2204chapter%2011%20review

2204chapter%2011%20review - CHAPTER 11 REVIEW Marketing...

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CHAPTER 11 REVIEW Marketing Concepts: Testing Your Knowledge 1. How does the wheel-of-retailing hypothesis explain changes in retail outlets? How does the retail life cycle concept explain these changes? The wheel-of-retailing hypothesis is a theory that explains how retail firms change, becoming more “upscale” as they go through their life cycle. The suggestion is that retailers compete on price and then move “upscale”, leaving room for other new low- price entrants. The retail life-cycle concept theory is a theory of retailing that focuses on the various life-cycle stages from introduction to decline. The suggestion is that retail institutions are introduced, grow, reach maturity, and then decline. Their degree of aggressiveness and innovation rise and then decline with the stages of the cycle. 2. What are some environmental trends that will have a major impact on the future of retailing? A number of environmental trends will continue to drive the evolution of retailing. These include demographic changes such as an aging population, increasing affluence among ethnic groups, time poverty resulting from increased numbers of working women, and technological developments such as advanced POS systems that enable retailers to provide more personal service. Environmentally conscious consumers look for retailers who are environmentally sensitive. Market globalization will continue to offer new opportunities for retailing innovation. 3. How are gross margins and turnover rates used to classify retailers? Describe the differences in merchandise assortments for convenience stores, supermarkets, specialty stores, discount stores, department stores, and hypermarkets. Retailers are usually classified by what they sell—the assortment (breadth and depth) of product lines). We can also classify retailers by the gross margin and turnover of this assortment. Discount stores, for example, work with low gross margins and high turnover. Specialty stores often have higher gross margins but lower turnover. Retailers often confront a basic trade-off between margin and volume, and they sometimes must adjust their merchandise mix as their strategy evolves. In some cases retailers try to develop a “portfolio” of products with low and high margins. They reason that by making a relatively large profit on some items, they can use these revenues as a buffer against price wars in other areas that may erode profitability.
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