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Chapter 16: Managing Retailing, Wholesaling, and Logistics

Chapter 16: Managing Retailing, Wholesaling, and Logistics


GENERAL CONCEPT QUESTIONS

Multiple Choice
1. Intermediaries include retailers, ________, and logistical organizations.

a. Internet companies

b. wholesalers

c. competitors

d. box stores

e. none of the above

Answer: b Page: 503 Level of difficulty: Easy


  1. Some intermediaries use strategic planning, advanced information systems, sophisticated marketing tools, measure performance on a return-on-investment basis, segment their markets, improve their target marketing and positioning, and ________.

a. contend with dwindling customer bases

b. aggressively “squeeze” manufacturer margins

c. aggressively pursue take over strategies

d. dominant the manufacturers they do business with

e. aggressively pursue market expansion and diversification strategies

Answer: e Page: 504 Level of difficulty: Easy


3. Retailing involves getting the goods or services to the ultimate consumer. Which of the following is NOT a form of retailing?

a. The Internet

b. Mail

c. Vending machine



d. Person

e. none of the above

Answer: e Page: 504 Level of difficulty: Easy
4. Major retailer types include the following EXCEPT ________.

a. specialty store

b. discount store

c. catalog showroom

d. the Internet

e. superstore

Answer: d Page: 505 Level of difficulty: Medium
5. Retailers can position themselves as offering one of four service levels. Which of the following is NOT one of these levels?

a. Self-selection

b. Self-service

c. Limited service

d. Direct service

e. Full service

Answer: d Page: 505 Level of difficulty: Medium
6. Nonstore retailing falls into four major categories. Which of the following is NOT one of the four nonstore retailing categories?

a. Buying service

b. Internet sales

c. Automatic vending

d. Direct marketing

e. Direct selling

Answer: b Page: 506 Level of difficulty: Medium
7. One of the advantages of corporate retailing is that corporate retail organizations achieve economies of scale, greater purchasing power, better-trained employees, and ________.

a. wider brand recognition

b. more locations

c. branded merchandise

d. “fresh” merchandise

e. more advertising

Answer: a Page 506 Level of difficulty: Hard
8. An independent retailer using a central buying organization and joint promotion efforts is known as a ________.

a. corporate chain store

b. voluntary chain

c. retailer cooperative

d. merchandising conglomerate

e. franchise organization

Answer: c Page 507 Level of difficulty: Hard
9. In the face of increased competition from discount houses and specialty stores, department stores are waging a comeback war. Two models for department stores success seems to be emerging. The first is a store that has strong retail brand approach as demonstrated by Kohl’s in the United States. The second model is the ________ typified by Galeries Lafayette in Paris.

a. “tourist” area stores

b. single brand store

c. limited variety store

d. specialty store

e. showcase store

Answer: e Page: 507 Level of difficulty: Medium
10. Franchising accounts for more than $1 trillion of annual U.S. sales and nearly one-third of all retail transactions. Franchises are distinguished by three characteristics that are: (1) the franchisee pays for the right to be part of the system: (2) the franchiser provides its franchisees with a system for doing business; and (3) ________.

a. the franchiser controls all actions of the franchisee including hiring and marketing decisions

b. the franchisee has unlimited freedom to change the operation once he/she pays the upfront charges

c. the franchiser owns a trade or service mark and licenses it to franchisees in return for royalty payments.

d. the franchiser receives a percentage of sales from the franchisee for the right to belong

e. none of the above

Answer: c Page: 508 Level of difficulty: Hard
11. Retailers must make marketing decisions in the areas of product assortment and procurement, services and store atmosphere, price, communications, locations and ________.

a. niche

b. style

c. shoppers

d. target market

e. procedures

Answer: d Page: 509 Level of difficulty: Medium
12. The retailer must decide on product-assortment breadth and ________.

a. store location

b. layout

c. prices

d. selection

e. depth

Answer: e Page: 509 Level of difficulty: Easy
13. In the pursuit of higher sales volume, retailers are studying their store environments for ways to improve the shopper’s experience. According to Paco Underhill, one of his suggestions for fine-tuning retail space is ________.

a. make the store “fun” and “interesting” but move the shoppers through it quickly

b. honor the “transition zone” and allow the shopper time to “sort out” the stimuli

c. place the checkouts in the rear of the store

d. make the store more receptive to “men” shoppers

e. make them “hunt” for it

Answer: b Page: 509 Level of difficulty: Hard
14. After deciding on the product-assortment strategy, the retailer must establish merchandise source, ________, and practices.

a. vendors

b. suppliers

c. lead-times

d. policies

e. buyers

Answer: d Page: 512 Level of difficulty: Easy
15. Retailers are rapidly improving their skills in demand forecasting, merchandise selection, stock control, space allocation, and ________.

a. advertising

b. display

c. choosing the media mix

d. selecting the marketing channels

e. none of the above

Answer: b Page: 512 Level of difficulty: Easy
16. When retailers do study the economics of buying and selling individual products, they typically find that a third of their square footage is being tied up by products that do not make a ________.

a. sale


b. profit

c. funds


d. “turns”

e. none of the above

Answer: b Page: 512 Level of difficulty: Easy
17. ________ measures a product’s handling costs from the time the product reaches the warehouse until a customer buys it in the retail store.

a. Brand management

b. Shelf management

c. Profitability

d. Direct Product Profitability

e. Direct Product Performance

Answer: d Page: 512 Level of difficulty: Medium

18. The three elements of the services mix for retailers includes ________.

a. target marketing

b. breath and depth

c. transition zone

d. direct product profitability

e. ancillary services

Answer: e Page: 513 Level of difficulty: Easy


19. Pressed by discounters and by shoppers who are increasingly blasé about brands, retailers are rediscovering the usefulness of ________ as a point of differentiation for their stores.

a. clean well-stocked stores

b. “entertainment”

c. advertisements

d. customer service

e. individualization

Answer: d Pages: 513 –514 Level of difficulty: Medium

20. Every store has a “look,” a physical layout, its “colors,” sounds, and even its “scent.” These elements constitute a store’s ________.

a. layout

b. transition zone

c. atmosphere

d. brands

e. none of the above

Answer: c Page: 514 Level of difficulty: Easy


21. Approximately ________ of everything sold in this country is bought or influenced by a woman.

a. 40 percent

b. 85 percent

c. 80 percent

d. 60 percent

e. 50 percent

Answer: b Page: 514 Level of difficulty: Easy
22. Most retailers will put low prices on some items to serve as traffic builders or _____________.

a. loss leaders

b. profit leaders

c. traffic leaders

d. ad items

e. none of the above

Answer: a Page: 515 Level of difficulty: Easy
23. A EDLP pricing strategy for a retailer could lead to lower advertising costs, greater pricing stability, _____________, and higher retail profits.

a. a weak image regarding low pricing

b. a weak image of price fairness and reliability

c. a stronger image of fairness and reliability

d. a stronger image of low prices

e. a confused image of pricing and product availability

Answer: c Page: 515 Level of difficulty: Medium
24. Traditional brick-and-mortar retailers are responding to the growth of e-commerce by providing and emphasizing a ________ as a strong differentiator to stay at home shopping.

a. celebrities on premises

b. shopping experience

c. expert advice in selecting

d. wider selection of merchandise

e. reputation of the retailer


Answer: b Page: 515 Level of difficulty: Hard

25. Fine specialty retailers most likely fall into the ________ group with respect to margins and volume.

a. mixed markup, high-volume

b. low-volume, mixed markup

c. low-volume, low-markup

d. high-volume, high-markup

e. high-markup, lower-volume

Answer: e Page: 515 Level of difficulty: Medium

26. ________ is(are) a key positioning factor for retailers and must be decided in relation to the target market, the product-and-service assortment mix, and the competition.

a. Hours of operation

b. Advertisement

c. Locations

d. Prices

e. Assortment

Answer: d Page: 515 Level of difficulty: Easy


27. A key factor in a retailer’s communication strategy is to use communication tools that support and reinforce the stores ________ positioning.

a. image


b. personal choice

c. expertise

d. location

e. none of the above

Answer: a Page: 516 Level of difficulty: Easy
28. Retailers can locate their stores in the central business district, a regional shopping center, a ________, a shopping strip, or within a larger store.

a. suburbia

b. town centers

c. strip malls

d. freestanding

e. community shopping center

Answer: e Page: 516 Level of difficulty: Easy
29. One of the trends in retailing includes which of the following?

a. Reduction in the level of global competition.

b. A decline in the “shop at home” markets.

c. Growth of the “smaller” boutique types of stores.

d. Competition between Internet selling and store based retailing.

e. Competition between store-based and non-store based retailing.

Answer: e Page: 517 Level of difficulty: Hard
30. Retailers can assess a particular store’s sales effectiveness by looking at (1) the number of people passing by on an average day; (2) the _________; (3) the percentage of those entering who buy; and (4) the average amount spent per sale.

a. percentage of customers who bought merchandise on “sale”

b. total units sold per day

c. total dollar sales per day

d. percentage of those who buy full price merchandise

e. percentage who enter the store

Answer: e Page: 517 Level of difficulty: Hard
31. A “brand” developed by a retailer and/or wholesaler that is only available in selected retail outlets is called a _________ brand.

a. national

b. household

c. premium

d. selective

e. private label

Answer: e Page: 518 Level of difficulty: Easy
32. Some experts believe that achieving 50 percent of the market is the natural limit for private label brands because consumers prefer certain national brands and ________.

a. many product categories are not feasible or attractive for private labels

b. many product categories have solid national brands as market leaders

c. many product categories have so many brands that there is not room for an additional brand

d. many product categories are too large for a private-label brand

e. none of the above

Answer: a Page: 518 Level of difficulty: Hard
33. Using lower-quality ingredients, lower-cost labeling and packaging, and minimal advertising to produce a product that is 20 to 40 percent lower in price than nationally advertised products and 10 to 20 percent lower than a retailer’s private label product is called ________.

a. reseller brand

b. store brand

c. private label

d. generics

e. house brand

Answer: d Page: 519 Level of difficulty: Easy
34. Retailers charge for special display spaces and in-store advertising space. Retailers typically give more ________ display space to their own brands and make sure that their private label products are well stocked.

a. high traffic

b. front of store

c. access to

d. prominent

e. larger

Answer: d Page: 519 Level of difficulty: Medium
35. Besides the growing power of store brands, other factors weakening national brands include ________.

a. national brands quality is superior to store brands

b. national manufacturers have increased advertising support for their brands

c. national brands have quality control problems not found in store brands

d. consumers are more price sensitive

e. consumers are more selective on purchases of national brands

Answer: d Page: 519 Level of difficulty: Hard
36. The functions that wholesalers perform include all of the following EXCEPT ________.

a. bulk breaking

b. buying and assortment building

c. financing

d. producing

e. market research

Answer: d Pages: 520–521 Level of difficulty: Medium
37. Distributors differ from retailers in a number of ways. First, distributors pay less attention to promotion, atmosphere, and location than retailers do. Second, distributor transactions are usually ________ than retail transactions. Third, the government treats distributors differently in terms of legal regulations.

a. concise

b. larger

c. more complicated

d. more involved

e. limited

Answer: b Page: 520 Level of difficulty: Medium
38. To maintain their power, leading brand marketers should invest in heavy and continuous _____________ to bring out new brands, line extensions, features, and quality improvements.

a. advertising

b. promotions

c. P&L


d. A&P

e. R&D


Answer: e Page: 520 Level of difficulty: Easy

39. Major wholesaler types include all of the following EXCEPT ________.

a. car auction companies

b. truck wholesalers

c. cash and carry wholesalers

d. merchant wholesalers

e. agricultural farmer’s markets

Answer: e Pages: 520–521 Level of difficulty: Medium


40. Wholesalers-distributors have faced mounting pressure in recent years. They have had to develop appropriate strategic responses. One major drive has been to increase ________ productivity by managing their inventories and receivables better.

a. product assortment

b. buying practices

c. personnel

d. asset

e. products

Answer: d Page: 521 Level of difficulty: Medium
41. Wholesalers, like retailers, must make marketing decisions. Among the strategic areas that wholesalers have been forced to review includes all of the following EXCEPT ________.

a. transportation forms

b. target markets

c. pricing

d. place

e. product assortment and selection

Answer: a Pages: 521–522 Level of difficulty: Medium
42. Supply Chain Management (SCM) starts before physical distribution. It involves procuring the right inputs, _____ them efficiently into finished products, and then distributing them to the right customers.

a. using

b. converting

c. delivering

d. labeling

e. procuring

Answer: b Page: 523 Level of difficulty: Medium
43. Some strategies for high-performance wholesaler-distributors includes strengthening core operations, expanding into global markets, committing to TQM, marketing support philosophy, and ________.

a. lowering retailer expectations

b. doing more with less

c. changing retailers

d. automation

e. none of the above

Answer: b Page: 524 Level of difficulty: Hard

44. ________ involves planning the infrastructure to meet demand, then implementing and controlling the physical flows of materials and final goods from points of origin to points of use, to meet customer requirements at a profit.

a. Market logistics

b. Supply chain management

c. SCM

d. Integrated logistics systems



e. none of the above

Answer: a Page: 524 Level of difficulty: Medium


45. Market logistics can amount to 30 to 40 percent of the product’s total cost. Even though the cost of market logistics can be high, a well-planned program can be a ________ tool in competitive marketing.

a. effective

b. incremental

c. added


d. realistic

e. potent

Answer: e Page: 525 Level of difficulty: Medium
46. Maximum customer service implies larger inventories, premium transportation, and multiple warehouses, all of which raise market-logistics costs. Market-logistics costs interact with marketing strategy and are often ________ related.

a. disproportion

b. positively

c. negatively

d. complementarily

e. none of the above

Answer: c Page: 525 Level of difficulty: Hard
47. _____________ play a critical role in managing market logistics, especially computer, point-of-sale terminal, uniform product bar codes, EDI, and EFTs.

a. logistics systems

b. information systems

c. market logistics

d. supply chain management

e. none of the above

Answer: b Page: 525 Level of difficulty: Easy
48. Four major decisions must be made with regard to market logistics, order processing, warehousing, inventory, and ________.

a. transportation

b. purchases

c. pricing

d. information

e. none of the above

Answer: a Pages: 527­–528 Level of difficulty: Easy
49. The elapsed time between an order’s receipt, delivery, and payment is called the ________.

a. variable costs to payment cycle

b. product-to-payment cycle

c. inventory-to-sale cycle

d. order cycle

e. order-to-payment cycle

Answer: e Page: 526 Level of difficulty: Easy

50. The storage function (warehousing) helps smooth discrepancies between production and quantities desired by the market. Companies must decide on the ________ of inventory stocking locations.

a. number

b. costs


c. size

d. automation

e. all of the above

Answer: a Page: 527 Level of difficulty: Medium


51. ________ cost increases at an accelerating rate as the customer service level approaches 100 percent.

a. Delivery

b. Promotion

c. Inventory

d. Merchandising

e. Storage

Answer: c Page: 527 Level of difficulty: Easy
52. At some stock level point, management must reorder product to refill the inventory to an acceptable level. This “point” is called the ________.

a. order (reorder) point

b. inventory

c. minimum inventory level

d. inventory carrying costs

e. none of the above

Answer: a Page: 527 Level of difficulty: Medium
53. ________ warehouses store goods for moderate to long periods of time.

a. Distribution

b. Automated

c. Storage

d. Company owned

e. Local

Answer: c Page: 527 Level of difficulty: Easy
54. Inventory-carrying costs represent substantial dollars for manufacturers. These inventory-carrying costs include storage charges, cost of capital, taxes and insurance, and depreciation and obsolescence. Carrying costs might run as high as ________ of the value of the inventory.

a. 70 percent

b. 40 percent

c. 25 percent

d. 30 percent

e. 50 percent

Answer: d Page: 527 Level of difficulty: Hard

55. Total costs per unit increase with more orders and inventory-carrying costs per unit increase with more orders, the cost per unit for order-processing ________ per unit as a result.

a. decreases

b. increases

c. continues at the same level

d. increases dramatically

e. has no effect

Answer: a Page: 528 Level of difficulty: Medium


56. Marketers must be concerned with transportation decisions. Transportation choices will affect product ________, on-time delivery performance, and the conditions of the goods when they arrive, all of which affects customer satisfaction.

a. transferability

b. performance

c. usage


d. pricing

e. none of the above

Answer: d Page: 528 Level of difficulty: Medium
57. In deciding on the method or means of transportation, shippers consider such criteria as speed, frequency, ________, capability, availability, traceability, and costs.

a. air versus ground

b. gypsy truckers

c. dependability

d. branded name truckers

e. costs per mile

Answer: c Page: 528 Level of difficulty: Easy
58. Today customers want more frequent deliveries, shorter order-cycle times, direct store deliveries, mixed pallets, tighter promised times, and ________ packaging, price tagging, and display building.

a. colorful

b. child-proof

c. custom

d. easy opening

e. theft proof

Answer: c Page: 529 Level of difficulty: Medium
59. Market-logistics strategies must be derived from ________, rather than solely from cost considerations.

a. competitive analysis

b. low cost considerations

c. cost strategies

d. business strategies

e. marketing strategies

Answer: d Page: 529 Level of difficulty: Medium

60. Integrated logistics systems (ILS), involves materials management, ________, and physical distribution, abetted by information technology.

a. information flow systems

b. material flow systems

c. cash flow systems

d. product management systems

e. none of the above

Answer: b Page: 524 Level of difficulty: Medium



True/False
61. Retailing includes all the activities involved in selling goods or services directly to final consumers for personal, nonbusiness use.

Answer: True Page: 504 Level of difficulty: Easy


62. Any organization selling to the final consumers—is doing retailing. However, it does matter how the goods or services are sold and where they are sold.

Answer: False Page: 504 Level of difficulty: Easy


63. An off-price retailer is one in which the retailer has a broad selection of high-markup, fast-moving, brand-name goods in stock.

Answer: False Page: 505 Level of difficulty: Medium

64. Retailers can position themselves as offering one of four levels of service. However, self-selection and self-service are the same in discount retailers.

Answer: False Page: 505 Level of difficulty: Easy


65. Full service retailers have salespeople who are ready to assist the customers in every phase of their shopping trip.

Answer: True Page: 505 Level of difficulty: Medium


66. Nonstore retailing has not been growing as fast as traditional store retailing.

Answer: False Page: 506 Level of difficulty: Hard


67. Corporate retail organizations achieve economies of scale, greater purchasing power, wider brand recognition, and better-trained employees.

Answer: True Page: 506 Level of difficulty: Medium


68. The two models of the traditional department store’s responses to competition is to develop a store with strong retail brand approaches and the “showcase” store.

Answer: True Page: 507 Level of difficulty: Medium


69. Paco Underhill, managing director of the retail consultant Envirosell Inc., suggests that retailers, to increase sales volume, and make their shoppers hunt for the merchandise. His logic is this: while “hunting” the shopper will be exposed to more and more products, thus the likelihood increases that the shopper will purchase “impulse” items, thus increasing their overall purchase total.

Answer: False Page: 509 Level of difficulty: Hard


70. A retailer’s most important decision is “location, location, location.”

Answer: False Page: 516 Level of difficulty: Hard


71. The retailer’s product assortment does not need to match the target market’s shopping expectations.

Answer: False Page: 509 Level of difficulty: Medium


72. The real challenge begins, for a retailer, after defining the store’s product assortment and that is to develop a product differentiation strategy.

Answer: True Page: 510 Level of difficulty: Easy


73. A retailer’s real challenge begins after defining the store’s product assortment, and that is to develop a product-differentiation strategy.

Answer: True Page: 510 Level of difficulty: Medium


74. Retailers are rapidly improving their skills in demand forecasting, merchandise selection, stock control, space allocation, and display.

Answer: True Page: 512 Level of difficulty: Medium


75. When retailers do study the economics of product assortment, they find that two-thirds of their products contribute both sales and profits to the bottom line.

Answer: False Page: 512 Level of difficulty: Hard


76. A retailer can differentiate itself from other retailers by adopting a services mix from one store to another. Ancillary services are one of the services that retailers can choose to set his operation apart from others.


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