Merchandising Management
Exam Answer Key
Course Introduction
Merchandising Management examines the principles and practices involved in planning, buying, and selling products to maximize profitability and meet consumer demand. This course covers the merchandise planning process, inventory control, vendor relations, product assortment, pricing strategies, and the integration of technology in retail environments. Students will develop analytical and decision-making skills necessary to effectively manage product lines, predict trends, and provide value to both retailers and consumers within a rapidly changing marketplace.
Recommended Textbook
Retailing Management 10th Edition by Michael Levy
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17 Chapters
1498 Verified Questions
1498 Flashcards
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Chapter 1: Introduction to the World of Retailing
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Sample Questions
Q1) The development of information systems is one of the forces facilitating the growth of large retail firms.
A)True
B)False
Answer: True
Q2) A ________ refers to the market toward which a retailer will direct its efforts.
A) channel member
B) market segment
C) target market
D) mass market
E) warm market
Answer: C
Q3) Hotels, hair salons, and auto repair businesses are considered retailers.
A)True
B)False
Answer: True
Q4) Ethical principles can change over time.
A)True
B)False
Answer: True
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Chapter 2: Types of Retailers
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Sample Questions
Q1) A special type of off-price retailer owned by manufacturers is called a
A) consignment shop.
B) thrift store.
C) dollar store.
D) warehouse club.
E) factory outlet.
Answer: E
Q2) What is franchising? What does a franchisor offer its franchisees to get the franchisees off to a good start?
Answer: Franchising is a contractual agreement in which the franchisor (the company) sells the rights to use its business trademark, service mark, or trade name, or another commercial symbol of the company, to the franchisee for a one-time franchise fee and an ongoing royalty fee, typically expressed as a percentage of gross monthly sales. To get franchisees off to a good start, most franchisors provide off- and onsite training, location analysis assistance, advertising, and sometimes a protected territory (i.e., no other franchise may open a store within a certain radius of the first store). Some franchisors even provide financing or offer third-party financing opportunities.
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Page 4
Chapter 3: Multichannel and Omnichannel Retailing
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Sample Questions
Q1) Direct selling is a retail channel where salespeople interact with customers face-to-face.
A)True
B)False
Answer: True
Q2) Catherine wanted to purchase a digital camera. Hence, she visited an online retailer's website to learn more about the different features and capabilities of the device. Catherine went to a big-box store to make other purchases. She sees the camera there and purchases it. Which of the following terms describes Catherine's actions?
A) Channel migration
B) Channel expansion
C) E-tailing
D) Phishing
E) Automated retailing
Answer: A
Q3) The majority of retail transactions take place online.
A)True
B)False Answer: False
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Chapter 4: Customer Buying Behavior
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Sample Questions
Q1) Which of the following steps follows the recognition of a need?
A) Evaluation of alternatives
B) Information search
C) Composite segmentation
D) Postpurchase evaluation
E) Evaluation of consideration sets
Q2) While eating may satisfy a functional need, Lucia's Italian Restaurant features gurgling fountains, live music, Baroque paintings, and lush gardens to stroll while you wait. Which of the following needs is also satisfied while eating at Lucia's?
A) Physiological needs
B) Rational needs
C) Hedonic needs
D) Social needs
E) Motivational needs
Q3) Identify and describe the three types of consumer decision-making processes.
Q4) When consumers go shopping for pleasure, they are seeking to satisfy their hedonic needs.
A)True
B)False
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Chapter 5: Retail Market Strategy
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Sample Questions
Q1) Ashton, a chain of supermarkets, intends to change its pricing policy and promotional mix but intends on catering to the same market segment. Which of the following growth strategies will best suit Ashton LLC?
A) Market penetration growth opportunity
B) Market expansion growth opportunity
C) Retail format growth opportunity
D) Diversification growth opportunity
E) Wholesale format growth opportunity
Q2) Which of the following steps is typically the last step in the strategic retail planning process?
A) Develop a retail mix to implement strategy.
B) Establish specific objectives and allocate resources.
C) Evaluate performance and make adjustments.
D) Identify strategic opportunities.
E) Define the business mission.
Q3) Customer relationship management programs collect data about customer shopping behavior to enable retailers to build and maintain customer loyalty.
A)True
B)False
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Page 7
Chapter 6: Financial Strategy
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Sample Questions
Q1) Melanie's Bead Shoppe has total assets of $45,000, accounts receivable of $2,000, accounts payable of $3,100, and inventory valued at $20,000. Last year, her net sales were $29,000, and her operating profit margin equaled $14,000. What is her return on assets?
A) 31.1 percent
B) 12.5 percent
C) 7.0 percent
D) 22.0 percent
E) 48.3 percent
Q2) Calculate the return on assets for a gun shop that has total assets of $410,000, current assets of $74,000, total liabilities of $280,000, accounts receivable of $12,000, net sales of $64,000, and operating profit margin of $30,000.
A) 18.3 percent
B) 8.2 percent
C) 7.3 percent
D) 25.0 percent
E) 26.5 percent
Q3) Identify and describe the two paths of activities that determine return on assets (ROA).
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Page 8
Chapter 7: Retail Locations
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Sample Questions
Q1) What are the advantages and disadvantages of strip shopping centers?
Q2) The retail tenants in Underground Atlanta are similar to those found in specialty centers, except that they are all small. Their goal is to create a unique shopping environment for customers. What type of shopping center is Underground Atlanta?
A) Power shopping center
B) Regional mall
C) Strip center
D) Theme/festival center
E) Central-business district
Q3) Many companies are capitalizing on people being at the airports longer and not being able to carry many personal health and beauty aids. A vending machine selling cosmetics and perfume at an airport is a
A) kiosk.
B) parasite store.
C) store-within-a-store.
D) timed leased agreement store.
E) pop-up shop.
Q4) What are the advantages and disadvantages of choosing a freestanding site for your retail store?
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Chapter 8: Retail Site Location
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Sample Questions
Q1) A food court in a mall is an example of a(n)
A) multiple risk.
B) analog approach.
C) cumulative attraction.
D) consumer spotting.
E) diminishing adjacent.
Q2) Which of the following statements is not True when considering and evaluating store locations?
A) The best areas for locating stores are those that generate the highest return on investment in the short term.
B) It is important to examine an area's level and growth of population and employment and how long such growth will continue and how it will affect demand for merchandise sold in its stores.
C) It is important to have the strategic fit of the areas' population with the retailer's target market.
D) It is important to consider local and state legal and regulatory environments affecting operating costs.
Q3) What are the characteristics of a site that affect store sales and thus are considered in selecting a site?
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Page 10
Chapter 9: Information Systems and Supply Chain Management
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Sample Questions
Q1) Which of the following is not a way to reduce the level of inventory in the supply chain and the number of stockouts in the stores?
A) Using EDI
B) Sharing information
C) Using reverse logistics
D) Using vendor-managed inventory (VMI)
E) Employing collaborative planning, forecasting, and replenishment (CPRF)
Q2) Cross-docking is when vendors ship merchandise prepackaged in the quantity required for each store; when the products arrive to the distribution center, the products move to the staging area to be shipped to the designated stores.
A)True
B)False
Q3) What is an advantage of using RFID over traditional bar codes?
A) RFID eliminates the bullwhip effect.
B) RFID technology is expensive.
C) RFID holds more data stored on the device.
D) RFID makes tagging and pricing at DCs unnecessary.
E) RFID is environmentally friendly.
Q4) What are the activities that take place at a distribution center?
Page 11
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Chapter 10: Customer Relationship Management
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Sample Questions
Q1) ________ refers to the percentage of the customers' purchases made from the retailer.
A) 80-20 rule
B) Share of wallet
C) Customer lifetime value
D) Profit sharing
E) 1-to-1 retailing
Q2) CRM programs directed toward customers in the high-value segment
A) offer more discounts.
B) are focused on maintaining loyalty.
C) give more importance to frequent-shopper programs.
D) attempt to discourage 20 percent of shoppers.
E) provide online shopping options without processing charges.
Q3) Customer loyalty is limited to ensuring satisfaction by offering a wide assortment of products.
A)True
B)False
Q4) A data warehouse normally contains information on customer preferences.
A)True
B)False
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Chapter 11: Managing the Merchandise Planning Process
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Sample Questions
Q1) The retailer's information system determines the ________ by comparing the sales made through the POS terminals with the shipments received by the store.
A) perpetual inventory
B) order point
C) buffer stock
D) cycle stock
E) fill rate
Q2) The highest classification level in a buying organization is the
A) order point.
B) buying group.
C) stock-keeping unit.
D) merchandise group.
E) department.
Q3) How can having a high backup stock adversely affect a retailer?
Q4) Assortment, or depth, of a merchandise category is the number of different merchandising subcategories offered.
A)True
B)False
Q5) What are the factors that determine the level of required backup stock?
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Chapter 12: Buying Merchandise
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Sample Questions
Q1) Why do national brands often generate lower gross margins for retailers than private-label brands?
Q2) A(n) ________ developed by a retailer is comparable with national brands on quality rather than price.
A) premium brand
B) copycat brand
C) umbrella brand
D) exclusive brand
E) subbrand
Q3) Copycat brands imitate the manufacturer's brand in appearance and packing, generally are perceived as lower quality, and are offered at lower prices.
A)True
B)False
Q4) National brands
A) offer no alternatives for getting rid of excess inventory.
B) offer a higher profitability potential than store brands.
C) can limit a retailer's flexibility.
D) are specific to a retailer.
E) pose a risk in the form of uncertain sales.
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Chapter 13: Retail Pricing
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Sample Questions
Q1) Which of the following statements describes a situation in which markdowns would not be appropriate?
A) Markdowns would be appropriate on a pair of pillows that had been part of a display and were showing light wear.
B) Markdowns would be an appropriate pricing strategy for winter parkas that are still in stock in March.
C) Markdowns would be appropriate for licensed merchandise supporting a movie that was not as popular as predicted.
D) Markdowns would be appropriate for national brand merchandise that was priced 15 percent lower in a neighboring competing store.
E) Markdowns would be appropriate for a group of T-shirts that have a higher turnover than other T-shirts in the department.
Q2) Price elasticity is the percentage change in quantity sold divided by the percentage change in price.
A)True
B)False
Q3) Describe geofencing.
Q4) How can working with vendors reduce the number of markdowns?
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Chapter 14: Retail Communication Mix
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Sample Questions
Q1) Why is it problematic for retailers to spend about the same on communication programs for each geographic region?
Q2) A(n) ________ is a promotional program undertaken by a vendor and a retailer working together.
A) cooperative program
B) customer relationship management program
C) employee feedback management program
D) employee assistance program
E) work-life balance program
Q3) Which of the following forms of communication is the most expensive?
A) Publicity
B) Salespeople
C) Advertising
D) Magazine
E) Newspaper
Q4) When retailers and vendors use product placement, they pay to have their product included in nontraditional situations, such as in a scene in a movie or television program.
A)True
B)False
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Chapter 15: Human Resources and Managing the Store
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Sample Questions
Q1) Tiana works for a national retailer planning what merchandise will be sent to the different geographical areas of the country and manages the budget of the department. What position in the organizational structure of a retailing firm does Tiana have?
A) Merchandise planner
B) Divisional merchandise manager
C) Store manager
D) Buyer
E) Department manager
Q2) After screening applicants, the selection process typically involves a(n)
A) IQ test.
B) EQ test.
C) training module.
D) orientation module.
E) personal interview.
Q3) What are the approaches a retailer can consider when working to reduce employee theft?
Q4) What is the difference between structured program training and on-the-job training?
Q5) Define organization structure.
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Chapter 16: Store Layout, Design, and Visual Merchandising
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Sample Questions
Q1) William is always looking for a bargain and frequently visits the meat department to see the markdowns for meat dated to be sold that day. He finds a signage stating a half-price sale. This signage is an example of a
A) promotional signage.
B) category signage.
C) locational signage.
D) point-of-sale signage.
E) lifestyle signage.
Q2) In which of the following stores would you be most likely to encounter a straight rack?
A) Fresh Ones, a florist
B) Ted's department store
C) Dream Toys
D) Dailies supermarkets
E) Jenny's Hair Salon
Q3) Explain the concept of vertical merchandising.
Q4) The primary objective of a store design is in implementing the retailer's strategy.
A)True
B)False
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Chapter 17: Customer Service
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Sample Questions
Q1) Autumn calls the most reputable plumber in the community to repair the faucet in her kitchen. She pays the plumber for his work. However, the next day, Autumn sees the faucet leaking again and is stunned to see the repair was done with a strip of duct tape. This reaction from Autumn can be attributed to a(n)
A) faulty service agreement.
B) procedural fairness.
C) services cape.
D) service gap.
E) motivational guide.
Q2) The steps in effective service recovery are listening to the customer, providing a fair solution, and resolving the problem quickly.
A)True
B)False
Q3) How do all employees of a retail firm and the elements of a retail mix contribute to services that increase the value of the merchandise to customers?
Q4) Define communications gap. What can be done by a retailer to reduce this gap?
Q5) How can retailers reduce the knowledge gap?
Q6) What is the difference between personalized services and standardized services?
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