RMG 200 Study Guide - Final Guide: Inventory Turnover, Gross Margin, Loyalty Program

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Published on 24 Apr 2016
School
Ryerson University
Department
Retail Management
Course
RMG 200
Professor
Integration : Vertical wholesales and manufactures merchandise Backward: distributing and manufacturing (operating warehouses or designing private
label merchandise) Forward: manufacture undertakes retailing activities Everyday Low Pricing: somewhere between non-sale prices and deep discount
prices Multi attribute Model: Notion that a customer seems a retailer as a combination of difference characteristics Consideration Set: The goal of retailer
promotion is getting into the customer’s consideration set set of alternatives that the customer evaluates when making a merchandising selection
Market Segmentation: Retail market segment – group of customers who have the same needs that will be satisfied at the same store Actionability – the
definition of a market segment must clearly indicate what the retailer should do to satisfy its needs
Identifiability – the retailer can determine the market segment’s size Accessbility - customers can easily get into/out of a shopping center & the retailers
are able to deliver the appropriate retail mix to that segment Size – target segment must be large enough to support a unique retailing mix Geographic -
marketing by where customers live Demographic – age, sex. Income, education Geodemographic – based on both Lifestyle – How the consumer lives,
how they spend time/money, what their attitudes and opinions are about the world Composite – using multiple variables fashion category of
merchandise that typically lasts several seasons (sales vary dramatically) Buzz vs hype – buzz is genuine;y excited word of mouth, whereas hype is
artificially generated word of mouth manufactured by PR people Spread compatibility – degree to which a fashion is consistent with current values and
norms complexity – how easy it is to understand and implement in one’s life Trialability costs and commitment required to initially adopt the fashion
observability – degree to which a fashion is visible and easily communicated to other groups
Retail Mix nature of merchandise offered, pricing policy, advertising amd promotion, store design, typical location) Retail Format: NMicro-environment –
all the things in the retailer’s control, such as the products sold, thep rice, the location and promotion and imagery Macro-environment - external
environment in which the retailer operates. Includes competition, economic stability, technology, trends. SWOT Analysis – Strengths, weaknesses,
opportunities, and threats; designed to assess the micro and macro environment Positioning – the retailer’s actions in the retail mix that constructs their
perception in the customer’s mind Opportunity: Market penetration opportunity – increase sales and present customers using present retailing format
Market expansion opportunity – existing retail format in new parket segments retail format development opportunity - new retail format is offered
to the same target market diversification opportunity – new retail format to new market segment not presently being served related diversification
opportunity – retailer’s present offering and market share something in common with the market and format being considered Unrelated Opportunity –
diversification with no commonality between the present business and the new business Strategic retail plan: defines retailers select target market,
segments, determines the appropriate retail format, and build competitive advantages - - Mission statement description of the scope of activities a
retailers intends to partake in Situation audit – analysis of the opportunites and threats in the retail environment + strengths/weaknesses of retail
business relative to competitors Competitive Factors: Barrier entries - conditions in a retail market that make it difficult for firms to enter the market
Scale economies – cost advantages due to the size of a retailer Bargaining power of vendors – when a select few vendors control the merchandise
production in a market; allows them to control prices and terms competitive rivalry – frequency and intensity of reactions to actions undertaken by
competitors Entry Strategies: Direct Investment – investment/ownership by a retail firm or a division or sibusidiary that builds and operates stores in a
foreign country Joint Venture – an entering retailer joining resources with an existing one to form a new company Strategic alliance – collaborative
relationship between independent firms Global Stragegy – Replicating a retailer’s standard retail format and centralized management throughout the
world in each new market Multinational strategy – Involves changing a retailer’s products and image to reflect the international marketplace Trade Area
a geographic sector that contains potential customers Competition: Saturated trade area – offers customers a good selection of goods and services,
while allowing competing retailers to make good profits Understored trade areas – too few stores selling a specific good or service Overstored trade
area – area having too many stores selling a specific good or service Shopping Behaviour Convenience shopping – consumers minimize effort, are
insensitive to price; should locate stores close to where customers park Types of Locations: shopping center – group of retail and other commercial
establishments Strip center – a shopping center that usually has parking directly in front of stores Malls – shopping center with a pedestrian focus
Traditional strip center – designed to provide convenience shopping for day-to-day needs in immediate neighborhood Power Centers – dominated by
several large anchors There are others types of centers, but they’re as their names imply – Gentrification – process by which old buildings are torn
down/renovated to make way for new offices, housing developments, and retailers Site Attractiveness Traffic Flow (macro) – road patterns, (highways,
side roads) road conditions (stoplights, traffic), natural barriers (river), artificial barriers (railroad tracks, parks) Traffic Flow (micro) – Visibility,
amount/quality of parking facilities, congestion, ingress/engress (entering/exiting parking lot of retail site), cumulative attraction Trade Area: Primary
Area – 60% of customers Secondary Zone – 20% of store sales Tertiary Zone – Outermost ring of trade area, for those who only occasionally shop at
store Symbiotic Store – a store that doesn’t generate its own traffic and instead relies on the dominant retailer in its retail area/mall Store Design: Grid –
typically used by grocery stores, where merchandise is displayed on gondolas in repetitive patterns Racetrack – provides a major aisle to facilitate
customer traffic (loop) free-form layout – used primarily in small specialty storesor within the boutiques of large stores; arranges fixtures and aisles
asymmetrically point of sale area – Customer waits to checkout; most valuable area, since the customer is “held captive” there Planogram: diagram
created through various means that illustrates exactly where every SKU should be placed Types of products: impulse products: purchased by customer
without prior plans; located near front of store to draw customers demand/destination: area of store where demand is created before customers get to
their in-store destination Price lining – when retailers offer a limited number of predetermined price points within a classification Visual Merchandising
vertical merchandising – method whereby merchandise is organized to follow the eye’s natural movements up and down tonnage merchandising –
display technique in which large quantities of merchandise are displayed together frontal presentation – method of displaying merchandise in which
retailer exposes as much product as possible popping the merchandise – focusing lighting on special feature areas/merch Color – warm colors are
thought to attract customers Pricing Value – what a customer gets versus what they pay for (perceived benefits versus price: the ration of one to the other
determines success) cost-oriented method – determining retail price by adding a fixed percentage to the cost of merchandise (cost-plus pricing) markup
increase in retail price of an item after the initial markup percentage has been applied but before the item is placed on the selling floor initial markup –
retail selling price initially on the merchandise less the cost of goods sold maintained markup – amount of markup the retailer wishes to maintain on a
particular category of merchandise; no sales minus cost of goods sold reduction markdown discount to employees and customers keystone method –
retailers double cost of merchandise to obtain original selling price demand oriented method – based on what customers would expect or are willing to
pay (should be used in conjunction with the cost-oriented method) competition oriented method – retailers use competitors prices, rather than demand
or cost considerations price bundling – offering two or more different products for the one price multiple unit pricing – offering two or more similar
products at one price Variable pricing charging different prices in different stores zone pricing – chaging different prices for the same merchandise in
different locations based on competition in local markets item price practice of indicating price only on shelves/walls, not on products Finances EDLP
Strategy – conditioning customers to expect a fair and relatively low price enables retailers to charge slightly higher prices on some individual items
breakeven analysis – technique that evaluates the relationship between total revenue and total cost contribution margin – gross margin less any
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