firm that is owned by its customers. A group ofconsumers invest, receive stock certificates, elect officers, manage the operations, andshare the profits or savings that accrue.2.Do you believe that independent retailers will soon disappear from the retail landscape?Explain your answer.No. While the relative number of independents is diminishing in favor of chains,independents will still continue to be strong in such areas as restaurants, dry cleaners,specialtyclothingstores,appliancerepair.Independentsalsohavesomemajorcompetitive advantages compared to chains: flexibility in strategy, lower investmentcosts, specialist strategy, control over strategy, independence, consistency, and a strongentrepreneurial drive.3.Why does the concept of ease of entry usually have less impact on chain retailers than onindependent retailers?Independents can emerge due to low capital requirements, no licensing requirements, andno zoning concerns. Large chain retailers are generally much better capitalized andoftencompete with multiple formats in multiple markets.4.How can an independent retailer overcome the problem of little computerization?Theindependentretailercanoutsourcecommoncomputerizationareas,suchasaccounting,taxes, inventory management, and sales analysis(by customer and product)to specialists. Increasingly, software firms have also targeted independent retailers andsmaller chains with software appropriate for these retailers. Many of these firms offertraining sessions for store owners and managers.5.What difficulties might an independent encounter if it tries to expand into a chain?Independents may encounter overdependence on the owner, limited financial and timeresources, limited flexibility, and increased expenses (such as personnel and operatingcosts). Some consumers may desire to interact only with the owner due to socialissuesorconcerns over employee versus owner expertise.6.What competitive advantages and disadvantages do regional chains have in comparisonwith national chains?Advantages of regional chains over national chains include better managerial control andbetter ability to adapt to local needs (such as differences indemographics,lifestyles,climate, and other factors). Disadvantages of a regional chain (versus a national chain)are less name recognition outside the region’s geographic area, lower bargaining powerwith vendors, and less access to national media.

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Retail Management: A Strategic Approach, 13e(Berman/Evans/Chatterjee)Chapter 4Retail Institutions by Ownership37.What are the similarities and differences between chains and franchising?Similarities between chains and franchising include the existence of more than one outlet,access to media,long-range planning, existence of specialists, and economies of scale.Both chains and franchisees desire some degree of similarity in strategy across storeunits.Differences between chains and franchising include ownership, control, lower financialrequirements of franchises for expansion, andpotential conflicts between franchisor andfranchisee.A chain has much greater control over store managers thana franchise hasoverfranchisees.8.From thefranchisee’sperspective, under what circumstances would product/trademarkfranchising be advantageous? When would business format franchising be better?In product/trademark franchising, franchised dealers acquire the identity of their suppliersby agreeing to sell the latter’s products and/or operate under suppliers’ names; yet, thedealers operate relatively autonomously. This would be better for franchiseesthatwish tooperate with greater freedom and autonomy. It is also more appropriate for thosefranchiseesthathavegreaterexperienceandskills.Product/trademarkfranchisingreduces the involvement of the franchisor in site selection, training, and troubleshooting.In business format franchising, the relationship between franchisor and franchisee is moreinteractive. In addition to the right to sell goods and services, assistance is provided onsite location, quality control, accounting, startup practices, training, and responding toproblems.Thiswouldbebetterforafranchiseeseekinggreatertrainingandtroubleshooting support and for franchiseeswith less knowledge and experience inretailing.9.Why would a supermarket want to lease space to an outside operator rather than run abusiness, such as dry cleaning, itself? What would be its risks in this approach?Supermarkets stores may want to lease space to a dry cleaner to broaden their offerings,have access tospecialized skills, avoid training their own employees, minimize timeexpenditures by management,and reduce their own expenses. A supermarket may leasespace if it feels that a dry cleaner would be an excellent traffic draw to the overall store.Thedrycleanercouldalsoeffectivelyusedeadareasinthesupermarket.Thesupermarket’s senior management may also recognize that it lacks the specialized skillsto perform dry cleaning.Potential risks include conflicting operating procedures, adverse effects on store image,and association of the lessee with the store by consumers.10.What are the pros and cons of Sherwin-Williams using dual marketing?

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Retail Management: A Strategic Approach, 13e(Berman/Evans/Chatterjee)Chapter 4Retail Institutions by Ownership4Pros•Increased size of target markets, new customers•Increased sales volume and profits•Additional outlets•Ability to reach multiple market segments•Shared costs•Control over strategy•Access to a fully integrated systemCons•Division of efforts between two market segments possibly diluting strength ofmarketing•Possible blurring of image to consumers•Increased difficulty in managing multiple operations•Price competition from otheroutlets11.How could a small independent restaurant increase its channel power?A small independent restaurant could increase its channel power by purchasing a largeproportion of its needs from one supplier, by joining a cooperative buying group withnoncompeting restaurants, by purchasing large orders at one time, by purchasing suppliesfrom small vendors, and by using private brands of water and wines.12.Would REI be as successful if it operates as a traditional chain? Explain your answer.ManyofREI’scustomersareattractedtotheretailerbecauseitisaconsumercooperative.They feel it is important to vote for the board of directors, to share in profits,and to receive a rebate based on their purchases.Others are attracted to REI because of its selection and customer support and are notconcerned about the voice in management or the rebate. Some would even prefer the costsavings to beaccrued at the time of purchase as opposed to the end of the yearREI could keep both groups happy by increasing consumer awareness of cooperatives, byhaving two levels of cooperative membership and two levels of prices for active versusnonactive members, and by organizing cooperatives among segments of the population(college students and faculty, retired individuals, workers at a given company, unionmembers).

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Retail Management: A Strategic Approach, 13e(Berman/Evans/Chatterjee)Chapter 5Retail Institutions by Store-Based Strategy Mix1CHAPTER 5: ANSWERS TO QUESTIONSFOR DISCUSSION1.Describe how asmallshoe storecould be a destination retailer.A smallshoe storecan be a destination retailer when it is distinctive enough to causeconsumers to go out of their way to shop there. It can become a destination retailer byselling premiumlinesofshoes, selling special sizes (size 5 and smaller and size 12andlarger), appealing to consumers with orthotics, and having speciallytrained personnelexperienced with fitting consumers with special needs.2.Explain the wheel of retailing. Is this theory applicable today? Why or why not?The wheel of retailing explains the evolution of retail institutions on the premise that newtypes of retailers first appear as low margin/low price operations offering minimumservice. As they become successful, the innovators upgrade facilities and becomevulnerable to new innovators with lower cost structures.The rise of the off-price chain, factory outlets, factory outlet malls, and flea markets asretail institutions can be explained, in part, by the wheel of retailing.3.Develop a high-end retail strategy mix for atoystore. Include location, operatingprocedures, goods/services offered, pricing tactics, and promotion methods.Location—high rental shopping center or central business district locationProduct—full assortment of name brand, qualityEuropean-made toysService—technicians especiallytrained inassembling bicycles, and other items thatrequire assemblyPromotion—extensiveadvertising,and use of highly trainedsales personnelPrice—sale at list price4.How could these retailers best apply scrambled merchandising? Explain your answers.a.Kay Jewelersb.1-800 Flowersc.A localdelicatessend.Dunkin' Donutsa.Kay Jewelerscould sellfine watches, college rings, watch bands, watch batteries,designer costume jewelry,and graduation gifts like fine pen sets.

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Retail Management: A Strategic Approach, 13e(Berman/Evans/Chatterjee)Chapter 5Retail Institutions by Store-Based Strategy Mix2b.1-800 Flowers might sell any gift items (such as chocolates, fruit baskets,balloons,inexpensive watches and jewelry).c.A localdelicatessenmay feature special offers that can be combined with atheater-goingexperiencesuchasanoutdoorcaféwitheveninghoursonweekends.It could also sell pizzamade ina wood burning oven,servedwithimportedor craftbeers.d.Dunkin’ Donutsmay expand intosoups,sandwiches, specialtyteas,and aselective line of pastries.It could also offer catering services with an expandedmenu.5.What strategic emphasis should be used by institutions in the growth stage of the retaillife cycle compared with the emphasis by institutions in the maturity stage?In thegrowthstage, a retailer needs toexpand rapidly and get ready for increasedcompetition from newer formats.A retailer also needs sufficient capital due tohighexpansion.It also needs to respond to cost pressures due to alarger staff, as well as amore complex inventory system.In thematuritystage, retailers need to consider repositioning of the institution bypreparing for increased competitionas well asmarket saturation. The goal in maturity isto sustain this stage and forestall decline.6.Contrast the strategy mixes of convenience stores, conventional supermarkets, food-based superstores, and warehouse stores. Is there room for each? Explain your answer.RetailerStrategyConvenience storesNeighborhood location; medium width and low depth ofassortment;averagequality;limitedservice;limitedpromotion; average to above average pricesConventional supermarketsNeighborhoodlocation;extensivewidthanddepthofassortment; average quality; national, private, and genericbrands; little service; heavy use of newspapers, flyers, andcoupons; self-service; competitive pricesFood-based superstoresCommunity shopping center or isolated site location; fullassortment of supermarket items plus health and beautyaids and general merchandise; limited service; heavy use ofnewspapers and flyers; self-service; competitive prices

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Retail Management: A Strategic Approach, 13e(Berman/Evans/Chatterjee)Chapter 5Retail Institutions by Store-Based Strategy Mix3Warehouse storesSecondary site location, often in industrial area; moderatewidth and low depth of products; emphasis on nationalbrands purchased at discounts; very few services; little orno promotion; very low pricesYes, there is room for each, as long as each maintains its distinctive strategy and retains aloyal customer following. The most vulnerable store is the conventional supermarketbecause its strategy overlaps substantially with that of the superstore.Becauseit is alsoan older format, many conventional supermarkets are dated and in need of substantialrenovation.7.Do you think U.S. combination stores (supercenters) will dominate grocery retailing?Why or why not?Supercenters are a form of combination store and should be able to succeed in the sameway that combination stores have, through benefits including cost efficiencies, largeselection, and one-stop shopping. On the other hand, the hypermarket (the Europeanversion of a supercenter concept) did not succeed in the United States. Supercentersshould investigate why consumers did not like the hypermarket and should adjust theirstrategies accordingly. Oneexplanationis that the hypermarket was too massive for U.S.consumers.8.What are the pros and cons of Sephora carrying more than 200 brands of personal careproducts?Pros of Sephora’s 200-brand strategy include Sephora’s becoming a destination store andrelated-item selling opportunities.Consincludepossibleoverloadincustomerchoice,lowinventoryturnover,lessbargaining power with individual suppliers, the need for largerstores, difficulties intraining store personnel, and a largerrequiredoverall investment.9.Contrast the strategy mixes of specialty stores, traditional department stores, and full-linediscount stores.RetailerStrategySpecialty storesConcentrate on one good/service line; narrow, but deepassortment; knowledgeable sales personnel; intimate storesize and atmosphereTraditional dept. storesLargestoresize;extensiveassortmentofgoodsandservices;separatedepartmentsforbuying,promotion,customer service, and control; employs at least 50 people;merchandise must include dry goods and household items;

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Retail Management: A Strategic Approach, 13e(Berman/Evans/Chatterjee)Chapter 5Retail Institutions by Store-Based Strategy Mix4family wearing apparel and furniture, home furnishings,appliances, and TV sets; average to good quality; moderateto above-average prices; customer services are available;return and exchange privileges are providedFull-line discount storesBroad merchandise assortment; centralized checkout; self-serviceemphasized;cataloggenerallynotavailable;private-brandnondurablegoodsandwell-knownmanufacturer-brand durable goods; greater emphasis onauto accessories, gardening equipment, and housewares;inexpensive buildings, equipment, and fixtures; few creditsales; low prices10.What must the off-price chain do to succeed in the future?The most important part of the strategy of off-price chains involves buying merchandisevia opportunistic buyingand establishing long-term relationships with suppliers. Tosucceed, the chains must secure large quantities of current fashion merchandise atdrastically reduced prices and have a regular flow of these goods into the stores. Theymust continue to employ anopportunisticbuyingstrategy. Off-price chains must becareful not to “ride up” the wheel of retailing through having more costly locations, or toget away from their traditional buying strategy.11.Do you expect factory outlet stores to keep growing? Explain your answer.Factory outlets are manufacturer-owned stores where manufacturers sell merchandise thatis discontinued, irregular, off-season, or not in full lots.In some cases,items sold atfactory outlets are goods that were returned from department and specialty stores. Factoryoutlets have become popular because they enable a manufacturer to retain control overmerchandise and it can be quite profitable.Factory outlet malls also make outlet shoppingmore convenient for consumers. These malls have also increased the overall trading areaof many outlets.It is likely that factory outlet stores will continue to grow due to thesebenefits.However, there are some drawbacks. Outlets could negatively impact the sale of themanufacturer’s products at regular retail stores,and they may alienate the manufacturer’straditional resellers(such as specialty anddepartment stores). There are also limitedquantitiesofdiscontinued,irregular,andoff-seasonmerchandise.Tohavefullinventories throughout the year, some manufacturers stock their factory outlet stores withmerchandise especially made for these outlets.12.Comment on the decision of many membership clubs to begin selling gasoline.

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Retail Management: A Strategic Approach, 13e(Berman/Evans/Chatterjee)Chapter 5Retail Institutions by Store-Based Strategy Mix5Advantages of this strategy are the increased customer traffic generated by membersvisiting the club to purchase gasoline. This strategy only works if (a) membership clubsare able to undercut traditional gas station pricessufficiently, and (b) if a sufficientnumber of members purchase other items on the same shopping trip.Disadvantages of this strategy are that the normal trading area of a membership club ismuch larger than a typical gas station. It is possible that lower prices for gasoline may notencourage shoppers to travel large distances for one item. A second potential drawback isthat unlike many of the goods at a membership club, a member cannot stock up ongasoline. Atypicalcar’s gas tank is less than 20 gallons.

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Retail Management: A Strategic Approach, 13e(Berman/Evans/Chatterjee)Chapter 6Web, Nonstore-Based, and Other Forms of Nontraditional Retailing1CHAPTER 6: ANSWERS TO QUESTIONSFOR DISCUSSION1.Contrastomnichanneland multi-channel retailing. What do you think are the advantagesof each?A multi-channel retailer sells to consumers through multiple retail formats.To optimizeefficiency and enhance customer experiences, the best retailers turn to omnichannelretailing, anddeliver a consistent, uninterrupted, and seamless experience regardless ofchannel or device.Omnichannel retailing assumes that shoppers channel hop. They mayuse a laptop to determine which product they desire, a smartphone to compare in-storeprice levels, and buy onlinebutreturn in-store.The advantages of amultichannelretailer includea simplified management structure, aclear image, and specific goals for each channel.The advantages of an omnichannelretailer include possible synergies among the multiple channels, being able to appeal toconsumersthrough multiple channels and devices, shared customer databases acrosschannels, and appealing to different groups (based on their customer purchase journeymaps).2.Do you think that nonstore retailing will continue to grow faster than store-basedretailing? Explain your answer.Some types of nonstore retailing will continue to grow, while others will not.Web-basedsaleswill show the most growth as a result of its diversity, raising consumer confidencein it, overcrowding at stores, increases in working women, technological breakthroughs,and so on. Vending machines and direct selling will show little growth as a result ofrising costs, limited applications, and consumer distrust.3.How would you increase a direct marketer’s response rate from lessthan 1percent ofthose receiving E-mail sales offers by the firm to3percent?To increase a direct marketer’s response rate from less than1percent of those receivingE-mail sales offers to3percent, direct marketing efforts should bedirected atconsumerswhohaverespondedinthepast.Basically,directmarketersmaywanttoavoidunresponsive consumers as it may be too costly to continue to market to them.The response rate can also be increased by having specialized offerings to consumersbased on their past buying pattern. A $10 or 10-percent-off coupon to first purchaserswould also increase the response rate.Appealing to collectors of specific items,such as

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Retail Management: A Strategic Approach, 13e(Berman/Evans/Chatterjee)Chapter 6Web, Nonstore-Based, and Other Forms of Nontraditional Retailing2die-cast autosorhand-tooled leather classic books,would also aidin achieving thisobjective.Aformalloyalty program may also be helpful.Last,coupons and specialofferscould be transmittedtoa customer’s mobile phone usingtrackingsoftware.Thiswouldindicateacustomer’slocationusinggeofencingtechnology.4.Explain the “30-day rule” for direct marketers.Accordingto the “30-day rule,” direct marketers are obligated by a federal regulation toshipcustomerorderswithin30daysofreceivinganorder.Ifthiscannotbeaccomplished, customers are to be notified of delays. When an order is not shippedwithin 60 days, the customer is provided with a delivery date but has the option to cancelthe order and receive a full refund. This rule covers mail, phone, fax, and computerorders.5.What are the two main decisions to be made in the business definition stage of planning adirect marketing strategy?When planning a direct marketing strategy, two key decisions must be made in thebusiness definition stage. A company must decide if it will be a direct marketerexclusively or if it will have store-based locations as well. Secondly, a company mustdevelop a merchandising approach based on whether it is going to be a general directmarketer with a large assortment of products, or a specialty direct marketerthatcarriesasinglecategory of goods/services.6.How shouldWalgreenspharmacy(www.walgreens.com)handle consumer concernsabout their privacy?To handle consumer concerns about privacy,Walgreenspharmacyshould assure allconsumers that their namesand other personal information will positively not be sold ortradedtoanymailinglistbrokerorothermarketer.Walgreenspharmacyshouldunderstand that information concerning a person's health status and medications takenneeds to be handled inthestrictestconfidence.Store records as well as Web site ordering and delivery information need to be especiallysafeguarded.7.Differentiate between direct selling and direct marketing. What are the strengths andweaknesses of each?Direct selling involves personal contact and phone contact with consumers initiated by aretailer in the consumer’s home or office. The strengths of direct selling include shopping

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Retail Management: A Strategic Approach, 13e(Berman/Evans/Chatterjee)Chapter 6Web, Nonstore-Based, and Other Forms of Nontraditional Retailing3convenience, consumers receiving a lot of attention (so individual questions and concernscan be addressed), full demonstrations and explanations being made, consumers beingmore confident in their own surroundings, no competing brands as a distraction, andlower overhead costs.Weaknesses of direct selling include fewer female consumers at home during daytimehours, fewer salespeople being attracted to direct selling jobs, the sales force sizedetermines the firm’s market coverage (asmany potential customers are never contacted),low sales productivity, consumers who are skeptical of direct selling, high employeeturnover, high compensation, many legal restrictions, and the existence of a poor image.Direct marketing is a type of retailing where a customer is made aware of a goodorservice through a nonpersonal medium and then proceeds to place an order bythemail,phone, fax, orusing acomputer, smartphone or tablet.Strengths of direct marketinginclude the appeal it has to those who need a flexible shopping alternative to store-basedretailing, increased sales, reduced costs, lower prices, and easier targeting of customers.Weaknesses of direct marketing include it often being misunderstood by consumers,purchases cannot be viewed prior to purchase, a limited line is sold, costs due to printingand mailing may be high and unstable, staffing costs are usually higher than anticipated, acluttered marketplace, a poor image due to some unethical practices, difficulty planningpricesbecause catalogs are prepared months prior to mailing, and a low response rate.8.Select a product not heavily sold through vending machines and present a brief plan fordoing so.An example of aproduct not heavily sold through vending machines is single portions ofmedications for headaches, heartburn, etc. Vending machines should be placed inconvenience stores, airports,movie theatersand hotel lobbies. These machines should beequipped to take coinsas well as dollars. To discourage theft, the machines should beplaced in highly visible spots. In locations where shopsareselling comparable items,these stores should be encouraged to place these machines in front of their stores whenthestore is closed.9.From a consumer’s perspective, what are the advantages and disadvantages of the Web?From a consumer’s perspective, the Web provides a means to access a wider variety ofproducts at a retail level (at even a global level) without leaving the home. It is especiallyuseful for consumersinremote locations or for those who have difficulty leaving home todo their retail shopping. The Web also provides an opportunity for the consumer tocomparison shop(both product and price-based)with relative ease; consumers on theWeb have easy access to competitive analysis and productand price comparisons(usingshoppingbots).Webpurchasesoffertheaddedbonusofincreasedprivacyandanonymity over traditional storefront transactions and are currently free of sales taxes inmany instances.

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Retail Management: A Strategic Approach, 13e(Berman/Evans/Chatterjee)Chapter 6Web, Nonstore-Based, and Other Forms of Nontraditional Retailing4The Web may fall short for consumers who prefer to see products in person as theypurchase them. The sense of the buying experience is changed when purchases are doneoverthe Web. Consumers may easily adjust to buying items such as contact lens solutionfrom a Web-based outlet but may resist buying clothing from a Web-based retailerbecause they consider shopping for clothes an event that requires leaving the home. Theymay prefer to bephysicallyat the retail outlet for the full experience. It may be for thesimple reason that they always try on clothing before they buy or just because they preferto be in a mall setting to establish the mood for clothes shopping.10.From a retailer’s perspective, what are the advantages and disadvantages of havingtheWorld Wide Web?For a retailer, the Web offers the advantages of the potential access to a larger customerbase and operating on a 24/7 basis. The Web shortens the distance between the retailstorefront and the customer. Also, a Web site is advantageous to a retailer in that it isinexpensive, builds image, provides data on store locations and products, promotes andexplains a company’s offerings, enables consumers to choose what they want to view,and allows firms to gather feedback. In addition, specials can be promoted, employmentopportunities are featured, and sales are generated.The disadvantages of having a Web site from the retailer’s perspective include thedifficultysomeconsumers may have inusinga company’s Web site.Consumersmay beconcernedaboutprivacy and security, clutter exists, and Web sites must be continuallymaintained and updated to attract visitors.Credit card security and shipping costs are alsoissuesfor many consumers.Also, some retailers which are new to the Web may have difficulty in gauging the effectof Web-based sales on their overall business. Web-based retailing often requires a changeinthe company’s fulfillment operation, whereby warehousing and distribution strategieshave to change to follow suit. In addition, the precedent for time to fulfillment on theWeb is very short; the big players such as Amazon.com have made next-day or two-daydelivery part of the expectation of Web-based retailing. Some companies may havedifficulty competing in this environment.11.What must retailers do to improve customer service on their online stores?To stimulate greater customer service on the Web, retailers shouldassureconsumers thatpurchases will be private andsecure. Once consumerfears about shopping online areacknowledged, addressed, and overcome, more purchaseswill be made online.AnotherimportantpointisthatWeb-basedretailerscouldimprovetheeaseoftransactions to prevent potential customers from backing out of online sales. Web sitesshould have as few forms as possible to fill out and have ways to make repeat shopping

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Retail Management: A Strategic Approach, 13e(Berman/Evans/Chatterjee)Chapter 6Web, Nonstore-Based, and Other Forms of Nontraditional Retailing5easier (such as retention of credit card numbers and retention of preferred shippinginformation).Amazon’s one click purchase mode illustrates an easy to implement Web-based transaction.12.What future role do you see for video kiosks? Why?Kiosks can be used to supplement store-based sales for goods that are out-of-stock,thatare only available on the Web,or as a means of contacting customer service personnel.An electronics retailer, for example, can use a video kiosk to enable customers to surf theretailer’s Web site. This provides Web-based services in a retailer’s store environment.Kiosks can also be effectively used to purchase concert and airline tickets.

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Retail Management: A Strategic Approach, 13e(Berman/Evans/Chatterjee)Chapter 7Identifying and Understanding Consumers1CHAPTER 7: ANSWERS TO QUESTIONSFOR DISCUSSION1.Comment on this statement: “A competitive retail sector, facing an uncertain economicfuture,isbeingchallengedbyconsumerstocompetefortheirbusiness.Inthisenvironment, only the fittest and those really listening to what their customers really wantare likely to survive.”In hard times, marginal retailers will have a very difficult time surviving. Reducedcustomer spending, high unemployment, falling values of retirement plans, and loweringreal estate values pose special challenges to retailers. Successful strategies need to bebasedonlowoverallcosts,afocusonahighlytargetedaudience,distinctivemerchandise,and on high levels of customer service.2.Analyze the global population data in Table 7-1 from a retailing perspective.Table 7-1 provides a wealth of information that is very useful for retailers.Many uses ofthe data are as follows: The age distribution data allow retailers to gauge their approachto a consumer base of a particular country. A retailer that sells products geared for theelderly may not want to enter a country where a low percentage of the population is 65and older. A retailer selling children’s clothing may wish to invest in business in acountry with a rapidlygrowing population and a high population distribution of newbornsto14-year-olds.The literacyrate data are useful indetermininghow a retailer’spromotional messages are conveyed to the market. For example, in countries with lowliteracy rates, consumers may be better reached through using symbolic language ratherthan written words.Population growth rate can also give a retailer insight into growthprospects.3.How could aself-service frozen yogurtchain use the U.S. population data presented inTable 7-2?Aself-service frozen yogurt chaincan use the U.S. population demographics to helpdetermine its potential market in each region. Important data include each area’s percentof U.S. household income,percent of U.S. population, population by broad age groupingsand population density, and areas with greater population density.Thefrozen yogurtchain can focus on areas withhighpopulation density (this may attractmore customers per store) and areas with younger populations (these may include moredo-it-yourselfers).

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Retail Management: A Strategic Approach, 13e(Berman/Evans/Chatterjee)Chapter 7Identifying and Understanding Consumers24.Explain how a retailer selling expensivebicyclescould reduce the six types of perceivedrisk.Functional—Provide a three-year, “no excuses” warranty against breakage,and rust.Physical—Allattachedrear viewmirrors are backed using superior fastening devices.Financial—Compare competitors’ prices and products, meet competitors’ prices, andoffer refund/exchange privileges.Social—Emphasizethestore’sname,thereputationofbrandssold,andproductendorsements.Psychological—Focus on customers’ need for newfull-featured bicyclesas an extensionof one’s personality.Time—Offer fast delivery, provide broad selection, and one-stop shopping appeals;providefreeassemblyon all bicycle sold.5.Why is it important for retailers to know the difference between needs and desires?In marketing products to customers, retailers must know in which category their productfalls so that they may understand the connection between the attributes of their productand the expectations of their buyers. Retailers must understand that consumers whoperceive they need certain products will likely purchase them. They must understand thatproducts that are desired but not needed might be promoted in such amannerthatconsumers are coaxed into buying them anyway. Retailers must understand that thebehavior at the point of sale of a “need” may be tied to attributes such as price or value.However, consumer behavior at the point of sale of a “desired” product might be afunction of the “trendy” attributes of a product rather than the price. Retailers need tolearn what motivates consumers to buy or not buy their product and react to this bypositioning the product appropriately.6.Why do some consumers engage in outshopping? What could be done to encourage themto shop closer to home?Outshopping involves patronizing out-of-town shopping areas.Retailers should encourage customers to shop closer to homebymaintaining wideselections(includingspecialsizes),exclusivemerchandise,attractiveprices(evenmatching prices by out-of-town retailers), and free delivery, installation, and alterations.7.Is cross-shopping good or bad for a retailer? Explain your answer.Cross-shopping has some advantages to retailers who carry items that other types ofretailers specialize in. Cross-shoppers may elect to always buy milk at the closestpossible store that is convenient at the time of need. This means that the 7-Eleven mayget the sale on days between full grocery shopping trips, but the grocery store may get thesale on shopping days.

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