4 5 6retailing PDF

Retail Management: A Strategic Approach, 13e (Berman/Evans/Chatterjee)
Chapter 4 Retail Institutions by Ownership
1) The basic format or structure of a business is referred to as ________.

A) a retail store
B) a franchise
C) vertical integration
D) a retail institution
Answer: D
Difficulty: Moderate
Skill: Terminology/Concept
2) What percent of all retail store sales are made by independent retailers?
A) 10
B) 25
C) 60
D) 80
Answer: B
3) There are so many independent retailers in the United States because of ________.
A) ease of entry into the marketplace
B) widespread use of the franchise form of distribution
C) vertical integration by manufacturers
D) high investment per worker in retailing
Answer: A
4) Competition for new and existing retailers is high due to the ________.
A) high failure rates in retailing
B) high ease of entry into retailing
C) high investment per worker in retailing
D) complex licensing provisions for many kinds of retailers
Answer: B
Difficulty: Challenging
5) A major competitive advantage of independent retailers is ________.

A) specialization of retail functions
B) quantity discounts in purchasing
C) entrepreneurial drive
D) a good fit with other owned units
Answer: C
6) A major disadvantage of independent retailing is ________.
A) latitude in selecting customer markets
B) low bargaining power with suppliers
C) inflexibility in developing strategy
D) high investment requirements
Answer: B
7) An independent can increase its bargaining power with a supplier by ________.

A) buying substantially larger quantities than needed to take advantage of all discounts
B) insisting on quantity discounts from vendors
C) belonging to buying groups with other independents
D) focusing increased attention on closeouts, irregulars, and the purchase of merchandise off-
season
Answer: C
8) A unique disadvantage for independent retailers is ________.

A) a lack of competitive advantages
B) a lack of independence
C) a lack of control over strategy
D) overdependence on the owner
Answer: D
9) Retail chains account for ________ percent of total retail sales.

A) 30
B) 40
C) 75
D) 90
Answer: C
10) A chain retailer can achieve wholesale cost efficiencies by ________.

A) stressing the sale of private label brands
B) buying goods directly from suppliers in large quantities
C) using computer-based inventory management systems
D) having suppliers list suggested selling prices on labels
Answer: B
11) A chain retailer can gain efficiency in multiple-store operations through ________.
A) purchasing standardized store fixtures
B) receiving new items as soon as they are introduced
C) decentralizing operations
D) using all forms of advertising media
Answer: A
12) A major disadvantage of centralized purchasing to a chain retailer is ________.

A) overdependence on the boss
B) lack of quantity discounts
C) absence of bargaining power
D) complex managerial control
Answer: D
13) An example of a product/trademark franchise is a(n) ________.

A) real-estate brokerage franchise
B) auto dealer
C) fast-food franchise
D) auto-rental service franchise
Answer: B
14) Business format franchising is characterized by ________.

A) an interactive relationship between a franchisor and a franchisee
B) dealers operating relatively autonomously from suppliers
C) dealers having considerable freedom in developing and implementing their overall retail
strategy
D) the absence of royalty fees to franchisors
Answer: A
15) In which of the following does a dealer receives assistance on site location, start-up
practices, accounting systems, and management training in ________.
A) a leased department
B) business format franchising
C) independent channel ownership
D) a chain
Answer: B
16) The type of retailer with the largest percent of total retail franchise sales is ________.
A) restaurants (all types)
B) convenience stores
C) auto and truck dealers
D) general merchandise stores
Answer: C
17) Hotel and motel franchises represent what type of structural arrangement?
A) voluntary wholesaler-retailer
B) cooperative wholesaler-retailer
C) service sponsor-retailer
D) manufacturer-retailer
Answer: C
18) Franchisors yield considerable power in their relationship with franchisees due to their
ability to ________.
A) overstate the income potential of franchisees
B) teach procedures and management skills to franchisees
C) cancel a franchise if any major provision of the franchise agreement is not met
D) develop a cooperative marketing program
Answer: C
19) Cancellation provisions, requirements that purchases be made from approved vendors, and
standard operating procedures contribute to ________ for franchisees.
A) private labeling
B) constrained decision making
C) fair trade legislation
D) vertical integration
Answer: B
20) The Federal Trade Commission (FTC's) disclosure requirements and business opportunities
rule is intended to ________.
A) provide potential franchisees with adequate information prior to their making an investment
B) make it difficult for franchisors to terminate, cancel, or fail to renew franchisees without
sufficient cause
C) allow franchisees to purchase goods and services on a more competitive basis
D) grant exclusive territories to franchisees
Answer: A
21) A benefit of franchising to a franchisor is ________.

A) intrafranchise competition
B) the ease of establishing a uniform image
C) a national or global presence is developed more quickly and with less franchisor investment
D) the effect of an ineffective unit on resale values of other units
Answer: C
22) In most situations, leased departments have been used by existing retailers to ________.
A) improve the store's overall image by emphasizing fashion
B) deepen the merchandise assortment in selected merchandise categories
C) broaden their offerings into product categories that are on the fringe of the store's major
product lines
D) generate rental income from "dead" space
Answer: C
23) A major advantage of a leased department to the leased department operator is ________.
A) the conformity of the leased department to the overall store's operating procedure
B) some costs are reduced through shared facilities
C) the security of lease renewals
D) inflexibility of hours of operation and operating style
Answer: B
24) The leading form of vertical marketing system is ________.

A) partially integrated marketing system
B) independent vertical marketing system
C) fully integrated marketing system
D) a retail cooperative
Answer: B
25) Two independently owned businesses along a channel perform all production and
distribution functions in a(n) ________.
A) partially integrated system
C) fully integrated system
D) retail cooperative
Answer: A
26) A benefit to the use of a fully integrated system is ________.

A) greater use of specialized expertise in production and marketing
B) lower investment requirements
C) increased sales due to more intensive distribution
D) total control over its retail strategy
Answer: D
27) A fully integrated system represents ________.

A) vertical integration
B) partial vertical integration
C) horizontal integration
D) interbrand competition
Answer: A
28) A firm desiring the maximum degree of channel control should utilize ________.
A) an independent vertical marketing system
B) a fully integrated system
C) a partially integrated system
D) franchising
Answer: B
29) Which vertical marketing system allows a firm to utilize different wholesale and retail
channels of distribution?
A) dual marketing
C) partially integrated system
D) fully integrated vertical marketing system
Answer: A
30) The overall process whereby one member of a channel dominates the decisions made in the
channel due to the power it possesses is referred to as ________.
A) vertical integration
B) vertical marketing systems
C) bargaining power
D) channel control
Answer: D
31) A manufacturer can exert channel control through ________.

A) pre-ticketing merchandise
B) private branding
C) cooperative advertising
D) intensive distribution
Answer: A
32) Pre-ticketing merchandise and exclusive distribution are channel control strategies of
________.
A) retailers
B) consumer cooperatives
C) manufacturers
D) wholesalers
Answer: C
33) Wholesalers can possess channel control through ________.

A) franchising
B) private brands
C) fair trade legislation
D) tying contracts
Answer: B
34) A retail firm owned by its customer members is a(n) ________.

A) consumer cooperative
B) franchise
C) independent vertical marketing system
Answer: A
35) The growth of consumer cooperatives has been limited due to ________.
A) competitive actions by full-service retailers
B) fair practice legislation
C) wholesaler use of full-time forcing
D) the high degree of required customer initiative and drive
Answer: D
36) Which statement concerning ease of entry into retailing is correct?

A) Investment per worker in retailing is significantly greater than that of manufacturing
establishments.
B) Ease of entry contributes to the high failure rate among newer retailers.
C) Ease of entry into retailing contributes to the low number of new firms entering retailing in
any given year.
D) Ease of entry is reflected in high market shares (as a percent of total category sales) for the
leading firms.
Answer: B
Skill: Applied/Comprehensive/Integrative
37) Decision making is usually centralized and the levels of management personnel are
minimized in which retail institution?
A) variety store
B) department store
C) independent
D) chain
Answer: C
38) The "overdependence on the owner" problem for independent retailers can be overcome
through ________.
A) taking in an active partner
B) centralizing decision making in the firm
C) life insurance policies
D) limiting time demands on the owner
Answer: A
39) Uniform location standards are most likely to be present in which retail institution?
A) independent retailer
B) chain retailer
C) leased department
D) consumer cooperative
Answer: B
40) Specialization of personnel by functional area and/or geographic region is most likely to
occur in what type of retail institution?
A) independent
B) chain
D) consumer cooperative
Answer: B
41) A major competitive advantage of chains in contrast to independents is ________.

A) freedom from unionization
B) use of specialists in buying, selling, and store operations
C) freedom from antitrust legislation
D) less concern for overlapping locations
Answer: B
42) The high bargaining power of chains can be directly constrained by independents through
________.
A) using decentralized purchasing
B) refusing to purchase popular brands purchased by chains
C) threatening Robinson-Patman Act violations to suppliers
D) developing manufacturer brands
Answer: C
43) Centralized decision making is a major characteristic of which form of retail institution?
A) independents
B) vertical marketing systems
C) retail cooperatives
D) chains
Answer: D
44) Chain store efficiency in multiple-store operations can be significantly reduced by ________.
A) centralized buying that does not reflect regional and local preferences
B) a chain's performing wholesale functions
C) the use of computerized ordering and inventory management
D) use of national and regional media
Answer: A
45) Independents can compete with chain organizations (in terms of image, ability to use
regional and national media, and specialized personnel) through ________.
A) a leased department
B) an independent vertical marketing system
C) franchising
D) factory outlets
Answer: C
46) In contrast to business format franchising, in product/trademark franchising, franchisees

________.
A) utilize prototype stores
B) receive assistance from franchisors on site location and start-up practices
C) operate relatively autonomously from suppliers
D) have an active relationship with the franchisor
Answer: C
47) The major difference in the role of a franchisee between a product/trademark and a business
format franchise is that in a product/trademark franchise, the franchisee has ________.
A) less autonomy
B) greater autonomy
C) greater training
D) a greater chance of success
Answer: B
48) The job titles of cooperative advertising director, channel member customer service director,
real estate negotiator, and vendor inspection specialist are most likely to be found in what type of
retail institution?
A) business format franchise
B) product/trademark franchise
D) independent vertical marketing system
Answer: A
49) A channel member is most likely to be involved in developing a turn-key operation (that
includes equipment, a prototype building, training, and troubleshooting advice) in ________.
A) product/trademark franchising
B) business format franchising
C) a leased department
D) a membership warehouse club
Answer: A
50) Which form of retail institution most closely resembles a partially integrated system?
A) business format franchise
B) product/trademark franchise
C) retail chain
D) independent
Answer: A
51) The use of ________, ________, and ________ enable franchises to achieve a level of
coordination similar to that found in retail chain organizations.
A) prototype stores; standardized merchandise lines; cooperative advertising
B) royalty-based rental agreements; exclusive territories; franchisee training
C) franchisee training; prototype stores; independence in setting store hours
D) cooperative advertising; merchandise lines that are related to regional and local preferences;
product/trademark franchising
Answer: A
52) A major firm recently converted from a fully integrated vertical marketing system to
business format franchising. In setting price, store hours, and personnel policies, it is important
that the franchisor recognize that ________.
A) it can control franchisees through constrained decision making to receive higher profits from
the sale of all goods and services
B) it can control franchises through threatening franchise termination due to fair practice laws
C) franchisees have total freedom to set and implement all retail strategies as they see fit
D) in general, franchisees should be treated as owners and not as employees
Answer: D
53) The major difference between a voluntary wholesaler and a cooperative wholesaler is based
upon ________.
A) functions performed by retailers
B) size in number of units
C) ownership
D) basis for payment (straight cash payment versus royalty)
Answer: C
54) A group of independent retailers seeks to establish a common identity and to generate
increased bargaining power through centralized purchasing. Which of the following institutional
arrangement should they consider?
A) independent vertical marketing system
B) fully integrated vertical marketing system
C) business format franchise
D) cooperative
Answer: D
55) Constrained decision making is most commonly found in ________.

A) independent vertical marketing systems
B) manufacturer-retailer licensing agreements
C) business format franchising
D) product/trademark franchising
Answer: C
56) Constrained decision making is desirable by both franchisees and franchisors in that it
generates ________.
A) lower royalty and rental costs
B) independence from franchisor rules and regulations
C) intrafranchise competition
D) uniformity across all chain units
Answer: D
57) FTC rulings, fair practice laws, and franchise-member organizations have the effect of
________.
A) promoting service sponsor versus manufacturer franchises
B) increasing the channel power to franchisees
C) limiting franchisor "right to purchase" laws
D) further constraining decision making relative to franchisees
Answer: B
58) Fair practice laws have been designed to protect franchisees from unreasonable ________
from franchisors.
A) channel cooperation
B) channel power
C) bargaining power
D) price protection programs
Answer: B
59) Both franchisees and leased department operators typically pay rent on the basis of a
________.
A) percent of sales
B) long-term lease with flat payments
C) long-term lease with graduated payments
D) month-to-month agreement
Answer: A
60) Constrained decision making is used by ________.
A) independents and retail cooperatives
B) independents and chains
C) independents and leased departments
D) franchises and leased departments
Answer: D
61) An advantage of a leased department form of organization to a lessee is ________.

A) management assistance
B) financial support provided by the leasor
C) high traffic potential
D) protection from FTC regulations
Answer: C
62) Which of these is not a major disadvantage of a leased department to a lessee?

A) the use of shared facilities and equipment with the leasor
B) restrictions on days open
C) restrictions on goods/services offered
D) leasor refusal to renew the lease
Answer: A
63) The potential for channel conflict is greatest in which vertical marketing system?
B) partially integrated system
C) dual marketing
D) fully integrated system
Answer: A
64) A manufacturer with low company resources which seeks intensive distribution should
utilize which vertical marketing system?
A) a retail cooperative
Answer: B
65) The potential for channel conflict is minimized in which vertical marketing system?
C) dual marketing
Answer: D
66) A manufacturer of a specialty good understands that its maximum chance of sales success
occurs when it can control a product's final selling price as well as its retail advertising and
personal selling strategy. In the past, the manufacturer was dissatisfied with both the level of
sales support and the high level of discounting on its products. Which vertical marketing system
should the manufacturer utilize?
C) dual marketing
Answer: D
67) A cosmetics manufacturer is using a differentiated marketing strategy. While some of its
brands are sold through its direct selling organization, other brands are sold through department
and specialty stores. The manufacturer uses ________.
B) a partially integrated system
C) dual marketing
D) a fully integrated vertical marketing system
Answer: C
68) Manufacturers/service sponsors can exert channel control through ________.

A) franchising
B) private branding
C) fair practice legislation
D) store loyalty
Answer: A
69) Retailers use private labeling to generate channel control because ________.
A) greater channel communication is fostered
B) a large proportion of a manufacturer's output is sold to one retailer
C) retailers can more easily obtain bank financing
D) store loyalty accrues to the retailer from positive experiences with the brand
Answer: D
70) Which of the following has developed because existing retail institutions were perceived by
consumers as inadequately fulfilling market needs?
A) independent channel ownership
B) consumer cooperatives
C) leased departments
D) total vertical integration
Answer: B
71) Data for the Census of Retail Trade is collected and published twice in each decade.
Answer: TRUE
72) Approximately 70 percent of all retail stores are operated by independents.

Answer: TRUE
73) In general, when compared with manufacturing activities, retailing is characterized by

relative difficulty of entry.
Answer: FALSE
74) Orderly managerial succession is an advantage of an independent retailer form of

organization.
Answer: FALSE
75) An important problem for small, family-run independent retail businesses is the limited time
and resources devoted to long-run planning.
Answer: TRUE
76) Chain retailers are characterized by multiple outlets under common ownership with
decentralized purchasing and decision making.
Answer: FALSE
77) A chain retailer can achieve cost efficiencies by performing wholesaling functions such as
buying directly from manufacturers.
Answer: TRUE
78) Product/trademark franchisees operate in a relatively autonomous manner from their

suppliers.
Answer: TRUE
79) All types of restaurants, including fast-food franchises, account for the majority of retail
franchise sales.
Answer: FALSE
80) Three types of structural arrangements involving retail franchises exist: manufacturer-
retailer, wholesaler-retailer, and service sponsor-retailer.
Answer: TRUE
81) Under constrained decision making, a franchisor can exclude franchisees from or limit their
involvement in the strategic planning process.
Answer: TRUE
82) Leased departments generally occur in product categories involving substantial retailer
investments.
Answer: FALSE
83) Maximum channel control occurs in an independent vertical marketing system.

Answer: FALSE
84) In dual marketing, manufacturers can cater to multiple target markets with different
distribution systems.
Answer: TRUE
85) Consumer food cooperative sales have grown to a substantial share of total supermarket
sales, due to the ease of planning and implementing a consumer cooperative.
Answer: FALSE
86) A franchisee operating at two retail locations can be classified as either a chain or as a
franchise, but not both.
Answer: FALSE
87) High investment per worker and many state-based licensing restrictions contribute to the
difficulty of entry in retailing.
Answer: FALSE
88) Due to the Robinson-Patman Act and other antitrust forms of legislation, large retail chains
cannot enjoy significant advantages as a result of their high bargaining power.
Answer: FALSE
89) While centralized buying enables chain retailers to receive the benefits of bargaining power
and quantity discounts, it may result in a poor fit with regional and local consumer needs.
Answer: TRUE
90) Product/trademark franchising involves less constrained decision making for a franchisee
than business format franchising.
Answer: FALSE
91) Cooperative retail franchises enable independent retailers to receive the bargaining power,
single image, and access to mass media that is customary with traditional retail franchises.
Answer: TRUE
92) Hotels, carpet cleaning, and fast-food franchises are examples of a service sponsor-retailer
franchise structural arrangement.
Answer: TRUE
93) State-based fair practice laws seek to equalize the channel power of franchisees relative to
franchisors.
Answer: TRUE
94) While franchisors defend restrictive contract provisions regarding purchases of goods and
services as being essential for a common image, franchisees argue that such restrictions may
constitute antitrust.
Answer: TRUE
95) Leased department operators often lease space to other retailers as a means of generating
rental income, using "dead" retail space and providing additional in-store customer traffic.
Answer: TRUE
96) In general, independent vertical marketing systems are most appropriate for specialty goods.
Answer: FALSE
97) When a chain retailer bypasses a wholesaler by performing several wholesale functions, an
independent vertical marketing system is utilized.
Answer: FALSE
98) A manufacturer seeking to control retail selling prices and the in-store competitive
environment should utilize an independent vertical marketing system.
Answer: FALSE
99) Exclusive distribution, fully integrated vertical marketing systems, and franchising are used
by manufacturers to increase their channel control.
Answer: TRUE
100) Both retail franchise cooperatives and consumer cooperatives are owned by their members.
Answer: TRUE
101) While retailing is dominated by independents in terms of percent of retail units, it is

dominated by chains in terms of retail sales dollars. Explain this statement through the concepts
of ease of entry and the competitive advantages and disadvantages of chains versus
independents.
102) How can an independent retailer compete against chains? Specifically address the following
advantages of chains: high bargaining power, efficiency in multiple store operations, the use of
computers, and access to media.
103) a. Distinguish between business format and product/trademark franchising. Provide an

example of each.
b. Under what conditions would you recommend that a potential franchisee consider
product/trademark franchising? ... business format franchising?
104) a. Distinguish among the three types of structural arrangements that dominate retail
franchising.
b. Provide an example of each type.
105) Describe the competitive advantages and disadvantages of franchising from the perspective
of the franchisee.
106) Develop a detailed checklist for a prospective franchisee in evaluating a franchise.

107) a. Discuss the concept of constrained decision making as applied to franchising.

b. Describe how a franchisor can legally limit the discretion of franchisees.
c. Why is constrained decision making so important to franchisors and franchisees?
108) Describe the competitive advantages and disadvantages of franchising from the perspective
of the franchisor.
109) a. Under what conditions would you recommend that a department store lease space to a
leased department operator such as a fur salon?
b. How can the department store safeguard its interests? Explain your answer.
110) a. Under what conditions would you recommend that a manufacturer utilize an independent
vertical marketing system?
b. Under what conditions would you recommend that a manufacturer utilize dual marketing?
111) a. Discuss three strategies by which a retailer can maximize its channel control.
b. Discuss three strategies by which a manufacturer can maximize its channel control.
112) a. Develop a series of steps to organize a consumer cooperative.

b. What factors account for the lack of consumer cooperatives?
Chapter 5 Retail Institutions by Store-Based Strategy Mix
1) A retailer can become a ________ through low prices, specialized products, a large selection,
and superb customer service.
A) destination retailer
B) relationship retailer
C) parasite store
D) value-based retailer
Answer: A
2) An advantage to a retailer's reaching destination retailer status is its ability to ________.

A) charge higher prices for its goods
B) attract shoppers from a larger geographic area
C) attract a better work force
D) develop its own line of private label goods
Answer: B
3) According to the wheel of retailing theory, retail innovators first appear as ________.
A) low-price operators with low costs
B) power retailers
C) firms that provide a wide complement of customer services
D) firms that offer wide selections of highly specialized goods and services
Answer: A
4) According to the wheel of retailing theory, as retail innovators mature, they ________.
A) increase their market share at the expense of high-cost, full-service retailers
B) reduce customer services to concentrate on the price-conscious customer segment
C) further reduce price levels to maintain their low-cost competitive advantage
D) increase their services which leads to higher prices
Answer: D
5) The wheel of retailing suggests that ________.
A) consumers desire customer service over price
B) established retailers should be cautious in changing their strategy from low end to high end
C) retail consumers are store loyal
D) retailers that move up the wheel typically can keep their price-conscious customers
Answer: B
6) In scrambled merchandising, a retailer ________.

A) adds goods and services that may be unrelated to each other and to the firm's original business
B) trades up its customer services to attract a new target market
C) attempts to reduce its out-of-stock inventory
D) attempts to become a "category killer" retailer through its extensive assortment of
merchandise
Answer: A
7) An important advantage of scrambled merchandising to consumers is ________.

A) one-stop shopping
B) self-service merchandising
C) increased customer service
D) lower prices
Answer: A
8) In the long-run, scrambled merchandising is ________ in nature.

A) low-end
B) nondistinctive
C) contagious
D) self-defeating
Answer: C
9) Which theory asserts that retail institutions pass identifiable stages ranging from innovation to
decline?
A) scrambled merchandising
B) the wheel of retailing
C) rationalized retailing
D) the retail life cycle
Answer: D
10) In which stage of the retail life cycle theory does a company alter at least one element of the
strategy mix from that of its traditional competitors?
A) maturity
B) decline
C) introduction
D) growth
Answer: C
11) Progressive firms expand their geographic bases of operations and newer companies enter
the marketplace at which retail life cycle stage?
A) introduction
B) growth
C) maturity
D) decline
Answer: B
12) The retail life cycle stage characterized by market saturation is ________.
A) introduction
B) growth
C) maturity
D) decline
Answer: C
13) Through ________, retailers seek to jointly maximize resources, enlarge their customer base,
and improve productivity and bargaining power.
A) mergers
B) diversification
C) downsizing
D) rightsizing
Answer: A
14) A merger benefits the affected retailers through ________.

A) increased bargaining power
B) greater store name awareness
C) more efficient ordering systems
D) higher return on investment
Answer: A
15) A retailer can reduce dependency on its core operations through ________.
A) a cost-containment strategy
B) downsizing
C) diversification
D) mergers
Answer: C
16) Retailers reduce both initial investments and ongoing costs through ________.
A) adaptation strategies
B) a cost-containment approach
C) positioned retailing
D) mass merchandising
Answer: B
17) The use of standardized store layouts, second-use locations, and buying refurbished
equipment are characteristics of ________.
A) adaptation strategies
B) a cost-containment approach
C) positioned retailing
Answer: B
18) Sales of fill-in merchandise are particularly important to which food-oriented retailer?
A) convenience store
B) conventional supermarket
C) food-based superstore
D) box (limited line) store
Answer: A
19) A departmentalized self-service food store with minimum annual sales of $2 million is a
________.
B) specialty store
C) supermarket
D) food-based superstore
Answer: C
20) Which retail institution is not included in the traditional definition of a supermarket?
B) food-based superstore
C) warehouse store
D) box (limited-line) store
Answer: A
21) The average gross margins (selling prices less merchandising costs) for conventional
supermarkets have averaged about what percent of sales?
A) 5-6
B) 10-12
C) 20-22
D) 40-42
Answer: C
22) A combination store combines ________ into one facility.

A) multiple leased departments
B) a supermarket and a general merchandise retail operation
C) a department store and a full-line discount house
D) a warehouse store and a specialty store
Answer: B
23) A huge form of combination store is a ________.

B) supercenter
C) box (limited-line) store
D) warehouse store
Answer: B
24) Which food-based retail institution depends on aggressively priced private-label or

controlled brands and cut-case displays?
A) food-based superstore
B) box (limited-line) store
C) convenience store
D) conventional supermarket
Answer: B
25) A central aspect of the retail strategy of warehouse stores is ________.

A) special purchases of popular brands
B) a concentration on private label or controlled brands
C) use of high-rent retail locations
D) a focus on fill-in merchandise
Answer: A
26) A retailer that concentrates on selling one goods or service line is a ________ store.
A) full-line discount
B) specialty
C) variety
D) department
Answer: B
27) A category killer store is ________.

A) an especially large specialty store
B) an especially aggressive department store
C) a large combination store
D) any retail store that dominates a geographic market in terms of market share
Answer: A
28) Which retail institution has separate units responsible for buying, promotion, customer
service, and control?
A) full-line discount store
B) factory outlet
C) department store
D) variety store
Answer: C
29) Which retail institution has the most selection of any general merchandise retailer?
B) factory outlet
C) variety store
D) department store
Answer: D
30) Two types of retail institutions satisfy the definition of a department store: the traditional
department store and the ________.
B) supercenter
C) variety store
D) hypermarket
Answer: A
31) Dollar discount stores and closeout chains are successful spinoffs of the ________.
B) specialty store
C) department store
D) variety store
Answer: D
32) Which retail institution purchases brand-name merchandise on an opportunistic basis?

A) warehouse store
B) full-line discount store
C) flea market
D) off-price chain
Answer: D
33) A significant factor in the growth of factory outlets is the ________.

A) growth of off-price chains
B) desire of suppliers to control where their discounted merchandise is sold
C) desire for independent vertical systems by manufacturers
D) ability of outlets to purchase merchandise for cash
Answer: B
34) Which institution sells goods to both final consumers and retailers?
A) retail cooperative
B) flea market
C) factory outlet
D) membership club
Answer: D
35) The use of nontraditional sites is generally associated with which retail institution?
B) flea market
C) factory outlet
D) membership club
Answer: B
36) A destination retailer ________.

A) is patronized because of convenience
B) has a large proportion of outshoppers
C) is a parasite
D) uses price as its major component in the retailing mix
Answer: B
37) A destination retailer can be differentiated from other retailers on the basis of its ________.
A) high overall value orientation
B) small trading area
C) low overall prices
D) high consumer loyalty
Answer: D
38) A destination retailer is characterized by ________.

A) high consumer loyalty
B) multiple department organization structure
C) an extensive direct marketing operation
D) a low-cost operating structure
Answer: A
39) According to the wheel of retailing theory, retail innovators have what major advantage over
traditional retailers?
A) being a low-cost provider
B) a more convenient location
C) superior service
D) exclusive merchandise lines
Answer: A
40) According to the wheel of retailing theory, which pricing strategy is used by a retailer during
the innovation phase?
A) pricing above the market
B) pricing at the market
C) pricing below the market
D) skimming pricing
Answer: C
41) According to the wheel of retailing, retail institutions become vulnerable when ________.
A) the innovator's strategy is no longer considered unique by its target market
B) consumers do not accept the retailer's new price-conscious image
C) competitors can match the innovator's low-price strategy
D) new institutions have a significant cost advantage due to the innovator's upgrading its image
and costs
Answer: D
42) Which retail institutions best fit the innovator stage of the wheel of retailing theory?
A) convenience stores, food-based superstores, and supercenters
B) category killer stores, factory outlets, and Web-based direct marketers
C) food-based superstores, box (limited-line) stores, and combination stores
D) vending machines, direct selling, and direct marketing
Answer: B
43) The beginning stage of the wheel of retailing theory (when low-price institutions first appear)
corresponds to which stage of the retail life cycle stage?
A) maturity
B) decline
C) introduction
D) growth
Answer: C
44) Scrambled merchandising is most similar to which retail institution format?

B) chain
C) franchising
D) leased department
Answer: D
45) A pharmacy (due to increased competition from a neighboring supermarket) has now added
an exclusive line of cosmetics, and has expanded its line of greeting cards and gift wrapping
items. This strategy illustrates ________.
C) the retail life cycle
D) rationalized retailing
Answer: A
46) The evolution of the conventional supermarket into a combination store, food-based
superstore, and supercenter can be explained by which retail concept?
A) wheel of retailing
B) the retail life cycle
D) scrambled merchandising
Answer: D
47) Which food-based retail institutions best fit the scrambled merchandising concept?
A) warehouse store and conventional supermarket
B) combination store and food-based superstore
C) warehouse store and box (limited-line) store
D) convenience store and conventional supermarket
Answer: B
48) A retailer that believes that a retail life cycle resembles a fad should use ________.
A) rationalized retailing
B) positioned retailing
C) a cost-containment approach
Answer: C
49) The retail life cycle stage corresponding to an innovative retailer's first becoming vulnerable
to a new retailer with a lower cost structure is ________.
A) maturity
B) decline
C) accelerated development
D) innovation
Answer: A
50) A retailer should limit its investment in essential expenditures during which stage of the
retail life cycle?
A) maturity
B) decline
C) growth
D) introduction
Answer: B
51) The difference between a retail merger and diversification is based on the ________.
A) identity of the new business
B) size of the acquisition
C) similarity of the acquired business to the original business
D) source of capital for the acquisition
Answer: C
52) The food-oriented retailer with the narrowest width and depth of assortment is the ________.
A) conventional supermarket
D) convenience store
Answer: D
53) Which food-oriented retailer concentrates on the sale of fill-in items?

D) convenience store
Answer: D
54) An advantage of the self-service concept as applied to both food-oriented and general
merchandise retailers is ________.
A) increased impulse purchases
B) lower space requirements
C) improved pilferage control
D) lower fixturing expenses
Answer: A
55) The major difference between a combination store and a food-based superstore is based on
the ________.
A) size of the average unit in square feet
B) use of individual versus centralized checkouts
C) percent of sales from general merchandise
D) percent of private-label sales
Answer: C
56) Which of the following allows a retailer to accomplish one-stop shopping?

A) franchising
B) licensing
C) independent vertical marketing systems
D) food-based superstores
Answer: D
57) The food-oriented retailer with the greatest width of assortment is the ________.
B) supercenter
C) combination store
D) food-based superstore
Answer: B
58) Opportunistic buying is a key aspect of the retail strategy of ________.

A) warehouse stores and off-price chains
B) box (limited-line) stores and conventional supermarkets
C) supercenters and factory outlets
D) supercenters and vending machines
Answer: A
59) A narrow, deep product mix characterizes which retail institution?

A) department store
B) off-price chain
C) variety store
D) specialty store
Answer: D
60) A category killer store is a form of which retail institution?

A) variety store
B) specialty store
C) department store
D) off-price chain
Answer: B
61) Department stores have increasingly used designer boutiques to highlight specific designers
to small market segments. This strategy most closely resembles that of which retail institution?
A) superstore
C) variety store
D) specialty store
Answer: D
62) Which retail institution has the greatest assortment?

A) variety store
C) factory outlet
D) department store
Answer: D
63) While traditional department stores and full-line discount stores are both classified as
department stores, full-line discount stores are more likely than traditional department stores to
________.
A) allow customers to return and exchange merchandise on a decentralized basis
B) use credit sales
C) use centralized checkouts
D) use catalog-based ordering
Answer: C
64) Department stores are now facing increased competition from off-price chains, factory
outlets, membership clubs, and flea markets. This illustrates ________.
D) the retail life cycle
Answer: B
65) A factory outlet is an example of which form of vertical marketing system?

A) fully integrated system
C) independent vertical marketing system
D) diversified vertical marketing system
Answer: A
66) Which retail institution is an example of vertical integration?

A) membership club
B) off-price chain
C) factory outlet
D) warehouse store
Answer: C
67) Manufacturers often prefer to sell their closeouts, canceled orders, and out-of-season
merchandise to factory outlets rather than to off-price chains because ________.
A) factory outlets generate cash flow for use in manufacturing
B) manufacturer-owned outlets can generate high profit margins
C) manufacturers can control where branded products are ultimately sold
D) off-price chains have too much bargaining power
Answer: C
68) A manufacturer sells its goods through both department stores and factory outlets. This
illustrates a(n) ________.
B) dual marketing system
Answer: B
69) Low operating costs characterize which of the following retailing institutions?
A) conventional supermarket, convenience store, and food-based superstore
B) variety store, specialty store, and full-line discount store
C) factory outlet, membership club, and warehouse store
D) box (limited line) store, membership club, and variety store
Answer: C
70) Fees to customers account for a large proportion of total profits for ________.
A) membership clubs
B) flea markets
C) factory outlets
D) owned-goods service providers
Answer: A
71) A destination retailer has a relatively small trading area.

Answer: FALSE
72) A fundamental assumption of the wheel of retailing theory is that innovation is on the basis
of a change in at least one component of the retail mix.
Answer: FALSE
73) Two extreme cases of the wheel of retailing are the low-end and the high-end strategy.
Answer: TRUE
74) Increased consumer price consciousness explains much of the popularity of scrambled
merchandising.
Answer: FALSE
75) Scrambled merchandising has a contagious effect that can affect a variety of retail
institutions.
Answer: TRUE
76) The use of prototype stores, second-use locations, and the buying of refurbished equipment
are all an example of a cost-containment approach.
Answer: TRUE
77) Conventional supermarkets, food-based superstores, combination stores, box (limited-line)

stores, and warehouse stores are all included in the general definition of a supermarket.
Answer: TRUE
78) Conventional supermarkets can be profitable at gross margins that are far lower than
warehouse stores.
Answer: FALSE
79) The largest food-based retailer in terms of average store size is the supermarket.
Answer: FALSE
80) A combination store consists of a supermarket and a leased department general merchandise
store operator.
Answer: FALSE
81) The box (limited-line) store illustrates the first stage of the wheel of retailing.
Answer: TRUE
82) A category killer is a form of specialty store.
Answer: TRUE
83) Off-price chains typically purchase their merchandise through traditional wholesale
channels.
Answer: FALSE
84) Factory outlets are typically located at a far distance from a manufacturer's traditional
department store and specialty store customers.
Answer: TRUE
85) Membership clubs sell merchandise to both wholesale and final consumers.
Answer: TRUE
86) Destination retailers are sought after as tenants by shopping center developers because of
their large customer following.
Answer: TRUE
87) A small retailer can become a destination retailer offering consumers superior selection,
exclusive goods and services, and superior customer service.
Answer: TRUE
88) A fundamental assumption of the wheel of retailing theory is high customer loyalty.
Answer: FALSE
89) The vulnerability of a low-cost retailer in the wheel of retailing theory due to trading up
corresponds to the accelerated development stage of the retail life-cycle theory.
Answer: FALSE
90) The growth of scrambled merchandising means that manufacturers will have to increasingly
utilize selective distribution.
Answer: FALSE
91) Retail institutions evolving from introduction to growth require a high level of investment to
sustain growth.
Answer: TRUE
92) An appropriate retailer action in the maturity stage of the retail life cycle is to establish a
preemptive market position by leasing ideal locations to lock out competition.
Answer: FALSE
93) Prototype stores are often used as a cost-containment approach.

Answer: TRUE
94) Supermarkets have responded to the growth of the convenience store by being open for 24
hours and by installing express lanes for small purchases.
Answer: TRUE
95) The evolution of the combination store and food-based superstore from the conventional
supermarket can be best explained by the wheel of retailing theory.
Answer: FALSE
96) The rapid initial growth of the warehouse store and the off-price chain can be explained by
the wheel of retailing theory.
Answer: TRUE
97) The major competitive advantage of category killer stores is their high level of customer
service.
Answer: FALSE
98) Many retail analysts have begun to question the long-term viability of the department store.
According to one scenario, department stores are now out-priced by off-price chains, out-
merchandised by category killer stores, and out-serviced by specialty stores.
Answer: TRUE
99) High channel control is associated with the use of factory outlets as retail channels.
Answer: TRUE
100) Flea market operators can utilize the Web to supplement their traditional locations.
Answer: TRUE
101) Develop a strategy for a small independent leather goods retailer to become a destination
retailer.
102) Relate the wheel of retailing, scrambled merchandising, and the retail life cycle concepts to
one another.
103) a. Which recent institutional changes in retailing could have been forecast from the wheel
of retailing theory? Explain.
b. Which recent institutional changes in retailing could have been forecast from the scrambled
merchandising theory? Explain.
104) a. Identify the market characteristics of each stage of the retail life cycle.
b. Identify appropriate retailer actions for each stage of the retail life cycle.
105) Categorize five major food-oriented retailers using a width and depth of assortment
classification system. Explain your category choice for each retailer.
106) a. Differentiate among the retail strategy mix of combination stores, box (limited-line)
stores, and warehouse stores.
b. How can a conventional supermarket effectively compete against a convenience store?
107) a. Many retail analysts have begun to question the long-term viability of the department
store. According to one scenario, department stores are now out-priced by off-price chains, out-
merchandised by category killer stores, and out-serviced by specialty stores. Comment on this
statement.
b. How can a department store effectively compete against these forms of retail institutions? Be
specific in your answer.
108) Differentiate among the retail strategy mix of variety stores, traditional department stores,
and full-line discount stores.
109) How can a traditional department store compete against a membership club and a flea
market?
110) Explain how a full-line discount store can effectively compete against an off-price chain
and a membership club.
111) a. Differentiate between an off-price chain and a factory outlet.

b. Why do many manufacturers favor the use of factory outlets in contrast to off-price chains to
sell retailers' canceled orders, end-of-season merchandise, and so on?
112) Discuss the retail strategy mix of a membership club and a flea market.
Chapter 6 Web, Nonstore-Based, and Other Forms of Nontraditional Retailing
1) The most sophisticated form of retailing that offers a consistent, uninterrupted, and seamless
experience regardless of channel or device is ________.
A) single-channel retailing
B) multichannel retailing
C) dual marketing
D) omnichannel retailing
Answer: D
2) Multichannel and omnichannel channel retailing both engage in ________.

A) nonstore retailing
B) store-based retailing
C) vertically integrated marketing
D) channel control retailing
Answer: A
3) A customer orders products by mail, phone, fax, tablet, or computer in ________.

A) services retailing
B) direct marketing
C) direct selling
D) retail catalog showrooms
Answer: B
4) Direct marketers are typically divided into two broad categories: ________ and ________.
A) single channel; dual channel
B) static; interactive
C) mail; phone
D) general; specialty
Answer: D
5) Which of these is not a strategic business advantage of direct marketing?
A) Products can be examined prior to purchase.
B) Reduced inventories can be held.
C) A very large geographic area can be efficiently covered.
D) Customers encounter no crowds or parking congestion.
Answer: A
6) Unlike traditional marketers, the profitability of direct marketers is highly sensitive to which
types of expenses?
A) rental costs
B) postage and paper stock costs
C) energy costs
D) fringe benefit expenses
Answer: B
7) Which of the following is a not a disadvantage to a catalog-based direct marketer?

A) the inability to pinpoint specific customer segments through mailing lists
B) the effect of increases in postal rates and paper stock costs on profits
C) high clutter due to the large number of catalogs that are mailed
D) the inability to revise prices when catalogs are prepared months in advance of distribution
Answer: A
8) Direct marketers are most affected by which federal legislation?

A) Robinson-Patman Act
B) 30-day rule
C) Green River ordinances
D) Blue laws
Answer: B
9) The "30-day rule" requires direct marketers to ________.

A) ship orders within 30 days of receipt or notify customers of delays
B) have 30 days worth of inventory on hand based on normal sales rates
C) notify consumers of any delay by mail, phone, fax, or computer
D) cancel orders if they cannot be shipped within 30 days of receipt
Answer: A
10) Direct marketing is forecast to grow based on ________.
A) greater product standardization and the prominence of well-known brands
B) the growth of private label brands
C) direct marketing clutter
D) reduced postal rates and paper stock costs
Answer: A
11) Conventional vending machines are generally not considered as a form of direct marketing
since ________.
A) most transactions involve beverages, food items, and cigarettes
B) consumers do not complete transactions via mail, phone, fax, or computer
C) the transaction is automated
D) no credit or checks are involved as part of the transaction
Answer: B
12) A way to collect, store, and use relevant information about customers is ________.
A) marketing information systems
B) database retailing
C) marketing research
D) one-on-one research
Answer: B
13) A retailer keeps an updated record of its customers' purchases, method of payment, and size
and color preferences. This illustrates ________.
A) the 80-20 principle
B) database retailing
C) direct marketing
D) Web retailing
Answer: B
14) The high level of competition in direct marketing is due to ________.

A) high control over postal rates and paper costs
B) high profitability of existing direct marketers
C) low technological requirements for Web access
D) ease of entry into direct marketing
Answer: D
15) Direct marketing is increasingly used by store-based retailers. This illustrates ________.
A) multichannel retailing
B) downsizing
C) diversification
D) vertical integration
Answer: A
16) Direct marketing is increasingly used by store-based retailers since it ________.

A) increases sales to the store's current target market
B) is an inexpensive way to reach a broad geographic base
C) appeals primarily to male shoppers
D) enables the retailer to offer distinctive merchandise to small market segments
Answer: B
17) A direct marketer can economically appeal to the needs of a particular customer segment
through ________.
A) regional editions of catalogs
B) infomercials
C) specialogs
D) micro-merchandising
Answer: C
18) The promotional strategy of shopping networks ________.

A) enables purchases to be made only while an item is being advertised
B) relies heavily on cooperative advertising allowances
C) uses fringe times on cable television
D) stresses the use of infomercials
Answer: A
19) Infomercials are generally broadcast ________.

A) at peak hours on broadcast television
B) continuously on broadcast television
C) continuously on cable television
D) at fringe times
Answer: D
20) While an infomercial may be 30 minutes in length, it commonly has timed segments since
________.
A) the advertiser wants to better distribute ordering times
B) the advertiser can change the advertised product if the response is low
C) media rates are reduced
D) most viewers watch only a few minutes at a time
Answer: D
21) The first step in developing a direct marketing strategy is ________.

A) generating customers
B) business definition
C) customer response
D) maintaining the database
Answer: B
22) Which customer classification is least likely to respond to a direct marketer's efforts?
A) regulars
B) nonregulars
C) trivial buyers
D) nonrespondents
Answer: D
23) A typical response rate for a direct marketer is ________.

A) very low
B) moderate
C) high
D) very high
Answer: A
24) In general, which of the following would have the highest response rate to a direct marketer's
promotion?
A) a mailing of a general clothing catalog featuring sales merchandise
B) a mailing of a special magazine subscription offer which includes a sweepstakes offer
C) a mailing to past purchasers of a collectible doll for the third doll in a series
D) a mailing based on a rented list
Answer: C
25) An ethical issue that affects direct marketers relates to ________.

A) the sale of mailing lists
B) different prices charged in store and catalog operations
C) the distribution of overstocked goods to factory outlets
D) the cancellation of orders from suppliers that cannot deliver goods on time
Answer: A
26) Telemarketing is most closely part of ________.

A) direct marketing
B) direct selling
C) nontraditional retailing
D) interactive retailing
Answer: B
27) Direct selling and direct marketing are similar in that ________.
A) both are forms of dual distribution
B) both enable 24-hour per day ordering
C) mail and phone solicitations are used in both
D) store locations and fixtures are not necessary
Answer: D
28) Under the FTC's Telemarketing Sales Rule, telemarketers must ________.
A) disclose their identity, and that the purpose of the call is selling
B) offer a refund to unsatisfied customers
C) initiate all calls between 9 A.M. and 9 P.M.
D) remove any prospect from their phone list on written request
Answer: A
29) Which statement concerning vending machines is not correct?

A) Newspapers and cigarettes account for a high percent of vending machine sales.
B) Well-known brands and standardized nonfood items are best suited for vending machine
sales.
C) Eighty-five percent of vending machine sales involve hot and cold beverages and food items.
D) Most vending machines still do not have dollar bill changers.
Answer: A
30) Which statement concerning the World Wide Web and the Internet is not correct?
A) The World Wide Web is one way of accessing the Internet.
B) The World Wide Web accounts for five percent of overall U.S. retail sales.
C) The World Wide Web has graphics, sound, video, and audio capability.
D) Almost all online interactive retailing is conducted on the World Wide Web.
Answer: B
31) Which statement concerning the characteristics of World Wide Web users is not correct?
A) Females shop on the Web more often than males.
B) Consumers with high levels of education use the Web more often than lower-educated
consumers.
C) Adults over 60 use the Web most often.
D) Web users use the Web for information, entertainment, and interactive communications.
Answer: C
32) Which of the following is a negative feature for retailers of the World Wide Web?
A) the small size of the potential audience
B) the poor demographics of World Wide Web users
C) low degree of interactivity between users and retailer sponsor
D) credit card security issues reducing consumer purchasing
Answer: D
33) Which of the following is not an advantage of using the Web by retailers?
A) A Web site generally costs less to develop and maintain than a store.
B) The potential marketplace on the Web is large and dispersed.
C) Web sites do not have to be maintained after they are developed.
D) People can visit Web sites at any time.
Answer: C
34) A freestanding, interactive computer terminal that displays products and related information
on a video screen is commonly referred to as a(n) ________.
A) video kiosk
B) interactive vending machine
C) World Wide Web scanner
D) Internet scanner
Answer: A
35) A major advantage of the use of airport retailing by a retailer is ________.

A) tighter security at airports
B) access to a captive audience
C) interest in duty-free shopping by domestic travelers
D) availability of larger stores
Answer: B
36) Which of the following encompasses buy on line and pick up in store?
A) single-channel retailing
B) multichannel retailing
C) omnichannel retailing
D) nonstore retailing
Answer: C
37) A major advantage of omnichannel retailing is the ability of consumers to ________.

A) examine products prior to purchase
B) receive merchandise several days after placing an order
C) use multiple channels and devices in their purchase journey
D) receive discounts based on direct marketers' lower costs
Answer: C
38) Which is not a reason why direct marketing is especially suitable to small retailers?
A) Small retailers can inexpensively expand their trading area through direct marketing.
B) The costs and time demands of developing and maintaining a mailing list are low.
C) Consumers cannot determine the size of a retailer based on its catalog or Web site.
D) The costs of entry into direct marketing are low.
Answer: B
39) Merchandise cannot generally be examined by consumers in which retail formats?

A) vending machines and direct marketing
B) direct selling and specialty stores
C) membership clubs and flea markets
D) retail catalog showrooms and membership clubs
Answer: A
40) A direct marketer can best respond to the increases in paper costs by ________.
A) reducing the height and width of the catalog and lowering the size of all photographs
proportionately
B) using less costly grades of paper for photographs
C) recommending a Web site for additional information
D) purchasing recycled paper to appeal to ecologists, despite the still higher costs
Answer: C
41) Many direct marketers used to order merchandise after orders were placed by consumers.
Now, they place orders in anticipation of demand. This change in strategy is largely due to
________.
A) concern over better customer service
B) the "30-day rule"
C) discounts on purchases in advance of customer orders
D) delays in order fulfillment houses
Answer: B
42) Direct selling is not considered part of direct marketing since ________.
A) personal communication is used to initiate customer contact
B) no database is maintained
C) consumers do not interact with the firm
D) orders are not typically placed via mail or computer
Answer: A
43) The most valuable asset of a highly profitable direct marketer is generally its ________.
A) owned mailing lists
B) rented mailing lists
C) employees
D) inventory
Answer: A
44) Which lifestyle trend increased the desirability of direct marketing for consumers?
A) increased consumer sophistication
B) poverty-of-time
C) component lifestyle
D) increased ecological awareness
Answer: B
45) Low costs to develop and maintain a catalog or Web site, the ability to outsource order
fulfillment operations, and low inventory needs all contribute to ________.
A) a low level of competition within direct marketing
B) high direct marketing sales
C) low barriers to entry for direct marketing
D) the need for the 30-day rule of the Federal Trade Commission
Answer: C
46) A firm uses both direct selling as well as department store formats to sell its cosmetic
products. This illustrates ________.
B) a partially integrated system
C) a fully integrated system
D) multichannel retailing
Answer: D
47) Multichannel retailing is an example of what form of market segmentation strategy?

A) differentiated
B) homogeneous
C) skimming
D) niche
Answer: A
48) A direct marketer can effectively cater to a highly specialized niche market through use of
a(n) ________.
A) search engine
B) selective binding
C) infomercial
D) specialog
Answer: D
49) A direct marketer's selling advertising space to noncompeting firms in its catalogs most
closely resembles ________.
A) vertical cooperative advertising
B) a leased department
C) an infomercial
D) a regional edition
Answer: B
50) The promotional strategy of most infomercials ________.

A) stresses presold merchandise
B) stresses infomercials
C) encourages consumers to act immediately; otherwise, they have to wait for a special to be
repeated
D) utilizes network programming
Answer: C
51) Infomercials are ideally suited for ________.

A) nationally advertised manufacturer brands
B) goods that are not widely available that require a demonstration to show their benefits
C) private labels of major retailers
D) goods priced below market
Answer: B
52) A direct marketer determines the goods and services sold as well as its target market in the
________ stage of a direct marketing strategy.
A) order fulfillment
B) generating customers
C) business definition
D) consumer response
Answer: C
53) A fishing specialties retailer concerned about the quality of a list of fly fishermen enthusiasts
seeks to test a mailing list broker's mailing list. The retailer should ________.
A) purchase a mailing list
B) rent a mailing list
C) purchase a PC-based list of homeowners and mail catalogs to selected towns
D) seek to quickly develop its own list through a Web site
Answer: B
54) Which prospective customers are most likely to respond to a direct marketer's offering?
A) regulars and nonregulars
B) regulars and new contacts
C) new contacts and nonregulars
D) new contacts and nonrespondents
Answer: A
55) Which prospective customers are least likely to respond to a direct marketer's offering?
A) regulars and nonregulars
B) regulars and new contacts
C) new contacts and nonregulars
D) new contacts and nonrespondents
Answer: D
56) The handling of merchandise, including addressing, mailing, and billing customers is often
conducted by third-party service providers on a fee basis. These firms are called ________.
A) direct marketing service specialists
B) mailing list brokers
C) expediters
D) order fulfillment firms
Answer: D
57) The "30-day rule" most directly relates to which stage of a direct marketing strategy?
A) presenting the message
B) measuring results
C) maintaining the database
D) order fulfillment
Answer: D
58) A direct marketer can reduce its order fulfillment responsibilities by ________.
A) using a public warehouse
B) using a private warehouse
C) retaining a third party order fulfillment service provider
D) using a bonded warehouse
Answer: C
59) A direct marketer determined that its customers' high levels of dissatisfaction with the firm
concerned late delivery, the wrong items being delivered, or items arriving in defective condition
due to being damaged in transit. These complaints concern which direct marketing strategy?
A) order fulfillment
B) customer response
C) measuring results
D) customer contact
Answer: A
60) While a direct marketer's overall response rate is good, its average purchase amount per
catalog is below average. Most of its orders were placed by phone. The direct marketer should
________.
A) train its telephone-based personnel to cross-sell merchandise
B) utilize smaller catalogs for new contacts
C) utilize larger catalogs for regular customers
D) encourage customers to mail in their orders
Answer: A
61) A computer magazine routinely sells or rents mailing lists of its subscribers to local
computer stores. The magazine classifies its customers into categories based on their completing
a comprehensive questionnaire. The magazine's practice constitutes a(n) ________.
A) ethical practice
B) invasion of privacy
C) vertical cooperative promotion
D) horizontal cooperative promotion
Answer: B
62) Which forms of nonstore and nontraditional retailing are used by retailers that need to
demonstrate their products to consumers for at least 15 minutes to show their unique features?
A) the World Wide Web and video kiosks
B) the World Wide Web and video catalogs
C) infomercials and direct selling
D) vending machines and direct marketing
Answer: C
63) The depersonalization of many neighborhoods and the increase in working women have had
the greatest detrimental effect on which retailer?
A) direct marketing
B) direct selling
C) vending machines
D) retail catalog showroom
Answer: B
64) The use of party plans and group sales are strategies used by ________.
A) vending machine operators
B) direct marketers
C) Web-based marketers
D) direct sellers
Answer: D
65) Vending machine operators can expand their range of goods sold by ________.
A) increasing the number of machines in offices and factories
B) using microprocessors to record consumer preferences
C) adding dollar bill changers and debit card readers to current and new machines
D) adding voice synthesizers to existing and new machines
Answer: C
66) Rent (or a percent of sales) has to be paid for each location with ________.
A) video kiosks and vending machines
B) the World Wide Web and the Internet
C) the Internet and video catalogs
D) video catalogs and video kiosks
Answer: A
67) A major factor contributing to the low level of sales on the Web is ________.
A) consumer concern for credit card security on the Web
B) the need to constantly update each Web site
C) the poor demographics of Web users
D) the need for a Web master to be available during the hours the site is available for viewing
Answer: A
68) A trade-off to using a high degree of graphics on a Web site is the ________.
A) need for high-speed modems to download the graphics
B) need to constantly reconfigure the graphics
C) larger size of the Web site
D) increased downloading time for graphics-intensive sites
Answer: D
69) Some Web sites are a conglomeration of complementary noncompeting retailers. The Web
site coordinator is responsible for promoting the master Web site address and for maintaining the
computer server. Each retailer is then responsible for developing and updating its own Web site.
This arrangement closely resembles a ________.
A) central business district
B) shopping center
D) franchise
Answer: B
70) Which nontraditional retailing has a temporary captive audience?

A) airport retailing
B) vending machines
C) infomercials
D) direct marketing
Answer: A
71) Single-channel retailing is less complex to manage than multichannel retailing.

Answer: TRUE
72) Direct marketing, direct selling, and vending machines are all forms of nonstore retailing.
Answer: TRUE
73) Direct marketing enables a retailer to cover a large geographic area inexpensively and
efficiently.
Answer: TRUE
74) The profitability of catalog-based direct marketers is highly sensitive to postal rates and
paper costs.
Answer: TRUE
75) Direct selling and conventional vending machines are included as forms of direct marketing
since they are nonstore activities.
Answer: FALSE
76) The ease of entry into direct marketing means that this is a highly competitive industry.
Answer: TRUE
77) The addition of direct marketing to a store-based retailer is a complementary (instead of

competitive) activity.
Answer: TRUE
78) Specialogs are often used to target new customers.

Answer: FALSE
79) Ordering information is flashed on the screen once in an infomercial.

Answer: FALSE
80) A direct marketing strategy should start with media selection.
Answer: FALSE
81) Direct marketers can either rent or purchase mailing lists.

Answer: TRUE
82) Most direct sales activity currently occurs in the workplace.

Answer: FALSE
83) Despite the negative publicity, sales of cigarettes through vending machines has increased in
recent years.
Answer: FALSE
84) The World Wide Web is the multimedia-based portion of the Internet.
Answer: TRUE
85) The Web enables a retailer to efficiency reach geographically dispersed customers, including
foreign ones.
Answer: TRUE
86) A major disadvantage of direct marketing over traditional forms of retailing is its lack of
consumer convenience.
Answer: FALSE
87) Direct selling is considered part of direct marketing based on its means of customer contact.
Answer: FALSE
88) All forms of direct marketing rely on the development and maintenance of a consumer
database.
Answer: TRUE
89) A database could easily be the most valuable asset for a direct marketer.
Answer: TRUE
90) A direct marketing operation can expand the geographic customer base for an existing store-
based retailer.
Answer: TRUE
91) A direct marketer can reduce its catalog costs to selected target markets by using specialogs
and selective bindings.
Answer: TRUE
92) In planning an infomercial, a retailer should assume that the average viewer watches at least
half of the advertisement.
Answer: FALSE
93) A direct marketer contracts with a mailing list broker for one-time use of a mailing list. This
constitutes a mailing list purchase.
Answer: FALSE
94) Direct marketers of collectibles have the same repurchase rate as direct marketers of other
merchandise.
Answer: FALSE
95) It is comparatively difficult to evaluate the results of a direct marketing effort.

Answer: FALSE
96) A direct marketer that uses a dual channel of distribution strategy does not need to maintain a
common image between its store- and catalog-based retail operations.
Answer: FALSE
97) Sales productivity in direct selling is comparatively low, due to the difficulty of reaching
prospects.
Answer: TRUE
98) Even though it is a nonstore retailer, vending machine operators need to pay rent (often as a
percent of sales) for the use of a given location.
Answer: TRUE
99) A major advantage of the use of the World Wide Web over paper-based catalogs is the
ability of a retailer to immediately change pricing and product availability information.
Answer: TRUE
100) An advantage of the World Wide Web, as compared to traditional paper-based catalogs, is
freedom from concern over paper stock and postage prices.
Answer: TRUE
101) a. Describe the major advantages of buy online and pickup in store from a consumer's
perspective.
b. Describe the major advantages of buy online and pickup in store from a retailer's perspective.
102) a. Outline the strategic business advantages of a retailer's use of direct marketing.
b. What are the major limitations to direct marketing?
103) Why are direct selling and conventional vending machines not generally considered part of
direct marketing?
104) What are the advantages to a store-based retailer adding a direct marketing operation? ... the
disadvantages?
105) Outline the steps in conducting a direct marketing strategy.

106) Describe four measures that a direct marketer can use to measure the results of a
solicitation.
107) a. Outline the major reasons why direct selling has fallen or stagnated over the past few
years.
b. How can direct selling firms overcome these problems?
108) Discuss the major recent retail developments in vending machines.

109) Differentiate between the Internet and the World Wide Web.
110) Describe the positive features of the World Wide Web for a retailer. ...the negative
elements.
111) Under what circumstances would you recommend that a retailer utilize a video kiosk?
112) What are the relative advantages and disadvantages of airport retailing as compared to a
traditional retail site?

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Retail Management: A Strategic Approach, 13e (Berman/Evans/Chatterjee)

Chapter 4 Retail Institutions by Ownership

1) The basic format or structure of a business is referred to as ________.

5) A major competitive advantage of independent retailers is ________.

7) An independent can increase its bargaining power with a supplier by ________.

8) A unique disadvantage for independent retailers is ________.

9) Retail chains account for ________ percent of total retail sales.

10) A chain retailer can achieve wholesale cost efficiencies by ________.

12) A major disadvantage of centralized purchasing to a chain retailer is ________.

13) An example of a product/trademark franchise is a(n) ________.

14) Business format franchising is characterized by ________.

21) A benefit of franchising to a franchisor is ________.

24) The leading form of vertical marketing system is ________.

26) A benefit to the use of a fully integrated system is ________.

27) A fully integrated system represents ________.

31) A manufacturer can exert channel control through ________.

33) Wholesalers can possess channel control through ________.

34) A retail firm owned by its customer members is a(n) ________.

36) Which statement concerning ease of entry into retailing is correct?

41) A major competitive advantage of chains in contrast to independents is ________.

46) In contrast to business format franchising, in product/trademark franchising, franchisees

55) Constrained decision making is most commonly found in ________.

61) An advantage of a leased department form of organization to a lessee is ________.

62) Which of these is not a major disadvantage of a leased department to a lessee?

68) Manufacturers/service sponsors can exert channel control through ________.

72) Approximately 70 percent of all retail stores are operated by independents.

73) In general, when compared with manufacturing activities, retailing is characterized by

74) Orderly managerial succession is an advantage of an independent retailer form of

78) Product/trademark franchisees operate in a relatively autonomous manner from their

83) Maximum channel control occurs in an independent vertical marketing system.

101) While retailing is dominated by independents in terms of percent of retail units, it is

103) a. Distinguish between business format and product/trademark franchising. Provide an

106) Develop a detailed checklist for a prospective franchisee in evaluating a franchise.

107) a. Discuss the concept of constrained decision making as applied to franchising.

112) a. Develop a series of steps to organize a consumer cooperative.

2) An advantage to a retailer's reaching destination retailer status is its ability to ________.

6) In scrambled merchandising, a retailer ________.

7) An important advantage of scrambled merchandising to consumers is ________.

8) In the long-run, scrambled merchandising is ________ in nature.

14) A merger benefits the affected retailers through ________.

22) A combination store combines ________ into one facility.

23) A huge form of combination store is a ________.

24) Which food-based retail institution depends on aggressively priced private-label or

25) A central aspect of the retail strategy of warehouse stores is ________.

27) A category killer store is ________.

32) Which retail institution purchases brand-name merchandise on an opportunistic basis?

33) A significant factor in the growth of factory outlets is the ________.

36) A destination retailer ________.

38) A destination retailer is characterized by ________.

44) Scrambled merchandising is most similar to which retail institution format?

53) Which food-oriented retailer concentrates on the sale of fill-in items?

56) Which of the following allows a retailer to accomplish one-stop shopping?

58) Opportunistic buying is a key aspect of the retail strategy of ________.

59) A narrow, deep product mix characterizes which retail institution?

60) A category killer store is a form of which retail institution?

62) Which retail institution has the greatest assortment?

65) A factory outlet is an example of which form of vertical marketing system?

66) Which retail institution is an example of vertical integration?

71) A destination retailer has a relatively small trading area.