Term
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Definition
Return on assets
the profit return on all assets possesed by the firm |
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Term
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Definition
| a method for summarizing the factors that affect a firm's financial performance, as measured by ROA |
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Term
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Definition
| reflects the profits generated from each dollar of sales |
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Term
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Definition
| assesses the productivity of a firm’s investment in its assets |
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Term
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Definition
(after taxes) is the gross margin minus operating expenses, net interest, and taxes
=Gross margin- Operating expenses- Net interest- Taxes |
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Term
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Definition
| primarily the monies owed to the retailer because it has sold merchandise on credit to customers |
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Term
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Definition
| = Gross Sales + Promotional Allowances - Return |
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Term
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Definition
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Term
| Gross Margin (Gross Profit) |
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Definition
| profit made on merchandise sales without considering the operating expenses and corporate overhead expenses. |
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Term
| Maintaining/Increasing Margins |
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Definition
■Pay a Lower Price to Vendor
■Charge Customers a Higher Price
■Reduce Price Competition
■Reduce Retailer Costs -- Direct Product Profitability (DPP), Activity Based Costing |
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Term
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Definition
| Sales staff salaries + Commissions + Benefits |
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Term
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Definition
Rent + Utilities + Miscellaneous
expenses |
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Term
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Definition
Salaries of all employees other than
salespeople + Operations of buying
offices + Other administrative expenses |
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Term
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Definition
■Before interest expenses/income, taxes, and extraordinary expenses
■A commonly used overall profit measure due to the lack of control over taxes, interest, and extraordinary expenses
■Allows for a comparison of financial performance across companies or divisions within companies |
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Term
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Definition
Asset Turnover = Sales/Total Assets |
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Term
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Definition
Inventory Turnover = COGS/Avg. Inventory (cost) |
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Term
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Definition
■A Measure of the Productivity of Inventory:
nIt is used to evaluate how effectively retailers utilize their investment in inventory
■Shows how many times, on average, inventory cycles through the store during a specific period of time (usually a year) |
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Term
■Inventory turnover rate differs by |
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Definition
nIndustry
nProduct categories |
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Term
■Most retailers that are having problems achieving adequate profits have a poor _______ |
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Definition
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Term
How do retailers increase Inventory Turnover? |
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Definition
nIncrease Sales
nDecrease Inventory
•Decrease delivery lead-time
•Drive waist out |
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Term
Return on Assets is a very important performance measure because it shows how much money the retailer is _____ |
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Definition
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Term
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Definition
goals get set at the top of the organization and are passed down to the lower operating levles
- involves corporate officers developing an overall retail strategy and assessing broad economic, competitive, and consumer trends
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Term
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Definition
involves lower levels in the company developing performance objectives that are aggregated up to develoop overall company objectives
- buyers and store managers estimate what they can achieve, and their estimates are transmitted up the organization to the corporate executives
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Term
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Definition
| assess the amount of resources or money used by the retailer to achieve outputs such as sales |
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Term
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Definition
| asses the results of a retailer’s investment decisions |
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Term
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Definition
| determines how effectively retailers use their resource – what return (e.g., profits) they get on their investments (e.g., expenses) |
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Term
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Definition
■Sales
■Profits
■Cash flow
■Growth in sales, profits
■Same store sales growth |
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Term
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Definition
■Inventory ($)
■Real Estate (sq. ft.)
■Employees (#)
■Overhead (Corporate Staff and Expenses)
■Advertising
■Energy Costs
■MIS expenses |
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Term
| Why is Store Location Important for a Retailer? |
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Definition
■Location is typically prime consideration in customer’s store choice.
■Location decisions have strategic importance because they can help to develop sustainable competitive advantage.
■Location decisions are risky: invest or lease? |
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Term
| Examples of Unplanned Retail Locations |
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Definition
- Freestanding locations
- Kiosks
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Term
| Central Business District (CBD) Advantages |
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Definition
■Draws people into areas during business hours
■Hub for public transportation
■Pedestrian traffic
■Residents |
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Term
| Central Business District (CBD) Disadvantages |
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Definition
■High security required
■Shoplifting
■Parking is poor
■Evenings and weekends are slow |
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Term
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Definition
Shopping centers that consist primarily of collections of big-box retail stores such as discount stores (Target), off-price stores (Marshall’s), warehouse clubs (Costco), and category specialists (Lowe’s, Best Buy, Dick’s)
■Open air set up
■Free-standing anchors
■Limited small specialty stores
■Many located near enclosed malls
■Low occupancy costs
■Convenient
■Modest vehicular and pedestrian traffic
■Convenient
■Modest vehicular and pedestrian traffic
■Large trade areas |
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Term
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Definition
■Located in places of historic interests or for tourists
■Anchored by restaurants and entertainment facilities |
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Term
Larger, Multi-format Developments:
Omni-centers |
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Definition
■Combines enclosed malls, lifestyle center, and power centers
■Larger developments are targeted
nto generate more pedestrian traffic and longer shopping trips
nTo capture cross-shopping consumers |
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Term
| Mixed Use Developments (MXDs) |
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Definition
■Combine several different uses into one complex, including shopping centers, office tours, hotels, residential complexes, civic centers, and convention centers.
■Offer an all-inclusive environment so that consumers can work, live, and play in a proximal area |
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Term
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Definition
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Term
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Definition
| Central Business District, Regional malls |
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Term
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Definition
| Power Centers, Free Standing |
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Term
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Definition
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Term
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Definition
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Term
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Definition
Customers have a good idea of what type of product they want, but don’t have a strong preference for brand, model or retailer.
Typical for furniture, appliances, apparel, consumer electronics, hand tools and cameras. |
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Term
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Definition
Offer the benefits of comparison shopping
Consumers can see almost all brands and models in one store
Destination stores |
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Term
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Definition
Stipulate in the lease that the lessor is responsible for removal and disposal of this material if it’s found.
Retailer can buy insurance that specifically protects it from these risks. |
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Term
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Definition
such as asbestos-containing
materials or lead pipes used in construction. |
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Term
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Definition
e.g. dry cleaning chemicals,
motor oil, that have been stored in the ground. |
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Term
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Definition
open stores as long as profits increase
■Cannibalization diminishes returns from locating too many stores in an area |
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Term
| Franchisers are not concerned about.. |
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Definition
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Term
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Definition
nto maximize the sales and profits of its store(s)
nConcern about cannibalization |
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Term
| When evaluating and selecting a specific site, retailers consider |
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Definition
•The characteristic of the site
•The characteristic of the trading area
•The estimated potential sales that can be generated |
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Term
| What Should Retailers Consider regarding Parking? |
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Definition
Observe shopping center at various times
Employee parking availability
Shoppers that use cars
Parking by non-shoppers
Typical length of a shopping trip |
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Term
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Definition
| states that a cluster of similar and complementary retailing activities will generally have greater drawing power than isolated stores that engage in the same retailing activities |
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Term
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Definition
nRent
nCommon Area Maintenance Fee/Insurance
nAdvertising Fee |
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Term
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Definition
■A contiguous geographic area that accounts for the majority of a store’s sales and customers |
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Term
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Definition
| geographic area from which the shopping center or store site derives 50-70% of its customers |
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Term
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Definition
| geographic area of secondary importance in terms of customer sales, generating about 20-30% of the site's customers |
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Term
| Tertiary Trading or Fringe |
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Definition
| (the outermost area) includes the remaining customers who shop at the site but come from widely dispersed areas |
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Term
Factors Affecting the Size of the Trade Area |
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Definition
■Accessibility
■Natural & Physical Barriers
■Type of Shopping Area
■Type of Store
■The nature of merchandise, assortment, location of alternative sources for the merchandise
■Competition
■Parasite Stores |
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Term
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Definition
■Customer Spotting
■Use Census Data (census bock)
■Geodemographic Information Systems |
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Term
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Definition
| the process of locating the residences of customers for a store on a map and displaying their positions relative to the store location |
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Term
| How to obtain customer spotting data |
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Definition
•credit card or checks
• customer loyalty programs
• manually as part of the checkout process
• automobile license plates |
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Term
| Geographic Information System (GIS) |
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Definition
| a system of hardware and software used to store, retrieve, map and analyze geographic data along with the operating personnel and the data that goes into the system. |
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Term
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Definition
they are linked to a coordinate system that references a particular place on Earth
data includes spatial features such as rivers and roads |
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Term
■Market Potential Index (MPI) |
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Definition
nNumber of Households Purchasing a Product or Service in a Trade Area |
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Term
■Spending Potential Index (SPI) |
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Definition
nAverage Amount Spent on a Product or Service by a Household in a Trade Area |
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Term
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Definition
Based on the premise that the probability which a given customer will shop in a particular store
or shopping center becomes larger as the size
of store or center grows and distance or
travel time from customer shrinks |
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Term
| Multiple Regression Analysis |
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Definition
| Factors affecting the sales of existing stores in a chain will have the same impact upon the stores located at new sites being considered. |
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Term
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Definition
| retailer describes the site and trade area characteristics for its most successful stores and attempts to find a similar site. |
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Term
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Definition
■Do a competitve analysis
■Define present trade area
■Analyze trade area characteristics
■Match characteristics of present area with potential sites |
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Term
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Definition
| lease based on a % of sales |
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Term
| Percentage lease with specified maximum |
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Definition
■percentage of sales up to a maximum amount.
■Rewards retailer performance by allowing retailer to hold rent constant above a certain level of sales |
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Term
| Percentage lease with specified minimum |
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Definition
| retailer must pay a minimum rent no matter how low sales are. |
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Term
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Definition
| percentage of sales as rent decreases as sales go up. |
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Term
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Definition
used by community and neighborhood centers.
-Retailer pays a fixed amount per month over the life of the lease.
-Not as popular as percentage leases |
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Term
|
Definition
a variation of the fixed rate lease
-Rent increases by a fixed amount over a specified period of time. |
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Term
|
Definition
nLimits the landlord from leasing to certain tenants.
nSome tenants take up parking spaces and don’t bring in shoppers: bowling alley, skating rink, meeting hall, dentist, or real estate office
nSome tenants could harm the shopping center’s wholesome image: bars, pool halls, game parlors, off-track betting establishments, massage parlors and pornography retailers |
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Term
|
Definition
Prohibits the landlord from leasing to retailers selling competing merchandise
nSpecify no outparcels
nSpecify if certain retailer leaves center, they can
n terminate lease |
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Term
|
Definition
Allows the retailer to terminate its lease if sales don’t
reach a certain level after a specified number of years, or if a specific co-tenant in the center terminates its lease |
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Term
Why does human resource management give a sustainable competitive advantage? |
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Definition
■Labor costs account for a significant percentage of a retailer’s total expenses
■The customer experiences are determined by the activities of employees (selecting merchandise, providing information and assistance, etc.)
■These potential advantages are difficult for competitors to duplicate |
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Term
| Short-Term Objective of Human Resource Management |
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Definition
nIncreasing Employee Productivity
nProductivity = Sales/ Number of Employees |
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Term
| Long-Term Objective of Human Resource Management |
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Definition
nEmployee attitude à customer satisfaction and loyalty à long-term performance
nIncreasing Employee Satisfaction è Reducing Turnover
nEmployee turnover
= # of employees leaving their job during the year
# of positions |
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Term
Strategic Issues
Facing Retail HR Professionals |
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Definition
■The design of the organization structure for assigning
responsibility, and authority for tasks to people and business units
■The approaches utilized coordinate the activities of the firm’s department and employees, while motivating employees to work toward achieving company goals
■The programs used to build employee commitment, and retain valuable human resources |
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Term
Store Management Tasks
Performed in a Retail Firm |
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Definition
■Recruit, hire, and train store personnel
■Plan work schedules
■Evaluate performance of store personnel
■Maintain store facilities
■Locate and display merchandise
■Sell merchandise to customers
■Repair and alter merchandise
■Provide services
■Handle customer complaints
■Take physical inventory
■Prevent inventory shrinkage |
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Term
Administrative Management Tasks
Performed in a Retail Firm |
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Definition
■Promote the firm, its merchandise and its services
■Manage human resources
■Distribute merchandise
■Establish financial control |
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Term
| Assignment of Responsibility for Tasks |
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Definition
■Strategic – Top Management, Board of Directors
■Merchandise Management – Merchandise Division
■Store Management – Stores Division
■Administrative – Corporate Specialists |
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Term
| A buyer is responsible for |
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Definition
■procuring merchandise
■setting prices and markdowns
■managing inventories
■building and maintaining relationships
■attending trade and fashion shows
■negotiating with vendors on price, quantities, assortments, delivery dates and payment terms
■specifying private label merchandise |
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Term
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Definition
nIs responsible for a set of products that are viewed as substitutes by customers (Ex: all pastas – fresh, frozen, packed, or canned)
nIs evaluated on the profitability of category
nIs motivated to eliminate “me to” products and keep essential niche products
nIs used primarily by supermarkets, big box retailers |
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Term
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Definition
| responsible for allocating the merchandise and tailoring the assortments in several categories for specific stores in a geographic area. |
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Term
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Definition
| responsible for the financial planning and analysis of the merchandise category. They develop the budget plan and monitor performance |
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Term
| Activities Performed at the Macy’s Inc. Corporate Office |
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Definition
■Support services and counsel to operating divisions
■Conceptualizing, designing, sourcing, and marketing private label and exclusive merchandise sold at Macy’s and at Bloomingdale’s
■Overall strategy, product development, merchandising and marketing of home-related merchandise
■Logistics, distribution, and operations functions
■Services all proprietary and VISA credit card accounts
■Performance of most other non-store services for customers and employees
■Development of distinctive sales promotions
■Provision of an integrated electronic commerce, and data warehouse systems |
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Term
Advantages of Centralization |
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Definition
■Reduce costs (overhead falls with fewer managers)
■Coordinated buying achieve lower prices from suppliers
■Opportunity to have the best people make decisions for the entire corporation
■Increases efficiency |
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Term
Disadvantages of Centralization |
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Definition
■It is difficult for a retailer to adapt to local market conditions
■It may have problems responding to local competition and labor markets
■Personnel policies make it hard for local managers to pay competitive wages |
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Term
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Definition
nRecruit “the right people”
nSimply seeking the best and the brightest may not always be the most effective approach |
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Term
|
Definition
nIncreasing investments in management training programs and developing leaders
nIncreasing attention to college graduates - Generation Y |
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Term
|
Definition
nThe set of values, traditions, and customs of a firm that guides employee behavior
nBehavior enforced by social pressure |
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Term
|
Definition
nEmpowerment is the process of managers sharing power and decision-making authority with employees
•Gives employees confidence
•Provides greater opportunity to provide service to customers
•Employees are more committed to firm’s success |
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Term
■Creating Partnering Relationships with Employees |
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Definition
nReducing Status Differences
nPromotion From Within
nBalancing Careers and Families
•Flextime, job sharing |
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Term
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Definition
A set of approaches and techniques firms employ to efficiently and effectively integrate their suppliers, manufacturers, warehouses, stores, and transportation intermediaries into a seamless value chain. This chain incorporates which merchandise is produced and distributed in the right quantities; to the right locations; and at the right time; as well as to minimize system wide costs, while satisfying the service levels their customers require. |
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Term
| Why is Efficient Supply Chain Management so Important to Retailers? |
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Definition
■Improved product availability
■Higher return on investment
■Strategic advantage |
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Term
| Benefits of Efficient Supply Chain Management to Customers |
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Definition
■Reduced stockouts – merchandise will be available when the customer wants them
■Tailoring assortments – the right merchandise is available at the right store |
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Term
Strategic Importance of
Supply Chain Management |
|
Definition
■Opportunity to Increase Sales by Making the Right Merchandise is in the Right Place at the Right Time
nFewer Stock-outs
nGreater Assortment with Less Inventory
■Opportunity to Reduce Costs
nTransportation Costs
nInventory Holding Costs
■Improved ROI |
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Term
|
Definition
a retail business strategy that uses a supply chain management process to rapidly introduce fashionable merchandise and quickly respond to
customer demand for the merchandise |
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Term
| Higher Return on Investment |
|
Definition
Efficient Supply Chain Management leads to è
■Increased Sales from more attractive assortments in stock
■Improved Net Profit Margins from increased gross margin and lowered expenses
■Lowered inventory from less backup inventory in stock and higher asset (inventory) turnover |
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Term
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Definition
| Information about purchase is transmitted from POS terminal to the buyer/planner. The planner uses this information to monitor and analyze sales and decide to reorder more toaster ovens or reduce its prices if sales are below expectations |
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Term
|
Definition
Sales transaction data are also sent to the distribution center (6)
When the store inventory drops to a specified level,
more toaster ovens are shipped to the store, and the shipment
information sent to the corporate computer system (5) so that the
planner knows the inventory level, which remains in the
distribution center.
Information about purchases are aggregated by buyer/planner and sent to distribution center and vendor to ship merchandise (3) |
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Term
| Advanced shipping notice (ASN) |
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Definition
is a document that tells the distribution
center what specifically is being shipped and when it will be delivered.
The distribution center then makes appointments for trucks to make
the delivery at a specific time, date, and loading dock. |
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Term
|
Definition
Data warehousing is the coordinated and periodic copying of data from various sources, both inside and outside the enterprise, into an environment ready for analytical and informational processing
Wal-Mart makes good use of its data warehouse. Experts estimate that it is second in size only to that of the U.S. government |
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Term
| EDI Electronic Data Interchange |
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Definition
■is the computer-to-computer exchange of business documents between retailers and vendors
•Merchandise sales, Inventory On Hand, Orders
•Advanced shipping notices,
•Receipt of merchandise, Invoices for payment
nStandards:
•UCS (Uniform Communication Standard)
•VICS (Voluntary Interindustry Commerce Solutions)
nTransmission system:
•Intranet: local area network (LAN) that employs Internet technology
•Extranet: collaborative network that uses Internet technology to link businesses with suppliers, customers, etc. |
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Term
|
Definition
Authentication – system assures person on other end of session is who it claims to be
Authorization - that person has permission to carry out request
Integrity – info arriving is the same that was sent |
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Term
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Definition
■Reduces cycle time – inventory turnover is higher
■Improves overall quality of communications through better record-keeping
■Information can be easily analyzed |
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Term
|
Definition
Merchandise is allocated
to stores
on the basis of
forecasted demand |
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Term
|
Definition
Orders for merchandise are
generated at the store level
on the basis of
POS sales data |
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Term
| Requirements for a Pull Approach to Work |
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Definition
■Requires a more costly and sophisticated information to support it
■Should have the flexibility to adjust inventory levels on the basis of demand |
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Term
■Push supply chains are efficient for merchandise that has ______demand |
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Definition
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Term
|
Definition
nThe aspect of supply chain that refers to the planning, implementation, and control of the efficient flow and storage of goods, services, and related information from the point of origin to the point of consumption to meet customers’ requirements |
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Term
| Advantages of Using a Distribution Center |
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Definition
■More accurate sales forecasts are possible when retailers combine forecasts for many stores serviced by one distributor
■Enables retailers to carry less merchandise in the store
■Easier to avoid running out of stock
■Retail store space is more expensive than space at the distribution center |
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Term
| Advantages of Direct Store Delivery |
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Definition
■Gets merchandise faster, and is thus used for perishable goods (meat and produce)
■Helps the retailer’s image of being the first to sell the latest product (video games) or fads
■Some vendors provide direct store delivery for retailers to ensure that their products are on the store’s shelves, properly displayed, and fresh |
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Term
| Who Can Use Distribution Centers? |
|
Definition
■Retailers selling non-perishable merchandise
■Retailers offering merchandise that has highly uncertain demand like apparel
■Retailers selling merchandise that needs to be replenished frequently
■Retailers that carry a large number of items shipped in broken case quantities like drug stores
■Retailers with many outlets |
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Term
| Activities Performed by Distribution Center |
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Definition
■Managing inbound transportation
■Receiving and checking merchandise
■Storing or cross docking merchandise
■Getting merchandise floor ready
nTicketing and marking
nPutting on hangers
■Preparing to ship merchandise to a store
■Managing outbound
transportation |
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Term
|
Definition
■The process of moving returned goods from their customer destination for the purpose of capturing value or proper disposal
■Retailers recover loss through on-line auctions |
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Term
| Logistics for Fulfilling Catalog and Internet orders |
|
Definition
■When fulfilling orders from individual consumers, retailers ship small packages with one or two items to a large number of different places
nDistribution centers for picking and packing orders for consumers |
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Term
|
Definition
■Retailers consider outsourcing logistical functions if those functions can be performed better or less expensively by third-party logistics companies
■Transportation
■Warehousing
■Freight Forwarders
■Integrated Third-Party Logistics Services |
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Term
|
Definition
The built up inventory in an uncoordinated channel where retailers and vendors do not coordinate their supply chain activities |
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Term
| What Causes a Bull-Whip Effect? |
|
Definition
■Delays in transmitting orders and receiving merchandise
■Over-reacting to shortages
■Ordering in batches rather than generating a number of small orders |
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Term
| Retailers and Vendors Work Together |
|
Definition
■Use EDI
■Exchange information to reduce need for backup inventory, improve sales forecasts and production efficiency
■Vendor manage inventory (VMI)
■Collaborative planning, forecasting and replacement (CPFR) |
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Term
| Collaborative Planning, Forecasting, and Replenishment |
|
Definition
| the sharing of forecast and related business information and collaborative planning between retailers and vendors to improve supply chain efficiency and product replenishment |
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Term
| Vendor- Managed Inventory (VMI) |
|
Definition
| an approach for improving supply chain efficiency in which the vendor is responsible for maintaining the retailer's inventory levels in each of its stores |
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Term
| Vendor Managed Inventory (VMI) |
|
Definition
■Manufacturer access to POS information
■Replenishment automatically triggered
■Enables demand-based view of replenishment & production planning – reduce bull whip effect |
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Term
|
Definition
■The vendor does not know what other actions (e.g., promotion) the retailer is taking that might affect the sales of its products in the future |
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Term
|
Definition
■Focused on replenishment activity only
■Static-model based (assumed fixed reorder points to trigger replenishment)
■Often only moved inventory ownership rather than removing it
■Incomplete information for decision making
■Vendor and retailers use different systems and data bases |
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Term
|
Definition
■Common goals
■A single demand forecast developed collaboratively
■Collaborative Promotional planning & execution
■A single, shared data source
■Improved inventory management across entire Supply Chain
■Optimized replenishment strategies with joint ownership
■Process simplicity creates optimal framework for success |
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Term
| Radio Frequency Identification (RFID) |
|
Definition
allows an object or a person to be identified at a distance using radio waves.
■Reduces warehouse and distribution labor costs
■Reduces point of sale labor costs
■Inventory savings by reducing inventory errors
■Reduces theft – products can be tracked
■Reduces out of stock conditions |
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Term
| Why the Hesitation with RFID? |
|
Definition
RFID is expensive – the return on investment is low
It still only makes sense to put tags on pallets, cartons, expensive merchandise or high theft items
RFID generates more data than what can be currently processed
Consumers worry about privacy invasion |
|
|
Term
| When price elasticity is greater than - 1, the target market for a product is viewed to be ________ |
|
Definition
|
|
Term
|
Definition
percent change in quantity sold
percent change in price |
|
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Term
|
Definition
price elasticity x cost
price elasticity +1 |
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Term
|
Definition
= retail price – cost
retail price |
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Term
|
Definition
|
|
Term
|
Definition
Cost
1 – Initial markup % |
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