19 - How the retail business model works

Question 1

What is the primary focus of a retailer’s business model?

Answer 1

Volumes of products sold

The more products sold, the higher the margin and productivity.

Question 2

What metrics do retailers use to headline their performance?

Answer 2

• Sales per store
• Sales per square foot
• Sales per employee

Question 3

What are the two main strategies for retailer growth?

Answer 3

• Adding stores
• Increasing sales per store

Question 4

What is a key challenge in increasing sales per store?

Answer 4

Fine-tuning category mix, product lines, merchandising, and marketing

Question 5

What is the operating cost percentage of MNO Co Retailer?

Answer 5

10.8%

Question 6

How is retail often described in terms of cash flow?

Answer 6

Cash business

Question 7

What is the average inventory turnover for MNO Co Retailer?

Answer 7

8.3 times

Question 8

What does a high level of payables indicate for a retailer?

Answer 8

It generates a cash float

Question 9

What are the assets of MNO Co Retailer compared to long-term liabilities?

Answer 9

Assets are approximately equal to long-term liabilities

Question 10

What is a planogram in retail?

Answer 10

A map of where categories and products are located on shelves

Question 11

What is the significance of sales per square foot for retailers?

Answer 11

It measures productivity of space

Question 12

What type of retailers typically report sales per foot on a gross basis?

Answer 12

Most retailers

Question 13

What type of retailer has the highest sales per square foot?

Answer 13

Jewellery stores

Question 14

What is the average sales per employee for motor vehicle dealers?

Answer 14

$375,440

Question 15

What does GMROII stand for?

Answer 15

Gross Margin Return on Inventory Investment

Question 16

What two components drive the GMROII measure?

Answer 16

• Earn
• Turn

Question 17

True or False: Retailers can be classified as high earn and low turn or low earn and high turn.

Answer 17

True

Question 18

What characterizes the ‘earn and turn’ business model for retailers?

Answer 18

Maximizing margin and the number of inventory turns

Question 19

What is a natural rhythm of inventory turn?

Answer 19

Governed by store size, ordering, and inventory management processes

Question 20

What is a common reason grocery stores avoid high-margin products with low turns?

Answer 20

Risk of spoilage and complete write-offs

Question 21

What has enabled higher-end products to turn more quickly in grocery stores recently?

Answer 21

Rising disposable incomes and better packaging

Question 22

What is a finite amount of shelving in a store called?

Answer 22

Shelf space

Question 23

What is the term for the map of where categories and products are sited in a store?

Answer 23

Planogram

Question 24

In retail, what do products on the most visible shelves need to justify?

Answer 24

Their location

Question 25

What is the economic performance trade-off that retailers must balance?

Answer 25

Category range and depth

Question 26

Why do retailers keep toilet rolls despite their poor economic contribution?

Answer 26

They are major traffic builders

Question 27

What are high-traffic areas in stores that generate high rates of sale?

Answer 27

Check-out areas, end caps, dump bins

Question 28

What type of products are typically highlighted in special locations in stores?

Answer 28

Promotional items, fast-moving products, impulse-purchase items

Question 29

What influences the layout of product categories in retail?

Answer 29

The customer's decision tree

Question 30

In the hair care category, how should products be grouped to support customer choices?

Answer 30

By type of product, hair type, budget, size

Question 31

In the soft drinks category, what is the primary way products should be categorized?

Answer 31

By form first, then subdivided by sugar/caffeine content, flavour, brand

Question 32

What is the term for each size of each product in retail?

Answer 32

SKU (Stock Keeping Unit)

Question 33

What is a key factor for retailers when deciding how much space to allocate to each category?

Answer 33

Sales and margin per square foot

Question 34

What do major brands often become in category management?

Answer 34

Category captains

Question 35

How do retailers synchronize category merchandising with supply?

Answer 35

By planning promotional calendars up to nine months ahead

Question 36

What is a significant benefit of point-of-sale (POS) data capture for retailers?

Answer 36

Targeted offers based on customer behavior

Question 37

True or False: Most retailers find that the top 20% of customers deliver 50% of their profit.

Answer 37

True

Question 38

What is the primary focus of the Apple Store in its retail strategy?

Answer 38

The ownership experience

Question 39

What type of products does Apple prominently display in their stores?

Answer 39

Latest and hottest products

Question 40

What is the average sales per square foot for Apple Stores?

Answer 40

$4,000

Question 41

Fill in the blank: The Apple Store features a _______ bar for customer support.

Answer 41

Genius

Question 42

What is the typical number of applications for a job at an Apple Store?

Answer 42

16 applications per post

Question 43

What retail strategy is essential for retailers to avoid being outplayed?

Answer 43

Adapting business models quickly