final assignment rm

Submitted to:

Ms. Moon Pradhan

CH-9 TRADING AREA ANALYSIS

1. Comment on this statement: “A good location may let a retailer succeed even if its

strategy mix is mediocre”. Is it always true? Give examples.

Location is generally one of the most important factors customers consider while choosing a

store. A bad location may cause a retailer to fail even if its strategic mix is excellent. On the

other hand, a good location may help a retailer succeed even if its strategic mix is mediocre. A

great location can drive clients through your doors and keep them coming back for more and a

bad location can doom your business even before it opens.

A good location does not always mean that it has to be in the midst of a thriving marketplace to

get instant footfalls but the location must at least be a place where the customers can have an

easy access of the their demanded products near to their house, the transportation facility, ),

parking facility must also be provided.

Besides location, the retailers should find out what value-addition they can provide to the

customers. You may have a great location in terms of Accessibility, Customer walk-ins, other

amenitites like, food court etc. but in case if your product is not suitable for that particular

segment then there’ll be no use of having all those. You cannot have a cheap clothing shop in a

high end mall so the retailer should first be fully aware about the clients. Say for an example if

you have a product which is targeted at the lower middle class you cannot really open a store in a

really posh area, not that people won't come to your store but you won't have your target

audience coming to your store as the lower middle class people would generally avoid going to a

posh location to shop.

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2. What is trading area overlap? Are there any advantages to a chain retailer’s having

some overlap among its various stores? Why or why not?

A trading area is a geographic area containing the customers of a particular firm or group of

firms for specific goods or services. Similarly, a trading area overlap is the area where the same

customers are served by two firms. In other words, it is an intersection, cross between two

companies’ locations where both serve the same customers.

In having the overlap of its stores or outlets, it has advantages,

I. Its regular consumers will not go to other stores that are nearby the stores.

II. The total profit of the company will increase.

III. Increase in the overall customers in both outlets.

IV. According to book, total revised sales of existing store + sales of new store – total

previous sales of existing store, from this formula the profit will increase in its overall

outlets.

V. Increase in market share of the goods or service.

Example of trade overlap:

A retail store of Nepal that is, bhat bhateni of naxal of Kathmandu and its trading area

was up to Chakrapath or above it but the retail open its oulet in Chakrapath. Now Bhat

Bhateni has all of its customers in the area and the profit too.

3. Use Huff’s Law to compute the probability of consumer’s traveling from their homes to each of three shopping areas: square footage of selling space – Location1, 5,000; Location 2, 8,000; Location 3, 10,000; travel time – to location 1, 12 minutes; to Location 2, 18 minutes; to Location 3, 25 minutes; effect of travel time on shopping trip – 2. Explain your answer.

Given:

Square footage of selling space location 1 (S1) = 5000


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Travel time to location 1 (T1) = 12 min



Effect of travel time (¿= 2

No of shopping location (n) = 3

To find, the probability of consumers travelling from their home to 3 different locations i.e. P1, P2 and P3

We have Huff’s Law:

Pj =

[S j /(T j)]

∑j=1

nSjTj

P1 = (5000/122) / [(5000/122) + (8000/182) + (10000/252)]

= 46.04%

P2 = (8000/182) / [(5000/122) + (8000/182) + (10000/252)]

= 32.74%

P3 = (10000/252) / [(5000/122) + (8000/182) + (10000/252)]

= 21.22%

Hence, if 100 people live 12 min from location 1, 46 people will shop there.

Similarly, if 100 people live 18 min from location 2, 33 people will shop there,

And, if 100 people live 18 min from location 3, 21 people will shop there.

4. If a retail area is acknowledged to be “saturated”, what does that signify for existing retailers? For prospective retailers considering the area?

A saturated trading area has the proper amount of stores to satisfy the needs of its population for

a specific good or service and to enable retailers to prosper. To the above question, if the existing

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retail area have saturated area then it’s doing profitable business of the flow of people is good

and it can satisfy the people needs and wants in the particulars goods and service. For example, a

book supplying area that has saturating trading area then it can supply various books to its

customers according to their needs.

For the new comers for the existing saturated area the retailer should take into account that if I

come to this place will my business do well or the profit will be enough to handle my business.

Because an addition of extra store in the place will distribute the profit and some of the store has

to cut and gives it to the entrance one. Other thing that might happen is that many stores might

go into loss and have to leave the business. Or the new one which is going to start a business in

this might not be in stable, they might get into loss.

So before thinking of starting a business in saturated area you will have to take into account that

will I be in profit in long run or not.

CH 10: SITE SELECTION

From the retailer’s perspective, compare the advantages of locating in unplanned business districts versus planned shopping centers.

Unplanned Business District Planned Shopping Centers

Retailers can own more than one similar

stores in this area

Have higher flexibility

No sharing of utilities bills which might

make costly to the retailers like

electricity, water, advertisements, etc

Only one store is open in this site.

Have limited flexibility

Sharing of utilities bills which might

make costly to the retailers like

electricity, water, advertisements, etc so

that cost is reduced

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Higher thefts rates.

Guards are kept for night duty.

No need of membership in a merchant’s

association which may be of less or of no

value.

People do not value such store much so

more better advertising as well as

strategy mix is required

Low thefts rates.

Guards are kept for night duty.

Need of membership in a merchant’s

association which may be of less or of no

value

People enjoy shopping in such centre so

less cost is incurred in advertising and its

strategy mix

Differentiate among the central business district, the secondary business district, the neighborhood business district, and the string.

Central Business

District

Secondary Business

District

Neighborhood

Business District

String

It is the hub of

retailing in a city

and synonymous

with term

downtown

Is a unplanned

shopping area in

a city or town

that is unusually

bounded by the

intersection of

two major streets

It is unplanned

shopping area

that appears to

the convenience

shopping and

service needs of a

single residential

area

Is unplanned

shopping area

comparing a

group of retail

stores, often with

similar or

compatible

product lines,

located along a

street or highway

Exists where

there is a greatest

Exists in the

intersection of

Exists on the

major streets of

Exists in less

populated area

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density of office

building and

stores

two major cities its residential

area

Located in major

and big trading

areas of city

Located in small

trading area

Located in lesser

trading area

Located in least

or no trading area

Size of store is

big

Size of store is

comparably small

than CBD but big

than

Neighborhood

and String

Size of store is

small than CBD

and SBD

Size of store may

be bigger or

smaller as per

investment

Provide varieties

of goods and

services with

varieties of prices

Provide varieties

of goods and

services but sells

higher proportion

of convenience

oriented items

with a little

higher prices

Provide limited

varieties of goods

and services with

high prices

Provide least

variety of goods

and services with

very high price

Have higher

access to public

transportation

and high level of

pedestrian traffic

Have less access

to public

transportation

and low

pedestrian traffic

than CBD

Have lesser

access to public

transportation

than CBD and

SBD

Have least access

to public

transportation

Have very high rent

and taxes and less

advertising cost

Low rent and

taxes than CBD

and little higher

ad cost

Have lower taxes

and rent than

CBD and SBD

but high ad cost

Have very low

rent and taxes but

highest ad costs

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Explain why a one-hundred percent location for Pizza Hut may not be a one-hundred percent location for a local pizza restaurant.

Every retailer stores have its own formula of evaluating the location where they have to keep

their outlets. Some might give focus on parking area, traffic, flow of people, etc. at here the

location for pizza hut optimum site is different than the local pizza restaurant. It is because pizza

hut is a multinational company which sales pizza to every type of customers. The location for

pizza hut might be on the high street areas where flow of people might be high, have to have lots

of parking area, etc.

But for local pizza restaurant, they might focus on the people nearby and stop and have pizza,

where they might need less parking area, high transportation availability and other things.

How do the parking needs for a dentist, a TV repair store, and a shoe store differ?

Dentist: Required high area space because the people who come to dentist have at least motor

bike / scooter / 2 wheeled vehicles and some might have car or 4 wheeler vehicles.

TV repair store: The parking area need for TV repair might be moderate or no parking area. The

one who have facilities to repair in home doesn’t need parking area and the one who have to fit

the television in the office need small area for parking.

Shoe store: required moderate area for parking because all type of people comes to buy the

shoes, from the person who have cars to the person who comes in public bus.

So, parking areas needs for a dentist, a TV repair store and a shoe store are different.

Ch 11 Retail Organization and Human Resource Management

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Cite at least five objectives a small independent furniture retailer should set when setting up its organization structure.

The 5 objectives a small independent furniture retailer should set when setting up its organization structure are:

a. Outlining specific tasks to be performed in a distribution channel –Specific tasks include buying, shipping, receiving and checking, pricing, and marking merchandise ;inventory control ;display preparation; facilities maintenance; research; customer contact and follow-up and a lot more.

b. Dividing tasks among channel members and customers- These tasks may be divided among retailers, manufacturers, wholesalers, specialists and customers.

c. Grouping tasks into jobs--Tasks are next grouped into jobs, such as sales personnel, cashiers, inventory personnel, and management.

d. Classifying jobs-Then jobs are arranged by functional, product, geographical or combination classification.

Describe the greatest similarities and differences in the organization structures of small independents, chain retailers, and diversified retailers.

Small independents use uncomplicated arrangements with only two or three levels of personnel, and the owner-manager personally runs the firm and oversees workers. There are few employees, little specialization and no branch units. Many tasks are performed relative to the number of workers.

Chain retailers mostly use a version of the equal store organization. Unlike in small independents, there are many functional divisions, such as sales promotion, merchandise management, distribution, operations, personnel and information systems. But the overall authority is centralized. Store managers have selling responsibility. Many operations are standardized. An elaborate control system keeps management informed.

A diversified retailer is a multiple firm operating under central ownership .Like other chains, a diversified retailer operates multiple stores; unlike typical chains, a diversified firm is involved with different types of retail operations. Interpersonal control is needed with operating procedures and goals clearly communicated. Resources must be divided among different divisions.

Present a plan for the ongoing training of both existing lower-level and middle-management employees without making it seem punitive.

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In order to provide training to both existing lower-level and middle level management employees without making it seem punitive, firstly they should be thanked through speech and personally if possible before the start of the training and tell them that they all are equally responsible to bring the organization to the current position. Next they will be empowered i.e. self responsibility for the job will be given to all the employees so that they feel that they are the part of the organization. And lastly, they will be provided training showing that they are lacking these sort of skills during there empowerment and this will make them feel good and make them think that they are being noticed and cared by the organization.

How would you supervise and motivate a 19-year-old super-market cashier? A 65-year-old cashier?

19 years old: The best way of motivating the young people is increasing work responsibility, job

rotation, job enlargement etc. At this age they want to do everything they can and want to try

anything. But we should supervise them and suggest them every time. Other aspect can be giving

them holiday package.

65 years old: The best way of motivating old people in the organization is that giving more

decision making power, empowerment in the job they do and have authority in the resources that

they use. Other aspect can be having great respect to elderly employee in the organization. And

finally increasing their salary and giving them pension fun to them.

Chapter 14: Developing Merchandise

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Q. What are the advantages and disadvantages of a centralized buying organization?

Answer:

Advantages of a centralized buying

organization

Disadvantages of a centralized

buying organization

There is integration of effort Inflexibility

Strict control on the merchandise Time delays

Consistent image Poor morale at local stores

Proximity to the top management Excessive uniformity

Staff support

Volume discounts

Q. Under what circumstances could a retailer carry a wide range of merchandise quality

without hurting its image? When should the quality of merchandise carried be quite

narrow?

Answer:

The merchandise that wants to keep wide range of merchandise quality without hurting its image, when it wants to make the customers more satisfaction and provide them full range of choice in the product.

The merchandise that wants to keep narrow will focus on the special product and specific one only, for which they want to have a specialist image in the customers and make differentiate with the competitors.

Q. What are the trades-offs in a retailer’s deciding how much to emphasize private brands

rather than manufacturer brands?

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Answer:

The trade-offs in a retailer’s decision to emphasize private brands rather than manufacturer

brands could be:

• Line up suppliers

• Arrange for distribution and warehousing

• Arrange sponsors and ads

• Create displays

• Absorb losses from unsold items.

Q. What is the basic premise of category management? Why do you think that

supermarkets have been at the forefront of the movement to use category management?

Answer:

The basic premise of category management is that a retailer must empower specific personnel to

be responsible for the financial performance of each product category.

Category is keeping same type of goods or product in a space where the customer can easily get

all the goods or product they wants. Supermarket is forefront to keep its product in category

because there are hundreds and thousands goods that need to be kept in selves so it will be easy

for the supermarket to keep its product and it will be easy for customers to get its products.

CHAPTER 15: IMPLEMENTING MERCHANDISE PLANS

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Cite the advantages and disadvantages associated with these merchandise sources for your regular supermarket. How would your answer differ for a local deli?

a. Company-ownedb. Outside, regularly used

Outside, new

a. Company-owned:

Advantages:

Low merchandise costs and can make more profit High quality of supplies

Disadvantages:

Cannot acclaim insurance as they have to bear the loss themselves Takes time to build good image in the public

b. Outside, regularly used

Advantages:

Can have merchandise on credit Can acclaim insurance if any losses occur

Disadvantages:

Is little costly than owning self They may demand higher price due to their bargaining power

c. Outside, new

Advantages:

Can provide merchandise in lower prices to attract retailers Retailers have bargaining power on them

Disadvantages:

Takes time to build good image in the public Quality of the merchandise may or may not be good

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Under what circumstances should a retailer try to charge slotting allowances? How may this strategy backfire?

A one-time payment by a manufacturer or vendor to a retailer in order to ensure shelf space in the retailer's stores or in its warehouses. A retailer should try to charge slotting allowances when the product is completely new to the market or for new higher priced product that are risky for the retailer to carry.

For retailers they complain that if they do not charge up front as a means of self insurance, they end up holding the bag-losing money on products their customers don’t want when they could have stocked the same space with something else their customer does want. This is why the strategy may backfire.

What are the benefits of quick response inventory planning? What do you think are the risks?

The benefits of quick response inventory planning are:

1. It reduces inventory cost since it minimizes the space required for storage (retailers).2. Suppliers/Manufacturers can gain an insight into the sales of the product. It will

benefit the supplier/manufacturer by increasing or reducing the amount of product being produced and subsequently the product returns/obsolescence.

The risk can be

1. If there is no good relationship with supplier or shipments then the inventory may not be refilled on time

2. There might be strike or some other factor that may delay the fulfillment of the store3. Sometimes damaged pieces might be put on sale without knowing that there is

damage4. Sometimes mistakes may happen in advanced ship notices.

Present a seven item checklist for a retailer to use with its reverse logistics.

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Under what conditions are customer returns accepted by the retailer and by the manufacturer?

What is the customer refund policy? Is there a fee for returning an opened package? What party is responsible for shipping a returned product to the manufacturer? What customer documentation is needed to prove the date of purchase and the price paid? How are customer repairs handled? To what extent are employees empowered to process customer returns?

CHAPTER 16: FINANCIAL MERCHANDISE MANAGEMENT

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Which retailers can best use perpetual inventory system based on the cost method? Explain your answer.

For my opinion the retailers who have higher assortments of goods and high turnover of the inventory and with low average prices can best use perpetual inventory system. The retailers having departmental stores or the retailers that sell food items, clothing, furniture, etc will be more benefitted by using perpetual inventory system. As they have to sell a lot of varieties of products and this might confuse them or make some mistakes in calculation of sales or cost. So to prevent it if they use perpetual inventory system i.e. book keeping, then it would be easier for them to calculate their sales and their bearing costs. Also this will help them out to find out the stock shortages due to breakage or theft from customers or the employees so that they could be aware and implement some technologies to stop stock shortages. And also they don’t need to spend their valuable time on counting their stocks to find out the number of sales they made as it will be already recorded on their record.

Hence, perpetual inventory system would be beneficial to the retailers that have high assortments of goods and high inventory turnover.

The FIFO method seems more logical than the LIFO methods, because it assumes the first merchandise purchased is the first merchandise sold. So, why do more retailers use LIFO?

LIFO accounting assumes that the last unit entering inventory is the first unit sold or used. Conversely, FIFO assumes that the first item entering inventory is the first unit sold or used. LIFO method tends to be more common in industries where inventories are large and cost tends to increase each year. Because LIFO generally results in higher cost of goods sold and therefore lowers taxes.

A retailer has a beginning monthly inventory valued at $60,000 at retail and $35,000 at cost. Net purchases during the month are $140,000 at retail and $70,000 at cost. Transportation charges are $7,000. Sales are at $150,000. Markdowns and discounts equal $20,000. A physical inventory at the end of the month shows merchandise valued at $10,000 (at retail) on hand. Compute the following:

a. Total merchandise available for sale – at cost and at retailb. Cost complementc. Ending retail book value of inventoryd. Stock shortagese. Adjusted ending retail book valuef. Gross profit

Given,

Beginning monthly inventory (at retail) = $600000

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Beginning monthly inventory (at cost) = $35000

Net purchase during the month (at retail) = $140000

Net purchase during the month (at cost) = $70000

Transportation charges = $7000

Sales = $150000

Markdowns and discounts = $20000

Physical inventory at the end of the month (at retail) = $10000

A. Total merchandise available for sale:

At cost At retailBeginning inventoryNet purchasesAdditional markupsTransportation charges

$3500070000

-7000

$60000140000

--

Total merchandise available for sale

$112000 $200000

B. Cost compliment: Cost compliment = Total cost valuation / Total retail valuation = 112000/ 200000 = 0.56 or 56%

C. Ending retail book value of inventory:

Merchandise available for sale $200000

Less: Deductions:- Sales 150000 Markdowns and discounts 20000Total deductions 170000

Ending retail book value of inventory $30000

D. Stock shortages:

Ending retail book value of inventory $30000Physical inventory (at retail) 10000

Stock shortages (at retail) $20000

E. Adjusted ending retail book value:

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Adjusted ending retail book value = Physical inventory at retail

= $10000

F. Gross Profit:

Sales $150000 Less: Cost of goods sold Total merchandise available for sale (at cost) 112000 Adjusted ending inventory (at cost) 10000*0.56 Cost of goods sold 106400

Gross Profit $43600

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