RETAIL MANAGEMENT FINAL EXAM
QUESTIONS & VERIFIED CORRECT
PASSED ANSWERS
Merchandise Management - Correct Answer ✔✔ The analysis, planning, acquisition,
handling, and control of the merchandise investments in a retail operation.
Can be performed by a retail worker, salesperson, etc.
Most entry-level marketing positions involve some form of contact with _____________
Planogram - Correct Answer ✔✔ A schematic that illustrates how and where a retailer's
merchandise should be displayed on the shelf in order to increase customer purchases.
Often maintained with the input of vendors
Gross Margin Return on Inventory (GMROI) - Correct Answer ✔✔ Incorporates into a
single measure the idea of both inventory turnover and profit, and is used because
inventory is the largest investment a retailer makes.
(Gross Margin/Net Sales) x (Net Sales/Average Inventory at Cost) = (Gross
Margin/Average Inventory at Cost)
Gross Margin/Inventory Investment
In most lines of retailing GMROI performance of over 200 percent is expected.
Basic Stock Method (BSM) - Correct Answer ✔✔ A technique for planning dollar
inventory investments and allows for a base stock level plus a variable amount of
inventory that will increase of decrease at the beginning of each sales period in the
same dollar amount as the period's expected sales.
Used when retailers believe that it is necessary to have a stable level of inventory
available at all times.
Works best when a retailer has a low turnover rate or sales are erratic.
Average Stock for the Season = Total Planned Sales for the Season/Estimated
Inventory Turnover Rate for the Season
Average Monthly Sales = Total Planned Sales for the
Season/Number of Months in the Season
Basic Stock = Average Stock for the Season - Average Monthly Sales for the Season
,BOM Stock = Planned Monthly Sales + Basic Stock
Percentage Variation Method (PVM) - Correct Answer ✔✔ A technique for planning
dollar inventory investments that assumes that the percentage fluctuations in monthly
stock from average stock should be half as great as the percentage fluctuations in
monthly sales from average sales.
Used when the retailer has a high annual inventory-turnover rate - six or more times a
year.
BOM Stock = Avg. Stock for the Season x
½[1+(Planned Sales for the Month/Average Monthly Sales)]
Week's Supply Method (WSM) - Correct Answer ✔✔ A technique for planning dollar
inventory investments that states that the inventory level should be set equal to a
predetermined number of week's supply, which is directly related to the desired rate of
stock turnover.
Used by retailers such as grocers, whose inventories are planned on a weekly, not
monthly, basis, and where sales do not fluctuate substantially.
Inventory level in dollars varies proportionally with forecast sales.Thus, if forecast sales
triple, the inventory in dollars will also triple.
Stock-to-Sales Method (SSM) - Correct Answer ✔✔ A technique for planning dollar
inventory investments where the amount of inventory planned for the beginning of the
month is a ratio (obtained from trade associations or the retailer's historical records) of
stock-to-sales.
This is the method used in our merchandise budget and is quite easy; however, it
requires the retailer to have a BOM stock-to-sales ratio, which can be gained from:
1. POS data 2. Trade Associations 3. Turnover goals
Divide the number of months in the season by the desired inventory-turnover rate.
Open-to-Buy (OTB) - Correct Answer ✔✔ Represents the dollar amount a buyer can
currently spend on merchandise without exceeding the planned dollar stock.
Calculated as follows:
1. EOM planned retail stock 2. Plus planned sales for the month 3. Plus planned
reductions for the month 4. Minus stock on hand at retail 5. Equals planned purchases
at retail 6. Minus commitments at retail for current deliver
Should be flexible because consumer demand is "King"; however, changing it should
not be a common occurrence.
, Merchandise Line - Correct Answer ✔✔ A group of products that are closely related
because they are intended for the same end use (all televisions); are sold to the same
customer group (junior miss clothing); or fall within a given price range (budget women's
wear).
Category Management - Correct Answer ✔✔ The simultaneous management of price,
shelf-space merchandising strategy, promotional efforts, and other elements of the retail
mix within the merchandise category based on the firm's goals, the changing
environment, and consumer behavior.
Variety - Correct Answer ✔✔ Refers to the number of different merchandise lines that
the retailer stocks in the store.
Breadth - Correct Answer ✔✔ Also known as assortment, refers to the number of
merchandise brands that are found in a merchandise line.
A supermarket will have a wide _______ in the number of different brands it carries
while convenience stores will offer very little _______.
Battle of the Brands - Correct Answer ✔✔ Occurs when retailers have their own
products competing with the manufacturer's products for shelf space and control over
display location.
Depth - Correct Answer ✔✔ The average number of stock-keeping units (SKUs) within
each brand of the merchandise line.
Consignment - Correct Answer ✔✔ Also know as pay from scan, is when the vendor
retains the ownership of the goods and usually establishes the selling price; it is paid
only when goods are sold.
Extra Dating - Correct Answer ✔✔ Allows the retailer extra or interest-free days before
the period of payment begins.
Comp Shopping - Correct Answer ✔✔ When an employee of one retailer goes into
another retailer and check prices on a select few items to see how competitive they are
on a local basis.
Conflicts in Unit Stock Planning - Correct Answer ✔✔ 1. Maintain a strong in-stock
position on genuinely new items, while trying to avoid the 90% of new products that fail.
2. Maintain an adequate stock of the basic popular items, while having enough
inventory money available for unforeseen opportunities.
3. Maintain high merchandise turnover goals, while maintaining high margin goals.
4. Maintain adequate selection for customers, while not confusing them.
QUESTIONS & VERIFIED CORRECT
PASSED ANSWERS
Merchandise Management - Correct Answer ✔✔ The analysis, planning, acquisition,
handling, and control of the merchandise investments in a retail operation.
Can be performed by a retail worker, salesperson, etc.
Most entry-level marketing positions involve some form of contact with _____________
Planogram - Correct Answer ✔✔ A schematic that illustrates how and where a retailer's
merchandise should be displayed on the shelf in order to increase customer purchases.
Often maintained with the input of vendors
Gross Margin Return on Inventory (GMROI) - Correct Answer ✔✔ Incorporates into a
single measure the idea of both inventory turnover and profit, and is used because
inventory is the largest investment a retailer makes.
(Gross Margin/Net Sales) x (Net Sales/Average Inventory at Cost) = (Gross
Margin/Average Inventory at Cost)
Gross Margin/Inventory Investment
In most lines of retailing GMROI performance of over 200 percent is expected.
Basic Stock Method (BSM) - Correct Answer ✔✔ A technique for planning dollar
inventory investments and allows for a base stock level plus a variable amount of
inventory that will increase of decrease at the beginning of each sales period in the
same dollar amount as the period's expected sales.
Used when retailers believe that it is necessary to have a stable level of inventory
available at all times.
Works best when a retailer has a low turnover rate or sales are erratic.
Average Stock for the Season = Total Planned Sales for the Season/Estimated
Inventory Turnover Rate for the Season
Average Monthly Sales = Total Planned Sales for the
Season/Number of Months in the Season
Basic Stock = Average Stock for the Season - Average Monthly Sales for the Season
,BOM Stock = Planned Monthly Sales + Basic Stock
Percentage Variation Method (PVM) - Correct Answer ✔✔ A technique for planning
dollar inventory investments that assumes that the percentage fluctuations in monthly
stock from average stock should be half as great as the percentage fluctuations in
monthly sales from average sales.
Used when the retailer has a high annual inventory-turnover rate - six or more times a
year.
BOM Stock = Avg. Stock for the Season x
½[1+(Planned Sales for the Month/Average Monthly Sales)]
Week's Supply Method (WSM) - Correct Answer ✔✔ A technique for planning dollar
inventory investments that states that the inventory level should be set equal to a
predetermined number of week's supply, which is directly related to the desired rate of
stock turnover.
Used by retailers such as grocers, whose inventories are planned on a weekly, not
monthly, basis, and where sales do not fluctuate substantially.
Inventory level in dollars varies proportionally with forecast sales.Thus, if forecast sales
triple, the inventory in dollars will also triple.
Stock-to-Sales Method (SSM) - Correct Answer ✔✔ A technique for planning dollar
inventory investments where the amount of inventory planned for the beginning of the
month is a ratio (obtained from trade associations or the retailer's historical records) of
stock-to-sales.
This is the method used in our merchandise budget and is quite easy; however, it
requires the retailer to have a BOM stock-to-sales ratio, which can be gained from:
1. POS data 2. Trade Associations 3. Turnover goals
Divide the number of months in the season by the desired inventory-turnover rate.
Open-to-Buy (OTB) - Correct Answer ✔✔ Represents the dollar amount a buyer can
currently spend on merchandise without exceeding the planned dollar stock.
Calculated as follows:
1. EOM planned retail stock 2. Plus planned sales for the month 3. Plus planned
reductions for the month 4. Minus stock on hand at retail 5. Equals planned purchases
at retail 6. Minus commitments at retail for current deliver
Should be flexible because consumer demand is "King"; however, changing it should
not be a common occurrence.
, Merchandise Line - Correct Answer ✔✔ A group of products that are closely related
because they are intended for the same end use (all televisions); are sold to the same
customer group (junior miss clothing); or fall within a given price range (budget women's
wear).
Category Management - Correct Answer ✔✔ The simultaneous management of price,
shelf-space merchandising strategy, promotional efforts, and other elements of the retail
mix within the merchandise category based on the firm's goals, the changing
environment, and consumer behavior.
Variety - Correct Answer ✔✔ Refers to the number of different merchandise lines that
the retailer stocks in the store.
Breadth - Correct Answer ✔✔ Also known as assortment, refers to the number of
merchandise brands that are found in a merchandise line.
A supermarket will have a wide _______ in the number of different brands it carries
while convenience stores will offer very little _______.
Battle of the Brands - Correct Answer ✔✔ Occurs when retailers have their own
products competing with the manufacturer's products for shelf space and control over
display location.
Depth - Correct Answer ✔✔ The average number of stock-keeping units (SKUs) within
each brand of the merchandise line.
Consignment - Correct Answer ✔✔ Also know as pay from scan, is when the vendor
retains the ownership of the goods and usually establishes the selling price; it is paid
only when goods are sold.
Extra Dating - Correct Answer ✔✔ Allows the retailer extra or interest-free days before
the period of payment begins.
Comp Shopping - Correct Answer ✔✔ When an employee of one retailer goes into
another retailer and check prices on a select few items to see how competitive they are
on a local basis.
Conflicts in Unit Stock Planning - Correct Answer ✔✔ 1. Maintain a strong in-stock
position on genuinely new items, while trying to avoid the 90% of new products that fail.
2. Maintain an adequate stock of the basic popular items, while having enough
inventory money available for unforeseen opportunities.
3. Maintain high merchandise turnover goals, while maintaining high margin goals.
4. Maintain adequate selection for customers, while not confusing them.
