All Cases For Retailing Management, 11th Edition By Michael Levy, Barton Weitz and Dhruv Grewal

Case Synopsis, Uses, Discussion Questions, and Answers

ALL CASES All Cases For Retailing Management, 11th Edition By Michael Levy, Barton Weitz and Dhruv Grewal

NOTES: NOTES:

CASES SYNOPSIS, USES, DISCUSSION QUESTIONS, AND ANSWERS Uses of Cases

CASE 1. Get It, Go, Just Walk Out: Amazon’s Proposed Reinvention of the Checkout Process 2. Making Technology Personal: How Wayfair Is Leveraging High-Tech Tools to Connect with Consumers

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   3. Making Macy’s Meaningful: Moves by the Retail Chain to Maintain Its Competitiveness  

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4. Find ―Good Stuff Cheap‖ at Ollie’s Bargain Outlet 1 © MCGRAW HILL LLC. ALL RIGHTS RE SERVED. NO REPRODUCT ION OR DISTRIBUTION WITHOUT THE PRIOR WRITTEN CONSENT OF MCG RAW HILL LLC.

Case Synopsis, Uses, Discussion Questions, and Answers

CASE

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5. Tractor Supply Company Targets the Part-Time Rancher    6. Fast Fashion and Fast Digital Upgrades

by H&M   7. Home Depot Is Winning on Nearly Every Metric. How Is It Doing So? 

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8. Walmart Grocery Delivery   9. ―A Blooming Company‖ 

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10. Blue Tomato: Internationalization of a Multichannel Retailer 

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11. Staples, Inc.  12. Daily Table 

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13. Remixing a Green Business: The Green Painter   14. Ashley Stewart  15. The DecisionMaking Process for Buying a Bicycle   16. McDonald's - A Global Giant 17. The Coffee Wars 18. A True Platform for Sellers: How

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Case Synopsis, Uses, Discussion Questions, and Answers

CASE Alibaba is Trying to Take Over the World 19. Parisian Patisserie "Maison Ladurée" Goes Global 20. Retailing in India: The Impact of Hypermarkets 21. Diamonds from Mine to Market 22. Starbucks's Expansion into China 23. Planet Fitness: Pricing for Success 24. Tiffany and TJX: Comparing Financial Performance 25. Choosing a Store Location for a Boutique 26. Hutch: Locating a New Store 27. Understanding Grubhub's Service Quality 28. Zara Delivers Fast Fashion 29. Avon Embraces Diversity 30. Sephora Loyalty Programs: A Comparison between France and the United States 31. Attracting Generation Y to a Retail Career 32. Active Endeavors Analyzes Its Customer Database 33. Pizza Players, Pizza Prices 34. Mel’s Department Store under New Management 35. Developing an Assortment Plan for

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Case Synopsis, Uses, Discussion Questions, and Answers

CASE Hughes 36. Preparing a Merchandise Budget Plan 37. American Furniture Warehouse Sources Globally 38. How Much for a Good Smell?

39. Promoting a Sale 40. Target Marketing with Google AdWords 41. A Stockout at Discmart 42. Yankee Candle: Product Management and Innovation 43. Interviewing for a Management Training Position

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Case Synopsis, Uses, Discussion Questions, and Answers

Introduction to Case Analysis Case Analysis and Presentation Suggestions  

Case situations can be one of the most effective instructional methods for enhancing student involvement and stimulating understanding of retailing management concepts.

When evaluating cases, students should address the following areas: 1. Background of the situation, including organizational factors and the external environment.

2. The various concerns, issues, and problems evident in the situation.

3. The main area of concern (main problem).

4. Alternative courses of action.

5. Evaluation of alternatives, on the basis of criteria selected for this purpose.

6. Selection of a course of action.

7. Plans for implementing the course of action.

8. Identification of possible follow-up problems.

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As students prepare cases for class discussion and for written assignments, they should: 1. Carefully evaluate all information presented in the case.

2. List all possible problems and concerns, being sure to look at causes of the problem, not just its symptoms.

3. Use textbook material, current articles, and other resources (library materials, interviews, field observations) to research the situation, problem, and alternatives.

4. Be creative in developing alternative courses of action.

5. Assess each alternative on the basis of information in the case and the criteria established.

6. Be ready to defend their selected course of action.

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For students to benefit fully from a case analysis assignment, they must PREPARE and PARTICIPATE in the discussion.

Case Method Teaching Resources 

Instructional reference materials regarding the case method are available from Harvard Business School, Publishing Division, Operations Department, Boston, MA 02163-1098; write for details regarding cost and availability:

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Case Synopsis, Uses, Discussion Questions, and Answers

1. Hints for Case Teaching (copy available upon request) 2. Teaching and the Case Method (Christensen & Hansen) 3. Instructors’ Guide to Teaching and the Case Method (Christensen, Hansen & Moore) 4. Note to Beginning Case Method Teachers (Christensen). 

Dozens of excellent websites dedicated to teaching with the case method may be found by typing ―Case Method Teaching‖ or ―Case Analysis‖ into your favorite Internet search engine.

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Case Synopsis, Uses, Discussion Questions, and Answers

CASE 1: Get It, Go, Just Walk Out: Amazon’s Proposed Reinvention of the Checkout Process Synopsis: Some of Amazon’s latest innovations reflect its shifted focus to in-store, in addition to digital, retail settings. By innovating cashier-less options that scan purchases automatically, it supports its own Amazon Go stores but also expands its reach, by making these advanced technologies available to competitive retailers.

Uses: Chapter 1: Introduction to the World of Retailing Chapter 3: Digital Retailing Chapter 18: Customer Service Discussion Questions 1. How does the Dash Cart facilitate the spread of the Just Walk Out technology tool?

The Dash Cart arguably can be deployed in a wider range of retail settings than the original Just Walk Out technology, because the carts are mobile versions. Rather than having to retrofit existing stores, they could more easily add the carts. Accordingly, this introduction seems to indicate Amazon’s goal of getting its technology into a wider range of retail locations, as well as its aspirations to extend its role, to become a technology provider as well.

2. Why is Amazon seeking to sell its proprietary technology to potential competitors? What are the pros and cons of doing so?

It appears that Amazon aims to position itself as more than ―just‖ a retail giant. In so doing, it establishes a wider influence and solidifies diverse income streams. Furthermore, by getting its technology into competitors’ stores, Amazon might be accessing a new source of customer data.

Depending on the licensing agreement, it arguably could gather data from shoppers using the Dash Carts in other stores, which would be a very valuable source of new information that previously would have been owned only by the competing retailer. However, noting the case’s indication that consumers appreciate and enjoy the cashier-less technology options, licensing the advanced technology also might give those competitors an advantage. If a shopper wants to make a quick, contactless trip, they are not limited to visiting Amazon Go stores.

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Case Synopsis, Uses, Discussion Questions, and Answers

CASE 2: Making Technology Personal: How Wayfair Is Leveraging HighTech Tools to Connect with Customers Synopsis: Wayfair enjoys a strong, enviable position, with a strong market share in the furniture market and digital offerings that distinguish it from many other retailers. It continues experimenting with novel digital channels, an effort that benefitted the retailer during the COVID-19 pandemic.

Uses: Chapter 1: Introduction to the World of Retailing Chapter 3: Digital Retailing Chapter 4: Multichannel and Omnichannel Retailing Discussion Questions 1. Is it sufficient for Wayfair to stay online, or should it consider becoming an omnichannel retailer? Defend your answer.

Students could take either side of this debate. If they believe it should maintain its digital focus, they might cite the strength of its current positioning, which might be undermined if Wayfair were to invest in opening physical stores, for example. But arguments for an omnichannel approach might cite the need to remain flexible, as well as highlight the ways in which it already operates in various channels, even if they are mostly digital. That is, if Wayfair already differentiates its approaches for its website, Facebook, and Instagram, it might continue to do so by developing alternative appeals for other digital channels and thus expand its omnichannel reach, even if it never opens physical stores. Opening physical stores for furniture may help customers select furniture by providing touch and feel options (e.g., How comfortable is that couch? How soft is the fabric?) that are not available for online furniture purchases.

2. Current evidence suggests Wayfair has not fully penetrated the Millennial cohort. What else could it do to appeal to younger consumers?

Wayfair should continue to assess how, where, and when this consumer cohort prefers to shop. It also might want to consider extending its product assortment to include more lower priced items to appeal to buyers, beyond its current market of relatively high earning consumers. Another option would be to invest in new product designs that appeal particularly to the style, residence trends, and preferences of younger buyers. Evaluating social media and home decorating influencers may increase brand awareness.

3. Wayfair offers extra services but doesn’t necessarily charge higher prices. How does it manage to achieve this value position?

One key benefit is the company’s lack of (costly) physical locations. In addition, many of the distinctive digital services it offers do not incur ongoing maintenance costs; a digital design tool, once developed and paid for, can be reused continually without requiring many additional resources.

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Case Synopsis, Uses, Discussion Questions, and Answers

CASE 3: Making Macy’s Meaningful: Moves by the Retail Chain to Maintain Its Competitiveness Synopsis: After surprising sales declines in the latter half of the 2010s, Macy’s developed a new strategy, to build on its current strengths and engage with new retail options. The strategy involves expanding its omnichannel presence, pursuing Millennial target markets, and transforming its supply chain operations.

Uses: Chapter 4: Multichannel and Omnichannel Retailing Chapter 5: Consumer Behavior Chapter 6: Retail Market Strategy Discussion Questions: 1. What is Macy’s plan to attract Millennials?

Macy’s has implemented a $400 million renovation effort for its flagship New York City store, testing out various options that might attract more of the cohort of shoppers between the ages of 18 and 35 years. The basement level of this massive store is a newly designated ―One Below‖ section that offers a notably different shopping experience. Macy’s also has designed merchandise specifically to appeal to Millennials. Macy’s provides services such as blow-drying stations, jean embroidering, and watch engraving. Shoppers can use a 3D printer to create their own custom jewelry, and a touchscreen wall allows them to take high-quality selfies.

2. How is Macy’s positioned in the fashion market? Who are its main competitors, and how well does it compete against them?

Macy’s midrange position in the fashion market seeks to offer good quality at reasonable price points. It offers a wide range of name-brand and exclusive products at prices lower than those charged by designer stores but higher than discount retailers. Its main competitors are other department stores, including higher priced options such as Nordstrom. Macy's also competes against Amazon, Wayfair, Kohl’s, Sephora, and Hudson's Bay Company. To deal better with Nordstrom’s advantages, Macy’s is opening off-price stores that will compete directly with Nordstrom Rack. Furthermore, Macy’s customer service focuses more on technology than sales personnel. Such advanced technology may appeal more to Millennials, though the lack of instore sales personnel can lead to the stores becoming messy.

3. Who are Macy’s target markets? In which targets is it winning, and in which is it losing?

Why? Traditionally, Macy’s has targeted Baby Boomers, but declining sales prompted it to target Millennials. It continues to attract Baby Boomers though, with its reasonable prices and wide variety of merchandise; these shoppers tend to have more disposable income and more time to shop and explore the inventory than do younger consumers, especially if they have already 9 © MCGRAW HILL LLC. ALL RIGHTS RE SERVED. NO REPRODUCT ION OR DISTRIBUTION WITHOUT THE PRIOR WRITTEN CONSENT OF MCG RAW HILL LLC.

Case Synopsis, Uses, Discussion Questions, and Answers

retired from the workforce. However, Macy’s has been losing thus far with Millennials, who have less income, more debt, and greater pressures on their time. Still, it is attempting to appeal more to this Millennial market by featuring more technology, teaming up with Best Buy to sell personal electronics (which studies show are a key sector in which Millennials are willing to spend more money), and opening off-price locations. It is still unclear if these strategies ultimately will be successful in winning over Millennial shoppers.

4. Perform a SWOT analysis for Macy’s.

Strengths:  Wide variety of merchandise for men, women, and children  Excellent customer relationship management  Valuable brand, ranked 164th by Fortune among Fortune 500 companies in 2021  Strong e-commerce sales, which have increased its revenues from online sales  Event marketing (e.g., Thanksgiving Day Parade)  Investment in automation  Household name Weaknesses:  Poor management  Plans to close around 125 stores over five years across the United States  Failed expansion into other countries  Declining quality of service  Messy and unappealing stores  Low staffing in stores, exacerbated by COVID-19, leading to a decline in the quality of customer service  Overdependence on the U.S. market Opportunities:  Strengthen global presence  Expand e-commerce sales  Diversify products  Focus on emerging markets  Expand through mergers and acquisition Threats:  Global recession  COVID-19 pandemic  Declining retail sector  Competition from Nordstrom, TJ Maxx, Kohl’s, Amazon, StitchFix, and many more  Trade pressures

5. Do you shop at Macy’s? Why or why not Students’ answers will vary.

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Case Synopsis, Uses, Discussion Questions, and Answers

CASE 4: Find “Good Stuff Cheap” at Ollie’s Bargain Outlet Synopsis: Ollie’s Bargain Outlet describes itself as ―one of America’s largest retailers of closeouts, excess inventory, and salvage merchandise.‖ In 2004, the company had 30 stores and is currently on a tremendous growth trajectory with 219 stores and counting. The company has an ambitious goal to reach 950 stores across the United States in coming years.

Uses: Chapter 1: Introduction to the World of Retailing Chapter 2: Types of Retailers Chapter 6: Retail Market Strategy Chapter 17: Store Layout, Design, and Visual Merchandising Discussion Questions: 1. Perform a SWOT analysis for Ollie’s. If you were able to invest in Ollie’s, would you?

Why or why not?

Strengths    

Weaknesses 

Recession-resistant concept Experienced team of buyers Relationships with vendors worldwide Loyal customers

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Opportunities   

Customers might want to trade-up from this retailer if they feel they can afford to go elsewhere Inconsistent merchandise offerings Bare-bones environment Inconveniences such as often having to wait in long lines to check out Threats

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Plenty of new geographic markets to which Ollie’s could expand Opportunity to leverage relationships with vendors as the retailer grows Word of mouth could generate additional business among members of the core and new target markets

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Competitors such as Big Lots, Family Dollar, TJX, and others sell similar merchandise Intensifying competition for the type of merchandise Ollie’s procures and sells An economic downturn could disrupt Ollie’s growth trajectory

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Case Synopsis, Uses, Discussion Questions, and Answers

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The retailer is on a strong growth trajectory and has plenty of room for expansion.

Ollie’s concept appeals to budget-conscious Americans, reputedly most of the U.S. population.

The retailer has formed many valuable relationships that aid its ability to procure merchandise that appeals to its target markets. As it grows, its economies of scale will only strengthen.

It has a very experienced team of merchants.

Investment Cons:   

Many of the goods Ollie’s sells are discretionary, so when customers tighten their belts, they likely reduce the purchases they make there.

Several other retailers offer similar or substitutable goods, often at competitive prices.

Other retailers or vendors may lure away members of Ollie’s merchandising team, which is a tight-knit, small group, and members of this team could retire or depart for other reasons.

2. Describe Ollie’s target markets. How are they similar? Different?

Core Target Market:      

Middle to lower-middle income households Often do-it-yourselfers (DIYers) Shops Ollie’s before venturing into more expensive retailers Willing to accept less-than-perfect or not the latest and greatest merchandise Likely to stick closely to a shopping list; less impulsive Consider the Brogan family described in the case to be indicative of the core target market

Secondary Target Market:  Middle to upper-middle income  Better educated  Adventurous: Willing to try new brands, unusual flavors, less common goods  Bargain hunters  More apt to impulse buy; may spend more money than anticipated, but will probably visit Ollie’s less frequently than the core target market Similarities:  

Bargain orientation A willingness to try less familiar brands, flavors, and types of merchandise

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Case Synopsis, Uses, Discussion Questions, and Answers

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The core target comes there because they need to shop at a store such as Ollie’s.

Higher-end secondary customers venture in because they’re looking for treasure hunt finds.

Higher-end customers may view Ollie’s Bargain Outlet as a place to discover new items they wouldn’t have thought to try, while the core target customer often settles for Ollie’s merchandise because it can’t afford the merchandise it would prefer. As a case in point, one might find Herr’s Baby Back Rib flavored potato chips. The secondary target perceives this as a low-risk find worth trying, while the core target buys it in lieu of the sour cream and chives flavor it prefers because it’s not available there, but the price is attractive.

3. Compare Ollie’s retailing strategy with Macy’s and with Marshall’s.

Ollie’s has more in common with Marshall’s than Macy’s.

As Compared with Macy’s, Ollie’s Bargain Outlet:     

Has a bare-bones environment; Macy’s shopping environment is more luxurious.

Is more self-service oriented; Macy’s has more sales associates to assist customers in the store, offers its own credit card, and caters to customers’ needs in a more overt fashion.

Only sells the merchandise currently on the floor (there’s no back stock, no transfers from other others, no online shopping).

Offers lower-end merchandise in a spartan environment while Macy’s sells the latest styles, first quality, and designer goods merchandised in a more appealing way.

Has off-mall locations while Macy’s stores serve as anchors in many malls, and Macy’s has flagship stores in downtown locations of several major cities.

As Compared with Marshall’s, Ollie’s Bargain Outlet:    

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Both sell end-of-season merchandise, overstocks, and discontinued goods.

Both have a treasure hunt environment.

Both sell items that may only appear once, adding to the urgency to ―buy now.‖ Ollie’s has a more stripped-down retail atmosphere (bare concrete floors, handwritten signs) with some merchandise sold out of cardboard displays. Marshall’s is a bit more sophisticated with dressing rooms, finished flooring, and more organized checkout lines.

Although both retailers sell housewares, books, and toys, Ollie’s sells fewer wearable pieces and more DIY goods.

Comparing on a category like food, Marshall’s sells more gourmet specialty items (cookies, candies, snacks), whereas Ollie’s sells more staple items such as brands of soup, side dishes, cereal, cookies, and condiments one would be likely to find in an average supermarket.

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Case Synopsis, Uses, Discussion Questions, and Answers

CASE 5: Tractor Supply Company Targets the Part-Time Rancher Synopsis: Tractor Supply Company (TSC) is a relatively large but little-known retailer that targets people seeking a rural lifestyle who operate farms or ranches as a hobby.

Uses: Chapter 1: Introduction to the World of Retailing Chapter 2: Types of Retailers Chapter 6: Retail Market Strategy Chapter 8: Retail Locations Chapter 18: Customer Service Discussion Questions 1. What is Tractor Supply Company’s growth strategy? What retail mix does TSC provide?

TSC targets hobby farmers/ranchers who are fully employed in jobs but want to enjoy a rural lifestyle and operate a farm or ranch in exurbs of a city. The retail mix of TSC is as follows:  Location: stores are in stand-alone locations in commercial corridors in the exurbs.  Merchandise assortment: a wide variety of merchandise provides everything the hobby farmer/rancher needs. Generally shallow assortment.  Pricing: because competition is limited, TSC has flexibility in pricing and offers good, better, best price/quality tiers or EDLP.  Communication mix: emphasis on personal selling.  Store design and layout: spacious layout, informative signage.  Customer service: well-trained sales associates.

2. How have TSC’s target customers changed over time?

It originally targeted full-time farmers, but as the farming industry consolidated, large farms bought directly from suppliers, bypassing retailers like TSC. 3. How does TSC’s retail mix provide the benefits sought by its target market?

Stores are located near the rural communities where the target market lives. Extensive customer service training ensures that customers receive knowledgeable and efficient service. The target market may not have extensive knowledge of farming or ranching, and sales associates can help fill that gap. TSC’s offerings of both lifestyle clothing and workwear would appeal to both customers who are farmers/ranchers and those who are not.

4. How vulnerable is TSC to competition? Why is this the case?

Not very vulnerable, because the target segment is not price sensitive or very knowledgeable about the products it needs. Thus, the target market is unlikely to be attracted to a low-cost, low14 © MCGRAW HILL LLC. ALL RIGHTS RE SERVED. NO REPRODUCT ION OR DISTRIBUTION WITHOUT THE PRIOR WRITTEN CONSENT OF MCG RAW HILL LLC.

Case Synopsis, Uses, Discussion Questions, and Answers

service retailer like Walmart. In addition, each rural area is relatively small, and thus, there is probably not enough business for multiple retailers targeting the small market with the same offering. Thus, after TSC enters a market, there would not be enough business in the market to entice a competitor to enter.

5. Why does TSC place so much emphasis on training employees?

Customer service is critical because the customers in the target market may not be very knowledgeable about the ranching/farming tasks to be performed and the equipment needed to perform those tasks.

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CASE 6: Fast Fashion and Fast Digital Upgrades by H&M Synopsis: With its existing efforts to allow consumers to buy anywhere, anytime, H&M was well-positioned to respond to the retailing implications of COVID-19. But it also is not resting on those laurels; this case outlines some cutting-edge experiments involving novel payment methods, digital avatars, and cross-channel capabilities.

Uses Chapter 2: Types of Retailers Chapter 3: Digital Retailing Chapter 4: Multichannel and Omnichannel Retailing Discussion Questions 1. What is H&M’s digital strategy?

It would be a good idea to visit https://www2.hm.com/en_us/index.html to better understand their digital marketing strategy – how they are segmenting the marketplace (e.g., women, men, baby, kids). It’s important to understand how they use up-to-date images of merchandise, and are employing the latest technology, such as Google Assistant, augmented reality, streaming, and realistic holograms. They are actively testing new approaches to improve customer experiences, such as digital fitting rooms and providing customers access to in-store app to locate merchandise and determine availability. Customers can also buy online and pickup in store, 2. Does this strategy match H&M’s positioning in the fast-fashion market?

Their positioning allows them a prestigious position as is evident by the various P’s: Product - Fast-fashion, on-trend clothes, and accessories - European-influenced fashion Price - Best price possible - High quality fashion at a low price Promotion - Multichannel promotion strategy using advertising, sales promotion, and Internet promotion - Strong brand awareness Place - Global brand with 5000+ stores in 73 countries 3. Should other fashion retailers mimic H&M’s efforts? Why or why not?

Rival fashion retailers will need to strategically decide whether to compete or not in the fastfashion industry.

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Case Synopsis, Uses, Discussion Questions, and Answers

CASE 7: Home Depot Is Winning on Nearly Every Metric. How Is It Doing So? Synopsis: Home Depot shows successful outcomes on various retail metrics, achieved through various efforts, including a dedicated omnichannel effort that it refers to as ―One Home Depot.‖ This initiative spans mobile, online, in-store, and supply chain operations, and it reflects the retailer’s strategic attempt to move beyond a price-oriented positioning to become the means by which ―Doers Get More Done.‖ Uses Chapter 3: Digital Retailing Chapter 4: Multichannel and Omnichannel Retailing Chapter 6: Retail Market Strategy Discussion Questions 1. Which metrics are most indicative of Home Depot’s success, in your view? Why did you choose them and not others?

Some illustrative metrics are provided next: - Revenue growth - Market share - Same-store sales (renovated stores, trained staff, new products) - Online sales (seamless omnichannel experience, mobile app, expanded inventory) - Growth in high-value transactions - Operating margin Individual prioritization will vary and can be justified based on growth, profitability and ROI. 2. How can Home Depot account for the costs associated with its improvement initiatives, as well as its necessary responses to the COVID-19 pandemic, accurately?

The firm focused on the safety and well-being of associates and customers during the pandemic, while providing customers with needed products and services. In addition, it invested in technology and infrastructure to facilitate and improve the customer experience. These investments helped Home Depot extend its buy online, pickup in store or curbside offering in a matter of days. The increased cost can be seen by the growth in operating expenses.

It also improved its direct fulfillment operations and reduced its online delivery lead times. The business grew by more than $21 billion in fiscal 2020.

Source Home Depot Annual Report 2020, https://ir.homedepot.com/~/media/Files/H/HomeDepotIR/2021_Proxy_Updates/2020_AR_IR_Site_Combined_Document_v2.pdf, assessed 2/22/2022.

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Case Synopsis, Uses, Discussion Questions, and Answers

CASE 8: Walmart and Grocery Delivery Synopsis: This case summarizes recent developments in the grocery delivery sector by analyzing how Walmart leverages its famous efficiency orientation to make delivery viable. It uses distribution centers and local fulfillment centers to get products closer to customers, both of which rely on advanced and robotic technologies to move the items rapidly onto trucks. In addition, in the last mile, it offers enhanced services, such as drivers who will put cold items directly into customers’ refrigerators, if they prefer.

Uses Chapter 2: Types of Retailers Chapter 4: Multichannel and Omnichannel Retailing Chapter 10: Information Systems and Supply Chain Management Discussion Questions 1. Create a diagram similar to Exhibit 10–1 that maps out Walmart’s grocery supply chain.

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Grocery Vendors Over 100,000 businesses around the world

Distribution Centers 210 DCs. Transportation fleet of 9,000 tractors, 80,000 trailers and more than 11,000 drivers.

Retail Locations 10,500 stores in 24 countries and eCommerce websites.

Sources (accessed March 2022): Walmart Location Facts, https://corporate.walmart.com/about/location-facts Our Supply Chain @ https://corporate.walmart.com/about Walmart Suppliers @ https://corporate.walmart.com/suppliers 2. Explain the importance of getting the supply chain ―right‖ for a successful Walmart grocery business. Can it succeed in this business without getting this right?        

It has leveraged its supply chain management to reduce cost.

Embrace technology and automation to track inventory and seamlessly restock merchandise.

Focus on how it can save people money.

Purchase merchandise in large volume.

Great ability to negotiate with vendors.

Establish long-term relationships with vendors.

Utilize cross-docking inventory.

Accurate order fulfillment.

It would be very hard to succeed without getting your supply chain right.

Source: ―Walmart Supply Chain [2021]: Why It Continues to Dominate,‖ January 4, 2020, https://www.skubana.com/

3. How is Walmart using third-party supply chain partners in its grocery delivery business?

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In-home delivery services and Instacart help lower in-store contact and increase customer convenience. For more information, have students read the press release, ―Walmart to Expand In-Home Delivery, Reaching 30 Million U.S. Homes in 2022,‖ https://corporate.walmart.com/newsroom/2022/01/05/walmart-to-expand-inhome-deliveryreaching-30-million-u-s-homes-in-2022.

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CASE 9: “A Blooming Company” This case demonstrates how a small, simple idea can morph into a successful larger business if the founders stay interested and alert and pay attention to signs in the marketplace. The company founders turned a narrowly focused side-hustle into a thriving business by first listening to cues that emerged in the marketplace, then pivoting when opportunity struck. The first big sign to which they paid attention resulted from their impromptu plant sale. They did not have to put in the effort to find new homes for their leftover plants, but they took this creative step, with energy and enthusiasm, and parlayed it into something more substantial—a new business model. The second big opportunity to which they responded was the COVID-19 lockdown. Instead of shrinking, they rose to the challenge. It took a Herculean effort and increased risk to retool their business quickly and with agility to accommodate increased demand, but they did, and their business took off. They astutely recognized an opportunity in the macro-environment and profited from it.

Uses Chapter 4: Multichannel and Omnichannel Retailing Chapter 5: Consumer Behavior Discussion Questions 1. What conditions created the fertile ground from which BloomBox, as well as its website getblooming.com, sprung? How did the founders take advantage of opportunities in the macroenvironment?

The company experimented with new concepts and scanned the marketplace to find an underserved niche in the marketplace. Mainly, it involved marketing fresh, healthy, affordable plants to gardeners, on a continuum from new and inexperienced to adept green-thumb gardeners. When the COVID-19 pandemic hit, the founders recognized an opportunity based on the huge number of orders that poured in quickly. Instead of turning down orders, they found a way to retool to accommodate the increased demand. The founders took a calculated risk, and it paid off.

2. What factors differentiate BloomBox from other places where customers can buy plants, trees, and gardening supplies?  Fresh, healthy plants sold at attractive price points.  Free delivery at a low threshold ($35) in open boxes to keep the plants at the peak of freshness and health.  Plants that have demonstrated ability to grow in the buyer’s local area.  Limited design services to show how to lay out a garden in a way that makes sense for the plants and is aesthetically pleasing.

3. Taking as inspiration the hobbies and interests that you have, sketch out a thumbnail plan for a start-up business. Using that idea as a springboard, develop a 30-second elevator pitch. For inspiration, think about movies, television shows, and BloomBox’s concept of ―milk delivery for gardening.‖ It should be visual and easily understood. This technique is used widely in the entertainment industry.

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Depending on students’ interests, their answers could take many twists and turns. Guiding them to pick a subject that interests them is a good starting point. A lot of time, effort, and passion goes into making a successful business, so it helps if the entrepreneur grasps the concept with vigor. Keying a concept to something people know, understand, and can visualize also makes them much more receptive to embracing it. Consumers understand how milk delivery operates, so tying it to plants was easy for them to grasp. A shop that sells little black dresses reminiscent of Breakfast at Tiffany’s might be another similar concept.

4. How do you plan to acquire your initial customer base? Describe the segmentation characteristics of two separate target markets.

Answers will vary based on the business concept. Stress the different bases of segmentation.

Advise students to think beyond demographic groups or to combine demographics with geography, benefits, or psychographic variables.

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CASE 10: Blue Tomato: Internationalization of a Multichannel Retailer Synopsis: Blue Tomato is the leading European multichannel retailer for board sports and related apparel. This case describes the different distribution channels adopted by the company, as well as the internationalization of Blue Tomato’s business activities.

Uses: Chapter 3: Multichannel and Omnichannel Retailing Chapter 5: Retail Market Strategy Discussion Questions 1. What strengths do the different distribution channels have from the company’s perspective?

The advantage of traditional, brick-and-mortar stores is the close and direct contact they offer with (potential) customers, a level of contact that aligns with Blue Tomato’s overall philosophy.

From its online store, Blue Tomato can offer more products than it could in brick-and-mortar stores, whose selling space is naturally restricted. Furthermore, the geographic limitations of its relatively few brick-and-mortar stores means that expanding to the online channel grants Blue Tomato access to many more new customers and possibly extends its business activities. This ability to attract new customers and extend business activities also does not demand substantial cost investments.

The advantages of the snowboard, freeski, skate/streetstyles, and surf/summer catalogs arise from their ability to appeal to new customers (e.g., convenience-oriented customers, consumers who do not use online channels).

2. Which synergies has Blue Tomato created across different channels? What additional actions might it take to become an omnichannel retailer?

In its brick-and-mortar stores, Blue Tomato has installed kiosks, which enable consumers to find personalized information about special offers in particular stores, as well as log on to their Facebook (or other social media) accounts to connect with their friends and ask for advice on, for example, how the latest snow gear or street wear looks on them.

In addition, customers can search for products in printed catalogues and order them online, or they might search for products online, then place an order by calling Blue Tomato’s phone reps.

The company plans to offer pickup and return services from its brick-and-mortar stores. Thus, customers will be able to order a product online and pick it up in a store.

To become a more omnichannel retailer though, Blue Tomato might enable customers to order products using online forms or via e-mail. The company might look into developing an app that enables customers to place their orders online.

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3. What key challenges remain for Blue Tomato in its efforts to coordinate these different channels?

The key challenge for Blue Tomato is to provide a consistent face to customers across all contact points. This demand requires not only that its customer orientation and commitment to providing the best service gets implemented in all channels but also that elements such as prices, communication, and merchandise management are standardized.

With regard to merchandise management, currently Blue Tomato suffers from poor overlap in its variety and assortment across different distribution channels. This poor overlap largely results from channel differences: The merchandise offered in brick-and-mortar stores and catalogs is limited in variety and assortment, whereas a huge quantity of products (more than 450,000) is available online. Ultimately, this circumstance may make it difficult to reinforce the brand’s image in customers’ minds.

With respect to communication, the company must ensure that its communication is formally integrated and that the integration of the content occurs across all channels.

4. Which challenges might Blue Tomato face as it expands its business activities internationally?

If the company decides to operate more brick-and mortar stores in foreign countries, it will need to invest large sums of capital.

Regardless of whether it pursues internationalization through direct exports or investments, tackling more markets could make it more difficult for Blue Tomato to follow a standardization strategy, because it will need to account for cultural differences and language barriers. With respect to merchandise management, prior experience has shown the company that the brands it offers invoke different images and prioritization in various foreign markets. Thus, some differentiation will be necessary.

Different legal conditions, tax rates, and logistics costs also might constrain Blue Tomato’s efforts to pursue a standardization strategy (e.g., shipping and payment conditions likely vary, inducing different product costs). Finally, standardization might be hampered by the amount of economic power and level of income of (potential) customers in each country.

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CASE 11: Staples, Inc. Synopsis: Staples operates in the highly competitive office products market. The office supply category specialists, including Staples and Office Depot/OfficeMax, dramatically changed the landscape of the office supply industry. Warehouse clubs, supermarkets, and full-line discount retailers also have begun taking market share away from the big two office supply retailers because of their ability to sell the bulk items at lower prices. The case reviews the various strategies that Staples is using to differentiate itself from its competitors and compete in a highly competitive market.

Uses: Chapter 4: Multichannel and Omnichannel Retailing Chapter 18: Customer Service Discussion Questions 1.

Assess the extent to which Staples has developed a successful multichannel strategy.

What factors have contributed to its success?

Staples has attempted to pursue a multichannel strategy by carrying more SKUs online, integrating kiosks in the stores, and coordinating orders and delivery.

2. What are the advantages and disadvantages of using kiosks as a part of its approach?

Students must evaluate both the pros and the cons of Staples’s in-store kiosks. In-store kiosks offer customers more SKU options than the retail store carries and eliminate the need to carry a lot of inventory at each location. However, Staples must persuade customers to use kiosks to order products rather than going to another retailer, and it must convince its own sales associates to direct customers to the kiosk to order products, for which the sales associates will not receive a commission.

3. How should Staples assess which SKUs to keep in its stores versus on the Internet?

The typical Staples retail store maintains approximately 8,000 SKUs, but Staples.com offers more than 45,000 SKUs. Because a retail store cannot carry as much merchandise as the Internet channel, the challenge is to keep an appropriate balance between minimizing stockouts and avoiding the proliferation of too many SKUs in retail stores. Staples should track which SKUs are sold through which channel to determine which to keep.

4. How do the Staples Copy and Print centers differentiate it from the competition?

The Copy and Print centers allow Staples to offer value-added services. These centers enable customers to order a wide variety of products such as business cards, signs, banners, invitations, documents, and photos (in-store or online) and receive the help of an in-store print specialist. In addition, these centers can stand alone and enter into markets where a big box retailer 25 © MCGRAW HILL LLC. ALL RIGHTS RE SERVED. NO REPRODUCT ION OR DISTRIBUTION WITHOUT THE PRIOR WRITTEN CONSENT OF MCG RAW HILL LLC.

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traditionally would not fit. Other services that Staples offers include business, tech, sustainability, furniture, and smart ordering services, to meet customer needs and differentiate itself from other retailers.

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CASE 12: Daily Table Synopsis: Founded by a former executive of Trader Joe’s, Daily Table aims to make fresh foods, including meat, seafood, and fruits and vegetables, accessible and available to low income consumers in the Boston area. The nonprofit organization relies on a membership model and sources and sells foods that other retailers have deemed unsellable. Thus it attempts to get nutritious foods to its target customers, reduce food waste, and sustain itself, a combination of objectives that requires dedicated effort and complex strategies.

Uses Chapter 5: Consumer Behavior Discussion Questions 1. How does Daily Table compare to Whole Foods and the conventional supermarket where you shop on the four principles of conscious retailing?

Answers will vary, because students will refer to the stores where they shop. In general though, their answers should address all four principles of conscious marketing. For example, 1) Daily Table’s purpose is to help communities by supplying high-quality foods at affordable prices.

2) Daily Table works with its stakeholders in the supply chain by sourcing food from local grocery stores that would otherwise discard the products due to imperfections or excess.

It helps the community by hiring local residents.

3) Daily Table’s mission is influenced by its leadership, including the founder, Doug Rauch.

4. Daily Table focuses its marketing ethics efforts toward individual, local consumers. The firm values customers through its membership program, while protecting privacy and keeping prices affordable for low-income customers.

Students should then compare Daily Table, Whole Foods, and their local supermarket in terms of their conscious marketing. Note that students may not be able to locate this information for their local supermarket. The key to this discussion is that Daily Table was created for a very specific target market to address the problem of lack of physical access to high-quality food in lowincome areas. Daily Table also addresses financial issues that reduce access to high-quality food, due to high prices. Although anyone can shop at Daily Table, it is intended to allow local neighborhood residents to purchase food products that would normally be physically unavailable or beyond their budget. Daily Table employs residents to allow those living in localities an opportunity to afford to shop at Daily Table, which also positively impacts the community’s local economy.

Whole Foods are often located in upscale neighborhoods where consumers can afford to pay the higher prices required to purchase high-quality food as well as health and beauty products. The product mix within the stores is designed to attract their upscale, highly-educated consumers.

Whole Foods makes a point of stocking and supporting local vendors, farmers, and producers in its stores, but it does not capitalize on the accessibility of product prices.

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The student’s local store might be a small, independent market or part of a large chain. As such, its positioning will vary.

2. How does Daily Table address the needs of different stakeholder groups: employees, customers, marketplace, society, and environment?

Students’ answers should include a discussion of the unique needs of each stakeholder group and how those needs are interdependent. Students should discuss how Daily Table fills a void in the marketplace and meets the needs of consumers by offering healthy food options at deeply discounted prices for low- to moderate-income families, while maintaining the dignity of the customer by charging for all its products and creating a clean and friendly store environment.

Students may also discuss how Daily Table introduced prepared meals to meet consumers’ needs for meals on the go. With regard to societal needs, students might mention how Daily Table helps combat hunger, diseases related to poor diet such as heart disease and diabetes, and environmental concerns by cutting food waste. Furthermore, answers should detail how Daily Table’s sourcing strategy benefits its suppliers. Daily Table obtains excess food from other stores, restaurants, and farmers. Therefore, its partners can sell and earn profits from food that would otherwise go to waste. Finally, answers should highlight Daily Table’s commitment to hire employees from within the communities it serves to both bolster the local economy and provide employees with the means to purchase healthy foods.

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CASE 13: Remixing a Green Business: The Green Painter Synopsis: To make the case for launching a new green retail business, this case offers readers an overview of some striking issues facing retailers in the green retailing movement in today’s marketplace. Using the example of an innovative green retail paint shop, it introduces store, product, social media, and marketing challenges that the shop addressed on its way to becoming profitable while competing in a large metropolitan city. The lessons in turn provide new insights on the state of green retailing and predictions of new changes being undertaken in communities, as well as creative business practices for retail innovators that want to enter the marketplace and succeed.

Uses: Chapter 5: Customer Buying Behavior Chapter 13: Buying Merchandise Discussion Questions 1. If you were starting a green business in the next five years, how would you design the business model? What lessons could you learn from The Green Painter?

Visit successful green companies for ideas, develop a business plan that is flexible and reasonable, and try to enter the market without a great deal of debt. Be open to new ideas, and be close to your customers, which translates into participating in the community with educational programs and focusing on developing new businesses and loyal customers. Expect slow profit growth and returns, which will be challenging but also will offer great satisfaction associated with creating a sustainable business environment that contributes to a better and healthier lifestyle for customers.

2. Research current business practices being used in the food and retail industries in general and report practices that would help you develop your business.

Answers will vary; students might start with businesses such as Patagonia, Walmart, Whole Foods, Target, or Starbucks. The article ―The 10 Most Environmentally Friendly & Sustainable Companies‖ (2022), available at https://growensemble.com/environmentally-friendlycompanies/, might provide them with some ideas.

3. Do a SWOT analysis for this business based on the information provided in this case.

Strengths: 1. The company has developed a unique green business.

2. Even in the early start-up phase, the business has developed brand loyalty, which is increasing.

3. The brick-and-mortar store has received a B Corp certification with third-party standards.

4. The business continues to evolve with new ideas and improvements.

5. The introduction of an educational website has expanded customer exposure.

6. The business understands its target customer.

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Weaknesses: 1. Customer preferences can change, and the business must continue to change to meet customer needs and expectations.

2. Other competitors can enter the green market and underprice New Living.

3. Entrepreneurs often do not focus on research findings and adapt their offerings in a timely manner.

Opportunities: 1. New Living has opportunities to expand its offering to other sources, such as Whole Foods, HEB, and other successful businesses.

2. The business can refine its products and expand markets.

Threats: 1. Competitors can copy the products and offer products at lower prices.

2. The brand can become saturated and lose market share.

3. The upper-end pricing structure can cause declining profits.

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CASE 14: Ashley Stewart Synopsis: Ashley Stewart is a plus-size women’s apparel store that has had financial problems in the past, but under new leadership, it is now thriving.

Uses: Chapter 5: Consumer Behavior Chapter 6: Retail Market Strategy Discussion Questions 1. What is Ashley Stewart’s retail format?

Ashley Stewart is a specialty store, selling apparel and accessories to a particular target market of women.

2. Who is its target market? Could/should that target market be expanded?

The target consumer is plus-size, fashionable women looking for stylish clothing. Because it is dedicated to women who wear larger sizes than are available in most conventional stores, its reputation is closely linked to its target, and it likely would suffer some damage to that reputation if it began targeting women who wear smaller sizes or men.

3. What are its bases for sustainable competitive advantage?

Ashley Stewart has a strong reputation for style and customer service. At the moment, it is nearly the only brand targeting this segment. Accordingly, it has encouraged strong customer loyalty, and its merchandise is unique among the various offerings in the retail clothing industry. This latter advantage could be copied by another retailer, but thus far, no one has done so, giving the brand a strong advantage in terms of building its reputation and its customers’ loyalty.

4. Perform a SWOT analysis for Ashley Stewart. If you were a potential investor, would you invest in it? Why or why not?

Have students visit the company website at https://www.ashleystewart.com/ for current information.

Strengths: reputation, customer loyalty, charismatic leader.

Weaknesses: history of bankruptcies, substantial competition, struggles earning a profit.

Opportunities: growing market, social media.

Threats: advertising limitations imposed by Google.

As reasons to invest, students might cite the promise that James Rhee has established and the apparent improving trends. Among reasons not to invest, they could acknowledge the brand’s history of losses and the lack of clear evidence that it can ever make a strong profit.

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CASE 15: The Decision-Making Process for Buying a Bicycle Synopsis: The Sanchez family buys three bicycles—one for their daughter, one for their son, and one for the father. This case illustrates the steps customers go through when buying a bicycle for their children and themselves. It can be used to discuss the stages in the buying process, the factors affecting the purchase decision, and how the purchase decision differs depending on the buyer's knowledge and needs.

Use: Chapter 5: Consumer Behavior Discussion Questions 1. Outline the decision-making process for each of the Sanchez family’s bicycle purchases.

The stages in the decision process are listed the left-hand column of the following table. The event associated with each of the three bicycle purchases is linked to each of the stages. As indicated in the text, not every purchase decision goes through all of the steps. Students should also recognize that more time might be taken at specific stages than others.

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Step in Buying Process Store Choice Need Recognition

Daughter

Son

(4) $100 from grandparents for bicycle

(1) $200 from grandparents for bicycle

Information Search

(5) look on the Internet; call store

(4) saw Target ad

Evaluation and Choice

(6) select dept.

(6) no suspension, store for low prices; minimal accessories blue color to maintain

Post purchase Evaluation

(8) dissatisfaction with choice; chrome rusted, poor tires

Father (6) buying bike for Miguel; walks by convenient bicycle shop (2) external search, magazines (6) can’t locate preferred brand; enjoyed trial experience riding bike

2. Compare the different purchase processes for the three bikes. What stimulated each of them? What factors were considered in making the store choice decisions and purchase decisions?

The process for both son and daughter were stimulated by the monetary gift from their grandparents. Buying a bike for the son and remembering his pleasant experiences riding a bike stimulated the father’s purchase decision process.

For the daughter, using the Internet and calling stores selling bikes and locating the store with the lowest prices made the store decision. Note that they were surprised that Kmart had the bike at a lower price than Toys ―R‖ Us and Walmart. Price and a blue color were the principal considerations in selecting a bike.

For the son, the store choice was based on seeing an ad. Durability and style of bike were the principal criteria. Accessories were very important before seeing the bikes, but the importance diminished when the actual choice was made.

For the father, the choice was based on finding a store that stocked the brand of bike he wanted.

When he could not find the brand, he stopped his decision-making process. However, the process started up again when he went into a shop that was convenient to where he worked. Durability and flexible set up were the most important characteristics.

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Note that the least time was spent selecting the daughter's bike and the most spent on the father's bike. The daughter's bike was a more extensive search then Miguel’s bike, but less than the father's.

3. Construct a multiattribute model for each purchase decision. How do the attributes considered and importance weights vary for each decision?

Attribute Price Color Flexible setup Weight Durability Brand name

Importance Weights son 6 10 7 10 -

daughter 10 10 4 3 -

father 7 1 9 9 9 6

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CASE 16: McDonald’s: A Global Giant Synopsis: McDonald's is a multinational fast-food corporation, founded in 1940 as a burger restaurant in California. It is the world's leading food service brand and serves customers in over 100 countries. Careful evaluation of the external environment (economic, technical, social/cultural, natural, competitive, and political/legal) and strategic planning have enabled the firm to be successful in new locations including India and China.

Uses Chapter 5: Consumer Behavior Chapter 6: Retail Market Strategy Discussion Questions 1. Which sociocultural factors have informed McDonald’s global expansion?

Most sociocultural factors may affect expansion, depending on the country, but some of them are likely more dominant: Uncertainty avoidance: The extent to which a society relies on orderliness, consistency, structure, and formalized procedures to address situations that arise in daily life.

Time orientation: short- versus long-term. A country that tends to have a long-term orientation values long-term commitments and is willing to accept a longer time horizon for, say, the success of a new product introduction.

Indulgence: the extent to which society allows for the gratification of fun and enjoyment needs or else suppresses and regulates such pursuits.

2. Which technical factors have informed McDonald’s global expansion?  Pioneer in overseas franchising.  Great real estate and supply chain competencies.  Excellent employee and management training programs.  Building an enormous food processing plant outside Moscow.  Improve the supply chain.  Emphasis on the 3Ds: delivery, digital, and drive-throughs.  Self-order touch-screen kiosks have been vastly popular with consumers, allowing diners to customize their orders to their precise specifications.  Technology-enabled display screens for drive-through locations offer new dynamic displays that can adjust to environmental conditions, as well as individual orders.  Automation is increasing (voice technology, and use of robots).

2. Describe some of the global marketing strategies that McDonald’s uses or might consider using to spread throughout the world.

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In most countries, the company employs a franchising strategy. It will need to consider how much menu and sourcing discretion to provide franchisors.

4. Explain McDonald’s global marketing strategy. Compare McDonald’s strategy in the United States (www.mcdonalds.com/us/en/home.html) to McDonald’s strategy in India (www.mcdonaldsindia.com).

Globally, McDonald’s typically segments on the bases of (1) age, (2) income, and (3) working class. Because India has a large vegetarian population, McDonald’s has added new products, such as the McVeggie burger and the McAloo Tikki Burger. In addition, with McCafé storefronts, it has focused on making McDonald’s a place to relax and socialize.

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CASE 17: The Coffee Wars Synopsis: Starbucks Corporation, founded in 1971 is the largest coffee shop chain with over 30,000 stores (over 15,000 in US) in over 80 countries.

Dunkin' is a dominant baked goods and coffee chain operating over 11,000 estaurants worldwide across 36 countries. The quick service restaurant offers a variety of breakfast, sandwich, and baked items.

Use: Chapter 6: Retail Market Strategy Discussion Questions 1.

Perform a SWOT analysis for Starbucks and Dunkin’. Based on your analysis, in which company would you invest? Justify your answer.

SWOT analysis: Starbucks

Internal

External

 

Positive STRENGTHS Ubiquitous stores Social marketing channels

Negative WEAKNESSES  High prices

OPPORTUNITIES  Growing market

THREATS  New competitors (McDonald’s, Taco Bell)

SWOT analysis: Dunkin’ Donuts

Internal

External

Positive STRENGTHS  Strong sponsorships  DoorDash

Negative WEAKNESSES  Fewer locations

OPPORTUNITIES  Growing market

THREATS  New competitors (McDonald’s, Taco Bell)

2.

Which growth strategies have been pursued by Starbucks and Dunkin’ in the past?

Which strategies do you believe will be most successful for the two firms in the future?

Why?

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Starbucks:

Starbucks connects with fans through social marketing channels, including its popular My Starbucks Idea site. New capabilities available through the apps will allow greater connections for the company.

Dunkin’ Donuts: Through partnerships with sports teams (e.g., ―Pats Win, You Win‖), Dunkin’ encourages consumers to interact more closely with it. The popular, vastly successful promotion will continue to bring fans to its stores.

3.

Which retailing metrics would be most helpful for an executive in charge of developing new products for a coffee chain?

Students will answer with different metrics. Some commonly used metrics to assess performance include revenues, sales, and profits. An attempt to maximize one metric may lower another.

Thus, managers must understand how their actions affect multiple performance metrics. The metrics used to evaluate a firm vary depending on (1) the level of the organization at which the decision is made and (2) the resources the manager controls.

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CASE 18: A True Platform for Sellers: How Alibaba Is Trying to Take Over the World

Synopsis: Alibaba Group Holding Limited (Alibaba) focuses on e-commerce, retail, Internet, and technology. It serves customers all over the world and competes with Amazon.com.

Uses: Chapter 5: Consumer Behavior Chapter 6: Retail Market Strategy Discussion Questions 1. How is Alibaba seeking to facilitate each stage in the B2B buying process?

Some students may struggle to answer this question, because Alibaba offers both selling and buying options in the B2B market. Because the buying perspective the easier to understand, this answer will be from a retail buyer’s perspective.

Stage 1: Need recognition Retail buyers typically have a need recognition at arises seasonally, either twice a year or four times annually. With the current state of the economy, the need to purchase internationally has increased somewhat, to facilitate the ability to purchase more cost efficiently.

Stage 2: Product specification The buyer has the ability to search Alibaba to determine what products are available from both domestic and international sellers. This ability helps determine exactly what the buyer wants and needs.

Stage 3: RFP process Alibaba has more than 10,000 business customers, so locating vendors is simple for the buyers, who can then send a request for proposals for the products they need, keeping it all within one network.

Stage 4: Proposal analysis, vendor negotiation, and selection Alibaba, as a single network, can receive streamlined information, which makes this stage of the process easier.

Stage 5: Order specification Upon completion of the analysis, negotiations, and selection processes, the order can be specified. Because it is a single network, the buyer can place multiple orders from a variety of vendors, all at one time.

Stage 6: Vendor performance assessment using metrics Upon completion of the ordering process and after receiving the inventory, the retailer can use metrics, such as profitability and inventory turnover, to evaluate the performance of the goods it received from purchasing through Alibaba.

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Alibaba helps buyers through the six stages of the buying process by streamlining the process through a single network.

2. What methods is Alibaba using to build its B2B relationships? What other methods might it try to expand its reach even further?

Alibaba is using competitive and collaborative benefits to build its B2B relationships. It can expand further by focusing on the growing importance of online platforms.

3. Can a competitor beat Amazon by competing with it in the B2B market.

Possibilities can never be overlooked, but if a business is strictly in the B2B market, it have a hard time overcoming Amazon, which has such a strong hold in the B2C market. Rather, B2B companies simply do not sell directly to consumers. If they decided to do so, many functions would need to change, such as breaking bulk and offering ways to pay for small purchases. The process would not be simple and, in many cases, not feasible.

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CASE 19: Parisian Patisserie “Maison Ladurée” Goes Global Synopsis: Ladurée, a famous French pastry company, is known worldwide for its macarons but only recently has entered the U.S. market. This entry has produced not only opportunities but also challenges for this company. In particular, this case focuses on questions related to appropriate locations, types of retail ownership, and ideal target markets.

Uses: Chapter 2: Types of Retailers Chapter 3: Digital Retailing Chapter 6: Retail Market Strategy Chapter 8: Retail Locations

Discussion Questions: 1. What is Ladurée’s target market and retail strategy in the United States?

Ladurée, an upscale pastry brand, targets high-income, well-educated customers and fashionforward buyers (mostly women) who can afford to pay high prices for luxury food and enjoy both good food in particular and quality products in general. To appeal to this target market, the company operates privately owned stores and franchises. Beyond standalone retail locations, Ladurée also proposes locations with tea rooms or full-service restaurants, in connection with the standalone retail store. Its competitive advantage is based largely on its secret macaron recipe.

As an innovative firm, it constantly works to devise new flavors and pastries. Its strong French gourmet brand enables it to build strong relationships with its customers.

2. Explain the reasons Ladurée owns its stores in some countries and uses franchising with local licensees in others.

Business in a foreign country always entails risk. Some countries are riskier than others, so operating franchises with a local retailer is sometimes a better option than trying to assume all the risk and going it alone.

In countries with high risk, operating franchises offers several benefits: (1) investments are lower, so the risk of monetary losses decreases as well; (2) local suppliers know the market better than Ladurée would if it were to open its own stores; (3) franchising can better account for cultural differences, such as flavors that may be less or more popular in a certain area; and (4) in some countries, such as India, legislation makes it difficult for a foreign business to operate without a partnership with a local retailer (more than 90 percent of Indian retailing consists of small family-owned stores). However, companies such as Benetton and Domino’s that sell goods under a single brand or through franchisees have been free to set up stores with Indian partners, and since 2012, even these requirements have been relaxed. Indian policy makers allow big foreign chains such as Walmart and Tesco to set up stores in the country. However, each of the India’s 29 state governments also has the right to forbid foreign-owned outlets in its territories.

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For a foreign firm entering the United States, it is better to operate its own stores, because the economic and political environments are relatively stable. There are not huge fluctuations in the exchange rate, and there is little political instability. American consumers’ tastes are similar to those of Europeans. Accordingly, it is relatively easy to forecast sales.

3. Which type(s) of retailing format(s) and location(s) is (are) best suited to match Ladurée’s marketing strategy in the United States?

Retailing formats/location Specialty stores

Pop-up stores

Upscale malls

Stores within upscale department stores (Neiman

Advantages

Disadvantages

- Enough space to have a deep assortment: pastries, macarons, and additional products (e.g., fragrances, candles, bags) - Knowledgeable salespeople to assist customers - Control over marketing and assortment - Flexibility and reactivity to market changes and customer needs. If a flavor isn’t selling, the company can stop making it - Creates buzz: spreads the image of Ladurée around big cities in a costeffective way (rent and wages only for a short period of time) - Allows Ladurée to evaluate the sales potential of some big U.S. cities before operating a store. Pop-up stores can be implemented in high-end department stores and in central business districts, where it could rent a strategically located store for a short period of time - Attracts dwellers from the surrounding area with different leisure products and services (e.g., apparel, electronics, books and music, food courts) - Draws customers who did not plan to come into a Ladurée store - Traffic and nature of customers known -Large trade area that fits Ladurée’s target market - Pleasing ambiance; Ladurée surrounded by high-end products - Draws in customers who represent

- High costs: rent, store layout, salespeople

- High rent and long lease - High occupancy costs - Food courts that can compete with Ladurée’s store - Strong mall management control over operations - Not possible to park in front of a store (not convenient, takes time to go to one specific store).

-High rent/expenses -Loss of control over marketing, assortment

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Marcus, Bloomingdale’s, Nordstrom, Saks Fifth Avenue) Merchandise kiosks in airports

Ladurée’s target market - Knowledgeable salespeople to assist customers - High pedestrian traffic - Higher profits than at regular malls - Passengers have time to shop before their flight - Gifts and easy-to-pack items are successfully sold in airports. Ladurée’s products fit this description

- High rent - Higher wages due to longer hours

4. Could Ladurée sell its products online? Why or why not?

Have students go to the company website at https://www.laduree.us/ for current information.

It could sell products online, though it needs premium transportation capabilities, because pastry products are perishable goods that need specific transportation facilities (freezers, anti-bacterial).

Even if the price would be somewhat more expensive because of extra transportation costs, customers seemingly should be willing to pay for something really special, and Ladurée’s products are special.

Ladurée has two options if it wants to sell its products online: - Follow the same shipping process as in Australia (i.e., products frozen and shipped from Switzerland), and then, instead of delivering them to the stores, the company could use a transportation company to deliver products to customers across the United States. This option would create extra costs, including those associated with the extra workers needed to pack orders in France and transport with specific facilities (freezers). A drawback for customers is that they would receive the pastries frozen at home, which could alter brand quality perceptions, in that the pastries likely taste different after they have been frozen and then thawed. Furthermore, customers would not have salespeople available to assist and advise them. They would not be stimulated by the entertaining experience of the pastries’ smell, nor by the wonderful store layout ambiance.

-

Open a pastry lab in the United States. Macarons could not be made in the United States, because Holder wants them prepared in France, but Ladurée could provide a new facility to pack orders there. This ―superstore‖ would handle store and online sales. If the online business grows to sufficient size, it could open an online fulfillment center and eventually a bakery. Running a fulfillment center in some low-cost location is much less expensive than opening a store in a high-end mall or central business district. It requires fewer people, and those people are less expensive to hire.

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CASE 20: Retailing in India: The Impact of Hypermarkets Synopsis: The shift from local mom-and-pop stores to more organized retail outlets is happening very quickly in India. It is embraced by many consumers despite the cultural and legal considerations associated with hypermarkets. The challenge lies in understanding what those consumers want and how to get it to them.

Uses: Chapter 1: Introduction to Retailing Chapter 2: Types of Retailers Chapter 5: Consumer Behavior Chapter 6: Retail Market Strategy Discussion Questions 1. List the benefits to consumers for hypermarkets and for Kiranas located in India.     

Hypermarkets All types of merchandise can be purchased in one place Affordable prices Appeals to younger consumers who represent a large portion of the population Can locate in large cities A majority of items are sourced locally

         

Kirana Local neighborhood stores Part of the community Convenient +85% of spending 10–15 million Kirana stores in India Offer locally relevant goods Personal relationships with customers Credit offered to known and regular customers Free home delivery by the store staff Could adapt to online orders

2. How will government spending in India to improve the nation’s infrastructure impact the growth of supermarkets and hypermarkets?

If the Indian government spends money to improve the infrastructure capabilities of the country, it will improve transportation and distribution to hypermarkets and organized retailing in general—which is good news for international retailers, because it is signals that the government supports the idea of improving the economy through growth in the retail sector. Because most consumers shop for produce on a daily basis, the improved conditions may help reduce waste and increase the supply to meet the vast demand. It is important to realize that the commitment from the government is only a first step. Massive changes to a nation’s infrastructure will take years to accomplish. International retailers have to be willing to deal with much inefficiency at first to be successful in the long term.

3. Read the Fortune article, ―Foreign Investment Cratered in 2020. India Was a Surprise Bright Spot,‖ by Naomi Xu Elegant at: https://fortune.com/2021/01/27/india-fdi-foreign-investment44 © MCGRAW HILL LLC. ALL RIGHTS RE SERVED. NO REPRODUCT ION OR DISTRIBUTION WITHOUT THE PRIOR WRITTEN CONSENT OF MCG RAW HILL LLC.

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2020/#:~:text=India's%20FDI%20rose%20to%20%2457,also%20significantly%20lower%20 than%20China's. How could foreign direct investment impact the retail sector in India?

Key points abstracted from the article:  Key investments occurred in a variety of technology industries, that will enable retailers to pursue e-commerce opportunities.  Foreign direct investment (FDI) in India jumped 13 percent in 2020, compared with the year before, making it one of the only major economies in the world to record an increase in FDI in the pandemic year, according to the United Nations Conference on Trade and Development.  Reuters reported that India's government is considering revising FDI rules in e-commerce that could hurt foreign firms like Amazon, which owns indirect equity stakes in Indian ecommerce companies Cloudtail and Appario.  At the same time, Narula says, investors remain eager to find ways into India: "At the end of the day, it's the world's largest market ... there's going to be people who want to sell in the Indian market." China is currently the world's largest market by population size, but India's population is expected to overtake China's in 2026; there currently are 1.3 billion people in India.

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CASE 21: Diamonds from Mine to Market Synopsis: The retail jewelry industry has been affected by concerns over the source of diamonds. Blood diamonds, often called conflict diamonds, are mined in war-torn African countries by rebels to fund their conflict. The rebels grossly abuse human rights, often murdering and enslaving the local populations to mine the diamonds. Jewelry retailers have had to respond to the issues raised by human rights groups.

Use: Chapter 5: Consumer Behavior Chapter 6: Retail Market Strategy Chapter 10: Information Systems and Supply Chain Management Chapter 13: Buying Merchandise Discussion Questions Note: Before you assign this case you could ask students if they have seen the movie Blood Diamond. You could ask them to share their reactions to the movie and see if they are aware of the Kimberley Process. Did the movie raise awareness about how diamonds can fuel conflict?

1. Where do diamonds come from? Using the gemstone diamond production data from 2019, calculate the percentage carat weight of production for all countries in the table. Create a bar graph for the top 10 diamond-producing countries.

Gem Diamond Mine Production, By Country 20191 Thousands of Carats

Percent Carat Weight

Russia

25,000

28.91%

Canada

18,500

21.39%

Botswana

18,000

20.82%

South Africa

8,000

9.25%

Angola

7,500

8.67%

DR Congo

3,000

3.47%

Namibia

2,500

2.89%

Lesotho

1,300

1.50%

Sierra Leone

600

0.69%

Tanzania

400

0.46%

Zimbabwe

400

0.46%

Country

1

Where Are Diamonds Mined?, https://geology.com/articles/gem-diamond-map/#producers, Accessed 12/25/2020.

46

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Australia

280

0.32%

Brazil

250

0.29%

Guinea

240

0.28%

China

100

0.12%

Other Countries

400

0.46%

Top 10 Gem Diamond Producing Countries, 2019 Russia Canada Botswana South Africa Angola DR Congo Namibia Lesotho Sierra Leone Tanzania -

2,000

4,000

6,000

8,000

10,000 12,000 14,000 16,000 18,000 20,000 22,000 24,000 26,000

Thousands of Carats

2. How has this slogan "A Diamond is Forever‖ influenced the consumer buying process for diamond jewelry? Go to the Gemnation homepage at http://www.gemnation.com/base?processor=getPage&pageName=forever_diamonds_1, to collect information background for your response.        

Well-recognized slogan Made diamond engagement rings popular Celebrates prestige, love, romance, and milestones A diamond lasts forever, love lasts forever How much will the consumer spend?

Reversed the declining price of diamonds Targeted at U.S. consumers Described as a necessary luxury 47

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

Associated with movie stars and Hollywood

3. Go to the website for the Cape Town Diamond Museum at https://www.capetowndiamondmuseum.org/ to learn more about the diamond supply chain.

After you have explored this site, take the 10-question Diamond Quiz at https://www.capetowndiamondmuseum.org/diamond-quiz/. What was your score? How could the information from this museum help consumers before making a diamond jewelry purchase?

Visitors learn how rough diamonds are formed and ultimately become jewelry.

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CASE 22: Starbucks’s Expansion into China Synopsis: This case examines Starbucks’s expansion strategy into China. Focusing on the marketing mix elements (product, promotion, price, and place) and human resources, Starbucks’s success in China is revealed over time, following the decision to concentrate in China in 1998.

Today, Starbucks’s mission is to continue expansion efforts in China. As of 2015, Starbucks had more than 2,500 stores in 118 cities. Students completing this case will learn about what made Starbucks successful in this emerging market and debate whether Starbucks can continue to profitably expand in China.

Uses: Chapter 5: Consumer Behavior Chapter 6: Retail Market Strategy Chapter 16: Human Resources and Managing the Store Chapter 18: Customer Service Discussion Questions 1. Prepare a SWOT analysis based on the case to support Starbucks’s expansion in China.

Based on your SWOT analysis, what recommendations would you make to Starbucks’s CEO with regard to the market development growth strategy for this country?

Strengths • Recognized brand • Quality product, premium coffee • ―Western coffee experience‖ • Offer a comfortable environment • Lessons learned from U.S. expansion • Well-trained employees • Wide variety of products • Operates in other countries

Weaknesses • Large company with other growth opportunities • Forced to close underperforming U.S. stores after rapid expansion • Lacking knowledge about the Chinese market • Products may not appeal to local tastes • High prices for an emerging market

Opportunities • Brand loyalty • New market segments • New products for local market • Growth opportunities • Joint ventures and business partners • China’s middle class • China’s large population and increased coffee consumption

Threats • Competition, cheaper coffee (e.g., Costa Coffee, McDonald’s) • Culture of tea drinkers • Slowing economy • Price-sensitive consumers

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2. Using the data in the Starbucks Stores Timeline exhibit, calculate the percent change in the number of locations in the table and plot the number of stores in a column graph. How many new locations would you expect the company to open in the next 3 to 5 years?

Starbucks Stores Timeline Year Number of Stores Percent Change 1987 17 ---94.12% 1988 33 66.67% 1989 55 52.73% 1990 84 38.10% 1991 116 42.24% 1992 165 64.85% 1993 272 56.25% 1994 425 59.29% 1995 677 49.93% 1996 1,015 39.11% 1997 1,412 33.57% 1998 1,886 32.45% 1999 2,498 40.15% 2000 3,501 34.50% 2001 4,709 24.99% 2002 5,886 22.75% 2003 7,225 18.60% 2004 8,569 19.51% 2005 10,241 21.47% 2006 12,440 20.67% 2007 15,011 11.12% 2008 16,680 -0.27% 2009 16,635 1.34% 2010 16,858 0.86% 2011 17,003 6.25% 2012 18,066 9.42% 2013 19,767 8.09% 2014 21,366 7.85% 2015 23,043 8.86% 2016 25,085 11.78% 2017 28,039 6.51% 2018 29,865 6.46% 2019 31,795 2.72% 2020 32,660 Starbucks Company Timeline, https://stories.starbucks.com/press/2019/company-timeline/, Accessed 3/22/2021.

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3.

Number of Starbucks Stores 50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 (5,000)

y = 30.739x2 - 36.64x - 757.79 R² = 0.994

1990

1995

2000

2005

2010

2015

2020

2025

3. Watch the video, ―Welcome to the Coolest Starbucks in the World—Powered by Alibaba,‖ at https://www.youtube.com/watch?v=T9JbcpOR2lw. Explain how this store location connects with Chinese customers.        

Many locations Fast growing 400 employees Digital capability with partner Alibaba for an interactive retail experience Mobile app Learn about the coffee roasting process Map of the store Menu

4. Starbucks closed the majority of its stores in China in January 2020 due to the COVID 19 outbreak. Find an article or news story and describe how the company was able to begin reopening locations by March 2020.

Some potential sources include ―Starbucks Closes Half its China Stores Amid Coronavirus Outbreak,‖ Leslie Patton, Bloomberg, 1/28/2020. Starbucks closes half its China stores amid coronavirus outbreak - Los Angeles Times (latimes.com); ―Coronavirus: Starbucks Closes 2,000 Chinese Branches,‖ BBC News, 1/29/2020, Coronavirus: Starbucks closes 2,000 Chinese branches - BBC News

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CASE 23: Planet Fitness: Pricing for Success Synopsis: Planet Fitness is an American franchisor and operator of fitness centers based in Hampton, New Hampshire. The company reports that it has 2,039 clubs, making it one of the largest fitness club franchises by number of members and locations. This gym offers various membership options with different benefits to attract and retain customers.

Uses: Chapter 7: Financial Strategy Note: Have students go to the company website at https://www.planetfitness.com/ for current information.

Discussion Questions 1. What benefits do customers receive in return for the sacrifice they make when buying a membership at Planet Fitness?

Planet Fitness promises a clean, friendly, laid-back workout environment featuring brand name cardiovascular and strength equipment. It maintains key elements that its members want: brandname equipment, unlimited fitness training, flat-screen televisions, and large locker rooms. It also offers customers a non-intimidating workout environment.

2. How does this benefit–sacrifice ratio give Planet Fitness a competitive advantage in its industry?

The low-cost monthly membership makes it easy to draw new members. Because most members come in only a couple of times each week, Planet Fitness also enjoys operating efficiencies and economies of scale, achieved by welcoming a high volume of members on any one day.

3. Given its price strategy, why is it essential for Planet Fitness to continually attract new members? Do its high-end pricing competitors face the same need? Why or why not?

Due to its lower margins, Planet Fitness needs a high volume of customers in order to maintain and/or grow profits. Higher-end competitors attract fewer sensitive-to-price customers and this gives them more leeway in offering additional high-margin amenities.

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CASE 24: Tiffany and TJX: Comparing Financial Performance Synopsis: Tiffany & Co. operates as a high-end specialty retailer worldwide. It is mostly known for its exquisite jewelry, but also has additional luxury items in its product assortment. TJX Corporation comprises a mix of stores under the names of TJ Maxx, Marshalls, HomeGoods, and Sierra Trading Post in the United States (with additional stores with various names internationally). TJX strives to offer exceptional value through its four pillars of great fashion, brand, quality, and price. This case offers a comparison of which retailer has the better overall financial performance.

Uses: Chapter 7: Financial Strategy 1. Calculate the following for both Tiffany & Co. and TJX using data from the abbreviated income statements and balance sheets in Exhibit 1.

Financial Indicator Formula Reference

Tiffany & Co.

TJX

a. Cost of goods percentage COGS $/ Net Sales $

39.3%

71.2%

b. Gross margin percentage GM $ / Net Sales $

60.7%

28.8%

c. SG&A expense percentage SG&A $/Net Sales $

42.2%

16.8%

d. Operating profit margin percentage (Op.Profit $/Net Sales $) or (GM% - SG&A%)

18.5%

12.0%

e. Net profit margin (after taxes) percentage Net Profit $/Net Sales $

11.3%

7.4%

f. Inventory turnover COGS/Inventory

.725

5.963

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g. Asset turnover Net Sales $/Total Assets $

.800

2.691

h. Return on assets (ROA) percentage Net profit Margin % * Asset Turnover

9.0%

19.8%

2. For a-h, compare and contrast the calculated financial figures for Tiffany & Co. and TJX, then analyze and discuss why the percentages and ratios differ for the two retailers. a. Cost of Goods Sold (COGS) is the amount retailers paid for the products sold, including shipping and distribution center costs. The higher the COGS compared to Net Sales, the lower the Gross Margin. The lower the COGS compared to Net Sales, the higher the Gross Margin. b. Gross Margin is the profit that retailers make on the merchandise they sell. Tiffany & Co. has a 60.7% Gross Margin and TJX had a 28.8% Gross Margin. Therefore, Tiffany had a significantly higher percentage gross margin (profit on the merchandise) that it sold.

Retailers like TJX, other off-price retailers like Ross Stores, and other discount retailers like Walmart typically have lower gross margins than specialty stores like Tiffany. This tendency exists because the strategy for discount stores is to offer merchandise at lower prices, with less service and ambiance, to price the products lower. Retailers such as Tiffany that have built a strong high-quality brand image often find that their customers are less price-sensitive and are willing to, in a sense, pay for the name, service, ambiance, quality, or image associated with the brand. Also, stores like TJX carry merchandise that is more easily comparable across brands and stores, which makes people more sensitive to price. Tiffany instead attempts to provide customers with unique and exclusive merchandise, which they are willing to pay more for. It is important that retailers have a high enough gross margin to cover all of the SG&A expenses, interest, and taxes, while retaining enough profit to satisfy shareholders. Retailers such as Tiffany & Co., with higher SG&A expenses, need a higher markup on their merchandise to achieve larger gross margins, whereas retailers such as TJX with lower SG&A expenses can sell their products at a lower markup or gross margin. c. SG&A Expense % The largest SG&A expenses for retailers typically is salary and wages.

SG&A also includes rent, utilities, advertising, and supplies. In looking at Tiffany & Co., one can see how its SG&A expense (42.2%) would be much higher than TJX stores (16.8%).

Tiffany stores are typically in very high rent locations, and Tiffany’s advertising would be more specialized image advertising than the more mass marketed advertisements of TJX. Tiffany & Co. would employ highly trained sales personnel and offer commissions, whereas TJX may have more entry-level retail associates with minimum training. All of these examples demonstrate why Tiffany & Co. would have a much higher SG&A percentage than 54 © MCGRAW HILL LLC. ALL RIGHTS RE SERVED. NO REPRODUCT ION OR DISTRIBUTION WITHOUT THE PRIOR WRITTEN CONSENT OF MCG RAW HILL LLC.

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TJX and why Tiffany & Co. must have a higher GM% to cover its SG&A expense % to still earn a profit. d. Operating Profit Margin is Gross Margin percent less SG&A percent. Tiffany & Co.’s.

Operating Profit Margin (18.5%) is higher than TJX’s (12.0%) because Tiffany & Co.’s significantly higher gross margin more than offsets Tiffany& Co.’s much higher SG&A expense percent. e. Net Profit Margin (after taxes): Tiffany’s Net Profit Margin (or Net Income after Taxes) is 11.3%, whereas TJX’s is 7.4%. Again, Tiffany’s higher Gross Margin is a significant factor in positively impacting its profit after taxes.

Up to this point, from a profit perspective alone, Tiffany is outperforming TJX. Even though Tiffany has a higher SG&A percent, its gross margin percentage is so large compared to TJX’s that it still surpasses TJX’s profit performance. However, TJX’s Net Profit Margin is still very good compared to other department and discount retailers. For example, Walmart’s Net Profit Margin for the same year was 3.0%. f. Inventory Turnover TJX’s inventory turnover (5.963) is eight times faster than Tiffany’s (.725). This means that TJX sells and replaces its inventory nearly 6 times a year, whereas Tiffany’s sells and replaces its inventory less than once in a year. TJX’s faster inventory turnover is expected due to the nature of its fashion merchandise. Trendy apparel and home goods by their very nature have a short lifespan. TJX brings in frequent smaller amounts of fashion merchandise that sell very quickly, resulting in a high inventory turnover. Customers visiting a TJX store an average of 6 times through a year would find almost completely different merchandise each time they visit. Tiffany, on the other hand, specializes in unique high-priced luxury items that people may want but not buy often. High-end jewelry and gifts are generally purchased for special occasions and holidays. As such, the inventory tends to stay in the store for a longer time, compared with fashion apparel. Also, Tiffany must carry a large assortment in each merchandise category so that people can feel like they have found exactly what they want, and not something that everyone else has. As a result, Tiffany has to invest much more in inventory to support its sales. A customer visiting a Tiffany & Co. throughout the year would find mostly the same merchandise offerings at each visit. g. Asset Turnover is a ratio of the value of a company’s sales or revenues generated relative to the value of its assets. TJX has a higher asset turnover (2.691) compared with Tiffany & Co. (.800). Generally, the higher the asset turnover ratio, the better the company is performing, because a higher ratio implies the company is generating more revenue per dollar of assets. h. ROA measures a company’s net earnings in relation to all of the resources it has available.

It tells an investor how much after-tax profit a company generated for each dollar in assets.

In other words, ROA measures how efficiently a company can manage its assets to produce profits. Because a retailer’s purpose is to generate revenues and profits, this ratio helps leaders and investors see how well the retailer can convert its investments in assets (including inventory) into profits. In most cases, a higher ROA is more desirable. Tiffany & Co.’s ROA 55 © MCGRAW HILL LLC. ALL RIGHTS RE SERVED. NO REPRODUCT ION OR DISTRIBUTION WITHOUT THE PRIOR WRITTEN CONSENT OF MCG RAW HILL LLC.

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is 9.0%, and TJX’s is 19.9%, so TJX is more effectively converting its investments in assets to profits.

3. Determine which retailer had the better overall financial performance.

Tiffany & Co. outperformed TJX in terms of Gross Margin, Operating Profit Margin, and Net Profit Margin. However, TJX outperformed Tiffany & Co. in asset-based metrics such as Inventory Turnover, Asset Turnover, and Return on Assets, making TJX appear to have the better overall financial performance.

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CASE 25: Choosing a Store Location for a Boutique Synopsis: Stephanie Wilson is considering a number of different locations for a new ready-towear boutique she is going to open. This is a hypothetical case.

Use: Chapter 8: Retail Locations Discussion Questions 1. List the pluses and minuses of each location.

Downtown Arcade

Tenderloin Village

Appletree Mall

PLUS Redevelopment might attract a lot of customer interest and traffic. Might attract tourist and downtown business customers.

By getting in early on this new development, Wilson might be able to get a prime location.

Modest monthly rental and lease terms.

Location of stores close to her home.

Low rent, no overage clause, short lease.

Traffic and nature of customers known.

Might afford opportunity for unusual visual merchandising and store design.

Good visible location in retail area.

Traffic and nature of customers known.

Mall draws most people of locations considered.

Other women's stores may draw in customers that could stop into Wilson’s.

MINUS Risky , no information about types of customers or amount of traffic.

Traffic limited to residents of the village.

Limited retailing doesn't have a big draw for outside neighborhood.

High rent, overage charge, and long lease.

New mall might draw traffic when it opens.

Competitive stores close by in the mall.

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2. What type of store would be most appropriate for each location?

Downtown Arcade—Store would have to cater to working women who work downtown and/or tourists. Merchandise might be more traditional, conservative with high service.

Tenderloin Village—Merchandise tailored to the trendy neighborhood. Could be more eclectic.

Appletree Mall—Need to develop a merchandise assortment that would be unique but offer competitive values to other stores in the mall. Due to the high rental charge, would have to be more concerned about maintaining high sales volume and higher inventory turns to make a profit.

3. If you were Wilson, which location would you choose? Why? The answer to this depends on Wilson’s interests. The mall has the highest risks due to the high rental charge but the highest potential profit. However, Wilson might not be able to use her creativity as much, due to the need to cater to a wider group of customers to maintain high sales volume. Tenderloin Village has the lowest risk and probably the lowest profit potential, but it would offer the greatest opportunity for Wilson to express her creativity. The Downtown Arcade is also risky, due to the unproven nature of the business. Customers might demand more conservative and traditional clothes, which limits Wilson’s creativity.

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CASE 26: Hutch: Locating a New Store Synopsis: This case deals with a large chain of popularly priced women's apparel stores that are generally located in small towns in the Southeast, Midwest, and eastern fringe of the Southwest. The company strategy is to sell to women between the ages of 18 and 40 years who are in the lower-middle to middle-income range. The principal issue is which of two available locations the manager should choose as the location for the next store. The manager has information on the demographics, lifestyles, and income of the populations for the trade areas of the proposed locations, as well as environmental information and descriptions of each center's characteristics.

The principal objective of this case is to give students an opportunity to use concepts learned in class to make location decisions. A second objective is to make students aware of the available secondary data sources obtainable from marketing research companies such as Claritas/UDS Data Services. Finally, the case encourages the use of both qualitative and quantitative information in the student's decision. This case should be used after students have been exposed to location strategies.

Use: Chapter 9: Retail Site Locations Discussion Questions 1. How do the people living in the trade areas compare with Hutch's target customer?

Hutch customers are price-conscious women between the ages of 18 and 40 years who live in small towns, like to wear the latest fashions, and are in the low- to middle-income range. Dalton is a bigger market by every measurable standard, though Hinesville is growing at a higher rate.

Furthermore, more than 11 percent of the population in Hinesville probably lives in barracks on the base.

Hinesville has a larger percentage of people within the target age group (Exhibit 2). However, multiplying the percentage of people between the ages of 21 and 44 years by the 2017 population projection, Dalton still has 34,570 people compared with 25,806 in Hinesville. Interestingly, even though Hinesville has the military base, its male population is only 49.1 percent, compared with 55.8 percent for Dalton. Thus, the number of women in the 21–44 year age group is 17,596 in Dalton, compared with 11,406 in Hinesville.

Although Dalton is generally more affluent in terms of household incomes, the level of education is much lower: 41 percent of the population in Dalton over the age of 25 years have no high school diploma. The employment picture mirrors Dalton's education: 42.3 percent of the population work in manufacturing, mostly in the carpet mills and related firms. Dalton has a much more diverse population than does Hinesville. Almost 80 percent of the Hinesville population is classified in the "Military Quarters" PRIZM cluster.

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Turning our attention to competition, Hinesville starts to look more attractive. Total sales, general merchandise store sales, and apparel store sales are all significantly higher in Dalton.

Dalton also has significantly more general merchandise and women's apparel stores. Finally, per capita sales for women's apparel are almost at parity with the national average in Dalton. Yet in Hinesville, the ratio is only 75 percent. It is therefore possible that Hinesville is understored in women's apparel.

At this point there should be a discussion about whether demand or competitive issues should be given more weight in the final analysis.

2. How do the proposed locations, including the cities, tenant mix, and the locations within the malls, fit with Hutch's location requirements?

We should assume that these locations are within a 400-mile radius of one of their distribution centers. The stores should be located in communities with a population range from 10,000 to 50,000 and a trade area of 50,000 to 150,000. Although both towns meet these criteria, Dalton is significantly bigger (87,293 compared with 57,945 for the 10-mile ring in 2016). Both towns have experienced significant growth.

Environmental factors could affect both locations. Dalton could be adversely affected by a drought. Students will argue about how Fort Stuart will affect Hutch sales. Some will say that if the "guys" get shipped out, their spouses will still be there and the paychecks don't stop. Others will argue that the spouses might also temporarily leave.

Hutch stores are generally located in strip centers anchored by either a Walmart or Target. Both locations meet these criteria.

The desired location for Hutch stores is adjacent to the center's anchor. The location within the center in Dalton is one spot from the Walmart. Although not perfect, it is acceptable. In Hinesville, the location within the center is adjacent to Target and is therefore an ideal location.

Hutch requires a tenant mix of several nationally recognized and popular local tenants. The Dalton center generally meets this requirement, though the McSpeedy’s Pizza and Century 21 training school are less appealing, because they do not bring shoppers into the center. Also, two outparcels in front of the proposed location are a problem. They reduce visibility and parking in front of the store, which may adversely affect the traffic flow into the store. Students might argue about the advantage of having a movie theater in the Hinesville location. Some will say that these patrons won't shop, while others will argue that the theater acts as an anchor for smaller centers.

3. Which location would you select? Why? All things considered; Dalton is a stronger market from a demand perspective. Dalton has more women within the target age categories. Dalton is also more affluent. It appears that the people that work in the carpet mills make a lot more money than those in the military. Yet, Hinesville 60 © MCGRAW HILL LLC. ALL RIGHTS RE SERVED. NO REPRODUCT ION OR DISTRIBUTION WITHOUT THE PRIOR WRITTEN CONSENT OF MCG RAW HILL LLC.

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may provide an excellent opportunity for Hutch, because it appears understored. Both sites are acceptable; Hinesville may be better because the movie theater can act as an anchor.

Furthermore, Dalton has outparcels and some non-shopping goods tenants. In the end, the instructor should evaluate the students' arguments without declaring a real winner.

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CASE 27: Understanding Grubhub’s Service Quality Synopsis: Grubhub helps customers find and order food from wherever they are. This business saw positive growth during the COVID pandemic. Customers who use Grubhub tend to be tech-savvy and likely to complain if an order is not perfect. Some delivery people do not meet expected customer service standards. In reviewing this case, students can assess the service gaps facing this company and suggest ways to improve the customer experience.

Uses: Chapter 10: Information Systems and Supply Chain Management.

Chapter 18: Customer Service Discussion Questions 1. Which service gaps is Grubhub currently addressing?

Grubhub is addressing knowledge and standards gaps, by establishing standards and training to ensure it offers quick, seamless, consistent, reliable, and affordable delivery services, as its customers expect. To address the communication gap, Grubhub communicates delivery promises, then works to keep them. The delivery gap marks the difference between the firm's service standards and the actual service that it provides customers. To deal with this risk, Grubhub maintains a 24/7 customer care team that is always available to respond to customer concerns. In addition, Grubhub monitors Twitter, on which it offers a specific, customer support–dedicated handle. Similarly, drivers can contact Grubhub directly if they recognize a problem at any point during the delivery process.

2. How might Grubhub address the remaining service gaps?

Grubhub is no different from most services in its need to be readily available to receive complaints and concerns from consumers. It would be excellent to prompt students to think through each gap and figure out how else Grubhub could overcome it.

3. Evaluate how Grubhub meets customer expectations using the five service quality dimensions.

Answers will vary, but students should discuss how Grubhub deals with each dimension:  Reliability: Grubhub uses accurate delivery estimates and updates to establish the reliability of the platform for customers.  Responsiveness: Grubhub maintains easy-to-use websites and apps. Users can access the service at their desks, on the move, or sitting on their couches with their phones.  Assurance: Grubhub delivers the food by a Grubhub-employed driver; thus, its customers know who is coming to their door and face less risk of a cold or ruined meal.  Empathy: Grubhub monitors Twitter, on which it offers a specific, customer support– dedicated handle. Similarly, drivers can contact Grubhub directly if they recognize a problem at any point during the delivery process.  Tangibles: Grubhub delivers the food by a Grubhub-employed driver, who carries a Grubhub-branded and insulated bag.

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4. Evaluate how Grubhub is set up to recover from service failures.

To deal with service failures, Grubhub maintains a 24/7 customer care team that is always available to respond to customer concerns. In addition, Grubhub monitors Twitter, on which it offers a specific, customer support–dedicated handle. Similarly, drivers can contact Grubhub directly if they recognize a problem at any point during the delivery process. It would be useful to look at various rating sites, such as sitejabber: https://www.sitejabber.com/reviews/grubhub.com. The current rating do not reflect well for Grubhub relative to other food delivery sites.

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CASE 28: Zara Delivers Fast Fashion Synopsis: Study the fast-fashion retail business strategy that was pioneered by Zara, a global specialty apparel chain located in La Coruna, Spain. Learn how this approach has been adopted by other retailers, including H&M (Sweden), TopShop (UK), Forever 21 (United States), and Uniqlo (Japan). Evaluate the information systems and supply chain management needed to support fast-fashion.

Use: Chapter 10: Information Systems and Supply Chain Management Discussion Questions 1. How does an individual firm like Zara manage a supply chain? How does it get new products from design to store so quickly?

Zara has set up its supply chain so that stores can respond immediately to customer demand for merchandise. Zara has factory locations that are close in geographic proximity to the company’s headquarters in Spain. Zara has set up its supply chain to have the flexibility to modify its operations in one supply chain function to expedite processes in another, such as pricing or tagging.

2. What are some of the ways that Zara’s supply chain management system has helped create value for its customers? Provide specific examples.

Zara is able to create value for customers in several ways. First, Zara is able to provide customers with a ―fast fashion‖ product faster than its competitors with short cycles and lead times. Second, Zara is able to meet customers’ demands and changes in customers’ tastes. Third, Zara is able to reduce stockouts because it ships merchandise to stores every few days.

3. What challenges did Zara’s focus on supply chain efficiency create? Are all such systems destined to suffer similar growing pains?

Zara limits the amount of inventory in stores and produces and ships in small quantities. This strategy sometimes creates a sense of scarcity among customers. Because Zara is in the fashion business, Zara merchandise must reflect changing fashion trends. Sometimes the system does not respond fast enough, and Zara encounters disappointed customers. In addition, sometimes Zara suffers from stockouts. An unfortunate problem for Zara occurs when inventory sits unused in one location while another store may desperately need the same merchandise.

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CASE 29: Avon Embraces Diversity Synopsis: Avon, the largest cosmetics firm in the United States, sells primarily through the direct-selling method, using more than 6 million independent sales representatives in more than 70 countries around the world. The case describes Avon's turnaround strategy since the 1970s when it started actively promoting diversity, by including more women and minorities in the top and middle management levels.

Uses: Chapter 4: Multichannel and Omnichannel Retailing Chapter 6: Retail Market Strategy Chapter 16‖ Human Resources and Managing the Store Discussion Questions 1. Why is Avon committed to diversity? How has this contributed to its growth and success?

Avon's target market is female consumers for all its cosmetics lines. Decision-makers need to be able to understand the needs of women and explore new market opportunities. But historical problems at Avon arose, when an all-male top management team ignored marketing research data on new market opportunities and pursued growth strategies that were not compatible with the rest of the firm's strategy and operations. Diversity at Avon ensures that sales representatives’ characteristics match more closely with customers, which is especially important because the firm uses direct-selling methods to market its products. Sales representatives understand the needs of the target market, offer credible advice, can maximize sales, and achieve superior performance for their own career advancement. Historically, for Avon, the inclusion of more women in top management positions has helped it avoid its strategic mistakes of the past.

Additional information: ―Avon's Latest Business Report Highlights Beauty of Doing Good,‖ Where Women Work, 7/20/2020, https://www.wherewomenwork.com/Career/2715/Avon-Corporate-ResponsibilityReport 2.

Read the blog post, ―9 Companies Around the World That Are Embracing Diversity in a BIG Way‖ at https://www.socialtalent.com/blog/diversity-and-inclusion/9-companies-around-theworld-that-are-embracing-diversity. What are these companies doing to value diversity? How does this commitment affect the firm’s financial performance?

A lot of pertinent information is provided to allow students better understand how these firms are handling and embracing diversity.

3.

Read the article from Global News dated February 11, 2021, ―Our Chief Scientific Officer Louise Scott Shares Why She Is So Proud to Lead a Highly Diverse Team in a MaleDominated Sector,‖ at https://www.avonworldwide.com/news/international-day-women-in65 © MCGRAW HILL LLC. ALL RIGHTS RE SERVED. NO REPRODUCT ION OR DISTRIBUTION WITHOUT THE PRIOR WRITTEN CONSENT OF MCG RAW HILL LLC.

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science. Why does Avon celebrate women in the science, technology, engineering, and mathematics (STEM) fields?   



 

To encourage more women in STEM disciplines To recognize its research & development team, in which 70 percent of the scientists are women.

To ensure that its employees can reach their potential, regardless of demographic categories (e.g., gender, culture, ethnic background), which in turn enables them to devote their best effort to their work and life tasks.

To acknowledge, as asserted by UN Women, that ―The jobs of the future will be driven by technology and innovation, and if the gender divide in Science Technology Engineering and Mathematics (STEM) is not bridged soon, the overall gender gap is likely to widen.‖ To achieve more gender balance across multiple disciplines, including those that appear more disparate, such as engineering.

To support a balance between employees’ careers and families.

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CASE 30: Sephora Loyalty Programs: A Comparison Between France and the U.S. Synopsis: Sephora is a beauty products retail chain founded in France by Dominique Mandonnaud in 1970 and owned today by Moët Hennessy Louis Vuitton (LVMH), the world’s leading luxury goods group. Sephora has a strong presence in several countries around the world.

It operates approximately 2,300 stores in 33 countries worldwide, with more than 430 stores in North America. It opened its first U.S. store in New York in 1998. The case compares loyalty programs between countries.

Uses: Chapter 11: Customer Relationship Management Have students visit the Sephora Beauty Insider webpage at https://www.sephora.com/profile/BeautyInsider for current information and benefits for this program.

Discussion Questions : 1.

Identify the benefits for a company to implement a loyalty program  Develop repeat purchase behavior.  Engender customer commitment and create a bond with the retailer (sense of community).  Encourage retailer loyalty.  Collect customer data on transactions, customer contacts, preferences, descriptive information, responses to marketing activities.  Use the information to target communications and promotions.

2.

        

3.

What are the design characteristics of an effective loyalty program?

Identify each customer and provide rewards for their purchases.

Use a tiered program. Not all customers have the same value for a company, so rewards should be tiered according to the volume of purchase.

Offer customers choices, because not all customers value the same rewards.

Reward all transactions.

Combine discounts and points for rewards. Do not simply offer price discounts. Research has shown that customers generally prefer to get something extra for their purchases, rather than a discount.

Incorporate charitable contributions.

Feature transparency and simplicity. The loyalty program should be easy to understand and quickly usable.

Provide customer services.

Offer unique benefits and target messages to individual customers. Personalization and personal attention.

What are the benefits of having a tiered loyalty program such as Sephora’s?

67

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Not all clients have the same value. In general, 20 percent of the customers account for 80 percent of the sales or the profits. Premium members are the most profitable and loyal customers.

They are not overly concerned about merchandise prices and discounts; rather, they place value on special and personalized services. They generally patronize only one retailer for a particular product category. By having a tiered program, customers in the lower tiers have incentives to purchase more to get to the higher tiers.

4.

Describe Sephora’s loyalty program design characteristics in both countries. What are the main differences? Which loyalty program is most effective at developing customer loyalty? Why? U.S. loyalty program Common to all programs: $1 spent = 1 point Rewards Beauty Insider Program: 100 points = sample-sized product 500 points = full-sized product Birthday gift Invitation to Beauty Insider-only events

Premium program V.I.B: minimum of $350 spent a year Rewards in addition to the regular program: Deluxe samples Exclusive monthly perks and gifts Access to prereleased products Event invitations 10 percent savings welcome offer Special discounts Free makeover Requirements: requalify each year with a minimum purchase of $350.

French loyalty program Common to all programs: 1€ spent = 1 point Rewards White card: 150 points or 4 purchases = 10 percent discount for next purchase Rewards Black card: minimum of 4 purchases or 150€ spent a year 150 points or 4 purchases = 10 percent discount for next purchase Invitations to special events Updated information on innovative products Personalized offers based on customers’ skin type or makeup style Premium program Gold card: minimum of 1500€ spent a year Rewards in addition to the Black card benefits: Exclusive private sales Full-sized birthday gift of customer’s choice Free shipping on website Free access to Sephora’s Beauty Bar once a month E-newsletter with exclusive beauty news Special telephone line Dedicated in-store assistance 1,000 points: Choice among several limited-edition Sephora Gold gifts Requirements: requalify each year with a minimum purchase of 700€

The main differences are:  Discount: In the French program, there is a mix of discount and rewards, whereas the American program only offers rewards. Discounts are used to tease consumers at the beginning of the relationship. This entry-level relationship, which is based on a lower price point, does not garner loyalty, because it is easily copied by 68 © MCGRAW HILL LLC. ALL RIGHTS RE SERVED. NO REPRODUCT ION OR DISTRIBUTION WITHOUT THE PRIOR WRITTEN CONSENT OF MCG RAW HILL LLC.

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



competitors. As the customer reaches higher levels, Sephora grants higher rewards and services, which creates a stronger relationship.

A different tiered program: The U.S. program is a two-tiered program, and the French program is a three-tiered program. Adding one level might indicate customer segments that represent different values for Sephora to differentiate marketing activities. The three-level program echoes the customer pyramid developed by Zeithaml et al. (2001).

Customer service: The French program offers a large number of services including personalized offers, personalized in-store assistance, free shipping, access to the Beauty Bar, and a special telephone access in the Gold program.

These services create value for the French customers because they make them feel special. There is also the incentive to purchase more to qualify for these services.

The French program is more effective at developing customer loyalty. It combines discounts and rewards. The more a customer is valued (in terms of purchase amount or purchase frequency), the more he/she will get rewards rather than discounts. Discounts are used to transform customers into good customers, because it encourages them to patronize the retailer more frequently.

The U.S. program offers rewards only, without discounts that might get newer customers to patronize the retailer more frequently. The two-tier program does not fairly reward customers in the middle, in between starter and loyal customers. In the French program, those that purchase at least 150€ already feel special because they are in the middle tier. In the two-tier American program, there is not enough differentiation between customers, which makes it more difficult to segment customers that seek different benefits.

5.

Are both Sephora’s French and American premium programs worth what they spend to reward customers? Why do both programs have a limited time validity and a specific requirement regarding the amount spent per year?

French premium program: Costs include: (1) rewards, (2) shipping, (3) newsletters, (4) salesperson’s training and time, (5) telephone line, and (6) additional gifts and private sales.

Benefits include: (1) recovery of the partial cost (minimum of 1500€ to access the program); (2) increased spending by this segment (minimum of 700€ each year has to be spent to keep the premium card); and (3) targeted and efficient marketing to the customers.

American premium program: Costs include: (1) additional points and deluxe samples, (2) discounts of 10% as welcome offer and special discounts, and (3) event invitations.

Benefits include: (1) recovery of the partial cost (minimum of $350 to access the program) and (2) increased spending by this segment (minimum of $350 each year to keep the premium card).

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Analyzing the costs and benefits of both premium programs, we conclude that both of them are worth more than the costs incurred in the program.

Time validity also can give customers a sense that they have to deserve their special status and that they can lose it. Purchase amount requirements are used so that customers understand that not all customers can be in the premium program. If there were no yearly purchase amount requirement, customers could spend more money to access the premium level the first time, then reduce their yearly spending amounts while still benefiting from the special rewards and customer services. With no such requirements, Sephora would lose money.

6.

Could the premium loyalty program implemented in France be adapted to the U.S. market? Explain.

Since there is no information in the text, further information needs to be sought. Data about the beauty market in both France and the United States are available on Datamonitor, on the website of the French National Institute of Statistics and Economic Studies, and the website of the U.S. Census Bureau.

On average, U.S. consumers spend more for fragrance, skin care, and body care than do French consumers, who rank fourth in this market (behind the United States, Japan, and Brazil; INSEE, 2006). Therefore, the French premium program likely could not be implemented in the United States, even if U.S. consumers spend more on average for beauty products, because they purchase more mass market beauty product than premium beauty products. Sephora sells mostly premium products (except for its private label), so French consumers spend more at this premium retailer than do American consumers. This tendency helps explain the difference between the premium programs in terms of purchase amount required ($350 versus 1500€). It might be that not many U.S. consumers would qualify to be in the Gold premium segment, so it would not be worth the additional trouble for Sephora.

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CASE 31: Attracting Generation Y to a Retail Career Synopsis: Diva is a specialty fast-fashion jewelry and accessories retailer, with roots in Australia but a store network spanning the United States, Russia, and Europe. The retailer is confronted with the problem of attracting and retaining its Generation Y workforce.

Use: Chapter 16: Human Resources and Managing the Store Discussion Questions 1. How can Diva demystify what happens behind the scenes and make potential Generation Y employees aware of the opportunities available to them beyond the shop floor?

Generation Y seldom sees retail as a career of choice, particularly given that many believe a retail career starts and finishes at the shop floor. Diva should communicate the career progression opportunities available, particularly for people who work in stores. It should describe the success of those who have advanced from the store to senior positions.

2. Diva has implemented a learning organizational culture in an attempt to attract and retain staff. Discuss the possible pros and cons of this strategy for Generation Y. On the positive side, Diva has developed a workplace environment that encourages goal-setting and self-improvement through several initiatives, such as training plans, career development programs, and leadership programs. It also offers an attractive salary package and career progression opportunities. However, it still confronts the problem of attracting and retaining a Generation Y workforce. A possible negative outcome of these initiatives is that they may not be the drivers that attract Generation Y. 3. Give examples of how other organizations (perhaps even nonretailers) attract a Generation Y workforce. What could Diva learn from other organizations?

The fast-paced technology industry provides a good example of a sector confronted with a predominantly Generation Y workforce. Google, for instance, engages staff in a variety of ways including flexible working environments (e.g., flexible hours, Wi-Fi Internet within the office so staff are not tied to a desk), a lack of ―corporate‖ culture (no suits!), and an engaging workspace (gaming facilities, free snacks, ―chill-out‖ areas). Alternatives may include reorienting these initiatives toward Generation Y, such as increasing workplace flexibility, promoting the fun aspects of the job (e.g., travel associated with buying roles), and catering to Generation Y’s desire for ―instant gratification‖ (e.g., fast-tracked career progression). Diva could trial some initiatives and over time track their effects on the Generation Y workforce.

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CASE 32: Active Endeavors Analyzes Its Customer Database Synopsis: Active Endeavors is an outdoor apparel and accessory retailer. The store has a database of its customers’ transaction records, including their name and address, transaction date, products and quantity purchased, and purchase price. The store owner is thinking of using the transactional database to target a direct mail campaign designed to increase traffic.

Use: Chapter 11: Customer Relationship Management Discussion Questions 1. Describe the type of customers in each group.

Students need to understand what recency, frequency, and monetary values mean. Recency is a measure of how recent the last purchase was. When the recency value is low, the likelihood of a purchase should be high. Frequency is a measure of long-run purchase frequency. It can be a cumulative number of purchases or an average frequency over a certain period. In this case, it is a cumulative number. Finally, monetary value is the long-run purchase amount. When the frequency and monetary values are high, the likelihood of purchase is expected to be high.

Group 1: The customers in this group are the regular buyers and the best customers. They have purchased very recently and have purchased frequently and spent a large amount.

Group 2: These are new customers. They have purchased very recently but only once and spent little. The store wants to develop a good relationship with these customers and convert them into its best customers.

Group 3: These customers had purchased frequently and spent a large amount in the past.

Their most recent purchase was more than three months ago, which is not too long. They still have the potential to become regular shoppers and the best customers.

Group 4: These customers purchased once and spent only a little, and their most recent purchase was not too long ago. These customers are not as good for the store as the customers in other groups.

Group 5: These customers used to be frequent and big spenders, but for some reason their most recent purchase was more than a year ago. They have potential but have not purchased for a long while.

Group 6: These customers are unprofitable. They purchased more than a year ago, purchased only once, and spent only a little.

2. What would you recommend Active Endeavors do to get more business from each group?

Group 1: The store should do everything it can to retain these customers. It can use a frequent shopper program and offer new products and deals through regular communications such as direct mail and e-mails.

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Group 2: It might offer new products and special deals, but good customer service and a memorable shopping experience would be important for this type of customer.

Group 3: The store should contact these customers by direct mail and emails and offer them new products and special deals.

Group 4: Because the recency value for this group is not too bad, it is important for the store to entice them to come back before it loses them altogether. The store should contact these customers with a special offer to entice them to come back. But if they do not respond, it may not be worthwhile to spend any more time and effort on them.

Group 5: The store should contact these customers with a special offer to entice them to come back. But if they do not respond, it may not be worthwhile to spend any more time and effort on them.

Group 6: These customers do not have good potential, and there seems to be a slim chance of getting them back. The store should not to do anything about this group and should expend its efforts elsewhere.

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CASE 33: Pizza Players, Pizza Prices Synopsis: This comparative case covers the battles for dominance by four major players in the retail pizza industry—Domino’s, Pizza Hut, Papa John’s, and Little Caesars—by outlining their distinct approaches to pricing and promotions. It also considers the role of small, independent pizzerias in defining the market. By outlining the competitive environment, this case helps students understand how pricing strategies represent both responses to the surrounding environment and active attempts to alter the status of the market.

Use Chapter 5: Consumer Behavior Chapter 14: Retail Pricing Discussion Questions 1. Which pricing tactics does each company utilize? Evaluate the effectiveness of each of these tactics for the particular pizza chain.

Papa John's relies on quantity discounts (e.g., order one large pizza at the regular price, get a second for just $.50) and price bundling (combine chocolate chip cookie and brownie for $6 with the order of any pizza). These efforts help it keep pace with competitors’ pricing.

Little Caesars, which aims to maintain its ―underdog,‖ overlooked status, uses leader pricing, such as offering a free Hot-N-Ready lunch if a sports upset occurs.

Domino's effectively achieves a consistent pricing strategy by using markdowns on the same baseline price (e.g., medium cheese pizzas for $5.99 each).

Pizza Hut, in an attempt to reverse a recent sales slump, has adopted price bundling (buy at least one other item, such as breadsticks or wings, get a medium, one-topping pizza for just $5). The effectiveness of this tactic is not clear yet.

2. How might the current price wars change the pricing tactics used by the major pizza chains?

As the price wars continue, the major chains must turn their attention from the small restaurants to one another. This shift will add to existing pressures for lower prices, which may cut in to the margins earned by all the major pizza chains. In turn, each of the competitors in this competitive sector need to find new, creative pricing tactics that keep customers happy while still maintaining their profits.

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CASE 34: Mel’s Department Store under New Management Synopsis: A new department store manager learns firsthand about markup and markdown in different departments and how her assortment and overall retailing strategy affect these day-today tactical decisions.

Use: Chapter 14: Retail Pricing Discussion Questions 1) Given the soft-goods targets, are these marked correctly? If not, what should the initial retail price be to obtain her 60 percent minimum initial markup percentage?

Elise received 200 units at a cost of $16. She also received 100 units costing $17.50. The first step is to calculate the initial markup based on her plan. The plan asks for a 60 percent initial markup on any soft good. Therefore: a. Retail price = cost of merchandise 1-markup percentage For the prewashed jeans: Retail price = $16/(1-.6) = $40 For the jeweled jeans: Retail price = $17.5/(1-.6)= $43.75 b. Now, compare the tagged price to the answers from part a.

Plan = $40 Tag = $30.50 Plan = $43.75 Tag $43.75 So, the vendor marked the prewashed jeans incorrectly, but did mark the jeweled jeans correctly.

2) By noon another shipment arrives. This time it is from SNEAK HERS, delivering her preholiday sneakers. Elise notices that the high tops do not have tags and need to be priced for the floor. She has her associate calculate the retail price. The invoice indicates the cost is $8.75. What should the initial retail price be, given her markup target?

For shoes, the initial markup target is 54%. She uses a similar formula to the above: Retail price=cost of merchandise/(1- markup percentage) Retail price - $8.75/(1-.56)= $19.88 3) Elise has been analyzing her sell through and saw that the “hot” T-shirts from back to school have not been moving, and she has sweater shipments due in the next two weeks.

She decides to mark down the T’s to make room for the anticipated shipment. The cost of the T’s was $2.25, and they were on the floor at a 62 percent markup. If Elise takes a 33 percent markdown, what is the new selling price?

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The first step is to find out the price they were initially. The information in the problem gives you the cost of $2.25 and an initial markup % of 62%. Using the formula: Retail price = cost of merchandise/ 1-markup percentage = $2.25/ (1-.62)= $5.92 Now, she needs to mark down the price from the retail price of $5.92. The new retail price on a markdown = present retail price – (markdown%  present retail price), or 5.92 – (.33  5.92) = 5.92 – ($1.95) = $3.97.

4) After six weeks passed, Elise analyzes her sales of the FUNWEAR prewashed jeans. Of her original 200 units this is what she found: 50 units sold at the original retail 34 units sold at a 38 percent markdown 116 units sold at a 44 percent markdown What was her average maintained markup percentage? Did it meet her goals? Explain how this was possible.

Maintained Markup is the actual sales realized for the merchandise, minus its costs. a. First calculate what all of her sales were.

50 units sold for $40 (remember from question #1, the tag needed to be changed) = $2,000 116 units at a 44% markdown. So the calculation should be original retail price of $40 – (markdown % * original retail price)= $40-(.44*$40)= $22.40. Selling 116 units at $22.40 is $2,598.40 34 units sold at a 30% markdown. The tricky part here is that students need to realize the markdown is on the original retail price. Markdown on one unit would be initial retail price of $40(.30*$40) = $28. Therefore, total sales on these were 34 units *$28 or $952. b. Now, the student needs the following: Actual sales were = $2,000 + $952 + $2,598.40 = $5,550.40 Actual costs: Back to Question #1 where we originally bought 200 units at $16 cost. Original cost of goods was 200*16= $3,200.

So, the Actual sales-actual cost= $5,550.40-$3200= $2,350.40 The problem asks for the average maintained markup %, so that students can compare to the plan, which is 34% for soft goods. The average maintained markup % = gross margin or $2350.4/5550.40 = 42%. Elise is well over plan, thanks to the fact that the majority of her sales were at the 44% first markdown versus the 30% second markdown!

5) Using the information in question 4, explain to management the possible reasons multiple markdowns could have been taken and why we compare to plan.

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Multiple markdowns are taken for many reasons in retail. One reason is a bad buy. As the store manager, you brought in the merchandise your buyer thought would sell, but due to color, style, or even price, it was not selling. Your job is to move the merchandise through to make room for hopefully better selling merchandise. This effort can mean multiple attempts at price reductions until the price makes the bad buy enticing to the consumer.

A second reason for multiple markdowns could be competition. Price pressure from competition can create the need for a store manager to take an additional markdown to stay competitive— especially for items like prewashed jeans, which are not unique and could face head-to-head competition from other retailers, making price comparisons easy for consumers.

Lastly, the inference of ―six weeks have passed‖ should prompt a good conversation about how long merchandise should stay on a selling floor. Although there are no hard and fast rules, time on the floor should reflect the retailer’s marketplace strategy, the category of goods (seasonal vs. staple), and so forth. However, multiple markdowns are usually needed to move the inventory at some kind of profit before liquidating.

We always compare to plan; at a corporate level, merchandise managers seek to maintain a margin in certain categories to maintain profitability. The plan is how managers know if their merchandise at their local level is contributing to the overall corporate plan. Store management is a balancing act of trying to maintain that profitability while also clearing the way on the selling floor for fresh, new merchandise to entice and delight the consumer.

6) FUNWEAR is a long-time vendor of Mel’s. It provides markdown dollars to help defray the lost gross margin dollars. Why would it provide this money to Elise?

Markdown dollars are one way that a vendor communicates that it is a partner for the retailer. It takes on some responsibility to deliver undamaged goods and assortments and colors that sell, knowing that if it doesn’t, it will need to pay. The better the merchandise sells through, the less money it needs to spend in markdown money.

7) Seventy-five toy trains were bought for the toy area at $3.50 each and were then priced at $10.00 each. Elise is running a department promotion and wants to reduce the price of the trains. To what can she reduce the retail price in order to meet her maintained markup goals?

Cost of the toy trains was $3.50, and they retailed at $10. Her targeted maintained markup % is 25 percent. The question then is how low she can drop the price so that (new retail price – cost)/new retail price is equal to or more than 25 percent. It becomes (X – 3.5)/X = .25, where X is the new reduced retail price, 3.5 is the original cost of the train, and .25 is the percentage minimum for the maintained markup (as per the plan). Solving for X, we get X = 3.5/.75, or $4.67. Therefore, the lowest retail price is $4.67 to still have a maintained markup of 25 percent.

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8) Mel’s wanted to create unique assortments and increase customer service. How does this strategy allow for better markup percentages? How are these related to perceived value?

These strategies allow for better markups, because they differentiates Mel’s in the marketplace.

The increased customer service and personal contact is worth something to the consumer, more than a competitive price on the Internet. The unique goods also are a point of difference that eliminates price comparison and keeps markup percentages high, because customers should be willing to pay more to get something unique. Value = Perceived value/Price. Retailers can increase value by offering more benefits or reducing prices. Reducing prices erode margins though, so it reduces markup percentages too. Adding perceived value through a better shopping experience (enhancements made at Mel’s), increased customer service, and unique assortments helps increase value for the customer.

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CASE 35: Developing an Assortment Plan for Hughes Synopsis: A department store needs to develop an assortment plan for imported merchandise. This case gives students an excellent chance to experience how a buyer must break down an open-to-buy allocation into SKUs, specifically, sizes and fabrics of oriental rugs. The students should be divided into teams of retailers representing Hughes Department Store and manufacturers representing Ghuman Export. The retail teams would develop an assortment plan based on figures given. The manufacturing teams would compile purchase policies and style lists using information given. Retail teams would negotiate with foreign manufacturer teams to achieve predetermined buying goals.

Use: Chapter 12: Managing the Merchandise Planning Process Discussion Questions 1. Work up a buying plan to use when buying from Ghuman's.

Decide how to distribute the allotted open-to-buy dollars among the available sizes, colors, and fabrications. For this overseas manufacturer, consider additional costs such as duty and shipping, which also need to be covered by the allocated open-to-buy dollars.

Exhibit 1 below provides the wholesale prices in columns 1 to 3 and adjusted prices in columns 4 to 6. We have assumed a 9 percent ocean freight charge, and Ghuman will absorb the duty. Of course, students can make any assumption about these charges. If the instructor uses this case for negotiation purposes, freight and duty are two main issues for negotiation.

2. How should Hughes distribute the allotted open-to-buy dollars among the available sizes, colors, and fabrics?

Exhibits 2, 3, and 4 are sample assortment plans for silk, wool, and cotton, respectively. They were developed from one large spreadsheet. For purposes of illustration, we examine the assumptions and calculations for Exhibit 2:    

Column 2 is taken directly from Exhibit I in the case.

Column 3 is the product of column I times the percent of sales in silk. Thus, the percent of silk in a 3'  5' rug is .15  .2 = .03.

Column 4 is the approximate amount of money to be invested in each SKU. Thus, the amount of money to be invested in silk 3  5 rugs is .03 (column 3) times the total opento-buy of $66,200 = $1,986. Note that students can assume other open-to-buy figures.

Column 5 is the approximate number of SKUs. The approximate number of silk 3  5 rugs is the approximate amount of money to be invested ($1,986) divided by the adjusted cost from Exhibit 1 ($436) equals 4.56 rugs.

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

Column 6 is the adjusted number of SKUs. Naturally, the buyer cannot purchase 4.56 rugs. So adjustments are made, both up and down, to whole numbers. In this case, we adjusted upward to 5 units.  Column 7 is the adjusted cost for the silk 3  5 rugs. It is the adjusted number of SKUs (Column 6) times the adjusted cost from Exhibit 1, or 5 times $436 = $2,180.  The total open-to-buy used was $66,326.50, which is slightly above but certainly within a reasonable range of the estimate of $66,200.

Exhibit 1. Cost Information SILK WOOL COTTON SILK WOOL COTTON COST COST COST COST COST COST ADJUSTED ADJUSTED ADJUSTED 400 250 436 0 272.5 700 500 200 763 218 545 850 700 275 926.5 299.75 763 1200 1000 350 1308 381.5 1090 1400 1300 500 1526 545 1417

SIZES

% OF SALES

3 by 5’ 4 by 6’ 6 by 9’ 8 by 10’ 9 by 12’ TOTAL

0.2 0.4 0.15 0.1 0.15

SIZES 3 by 5’ 4 by 6’ 6 by 9’ 8 by 10’ 9 by 12’ TOTAL

SIZES

Exhibit 2. Assortment Plan for Silk Rugs SILK % SILK $ SILK SILK UNITS UNITS ADJUSTED 0.03 0.06 0.225 0.015 0.0225 0.15

1986 3972 1489.5 993 1489.5 9930

4.56 5.21 1.61 0.76 0.98

5 5 2 1 1

SILK $ ADJUSTE D 2180 3815 1853 1308 1526 10682

Exhibit 3. Assortment Plan for Wool Rugs % OF WOOL WOOL $ WOOL WOOL SALES % UNITS UNITS ADJUSTED 0.2 0.12 7944 29.15 30 0.4 0.24 15888 29.15 30 0.15 0.09 5958 7.81 8 0.1 0.06 3972 3.64 4 0.15 0.09 5958 4.20 5 0.6 39720

WOOL $ ADJUSTE D 8175 16350 6104 4360 7085 42074

Exhibit 4. Assortment Plan for Cotton Rugs % OF COTTO COTTO COTTON COTTON SALES N% N$ UNITS UNITS ADJUSTED

COTTON $ ADJUSTE D

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3 by 5’ 4 by 6’ 6 by 9’ 8 by 10’ 9 by 12’ TOTAL

0.2 0.4 0.15 0.1 0.15

0 0.1 0.0375 0.025 0.0375 0.2

0 6620 2482.5 1655 2482.5 13240

0.00 30.37 8.28 4.34 4.56

0 30 8 5 5

0 6540 2398 1907.5 2725 13570.5

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CASE 36: Preparing a Merchandise Budget Plan Synopsis: This case can be difficult for students to grasp, but we think it is well worth the trouble, because it illustrates the relationship among the sales forecast, the seasonality pattern, inventory turnover, and the stock-to-sales ratios. We find it beneficial to walk students through the case line-by-line during the class period preceding the class in which it is due.

Use: Chapter 12: Managing the Merchandise Planning Process Student Instructions Your assignment is to assist Jim in the preparation of a merchandise budget plan. First, fill out the merchandise budget form for six months. You may use either the form accompanying this case. Then, on a separate sheet of paper, type and double-space a brief but specific explanation of how you derived the following: Adjustments to percentage distribution of sales by month.

Adjustments to stock/sales ratios I. Sales forecast The sales forecast is simply last year’s sales  1.19 to account for the 19 percent increase in sales II. Adjustments to percentage distribution of sales by month Students shouldn’t take a simple average of the past three years, because it assumes that all years are equally important in forecasting next year. They also might want to use the most current year, which is equally misleading, because it ignores all old seasonality history. A weighted average puts more emphasis on the most recent year and less on older years. We used .25, .35, and .4 for our calculations. The weighted sales figures then need to be adjusted based on Jim’s anticipation of an increase in sales in March and a decrease in April and May. These adjustments only bring the sales for the 6-month period to 98.75 percent, so monthly sales have to be readjusted to equal 100% by dividing each month by .9875.

III. Stock-to-Sales ratios Given the GMROI and gross margin plans, the projected average stock-to-sales ratio is 1.58.

Remember, to get the projected average stock-to-sales ratio for this 6-month period, you take 6/inventory turnover, not 12/inventory turnover.

The industry averages from the NRF are given, but each month needs to be adjusted so that they average 1.58. First, we must make the adjustment to the March, April, and May stock-to-sales ratio. We have a sales increase in March that would not be reflected in the NRF figures, so the stock-to-sales ratio would be slightly lower than the industry average given by the NRF, and 82 © MCGRAW HILL LLC. ALL RIGHTS RE SERVED. NO REPRODUCT ION OR DISTRIBUTION WITHOUT THE PRIOR WRITTEN CONSENT OF MCG RAW HILL LLC.

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likewise slightly higher for April and May. The stock-to-sales ratio moves inversely with sales.

Therefore a 10 percent increase in March sales results in a decrease in March’s stock-to-sales ratio (2.5  .94 = 2.35, where 2.5 = March stock-to-sales ratio from the NRF) and increases in April (1.8  1.04 = 1.872). and May (1.55  1.04 = 1.612). We assume a 6 percent decrease (100 – .06 = .94) in the March stock-to-sales ratio. For April and May, we assume the stock-to-sales ratios increase 4 percent (100 + .04 = 1.04), because sales decreased by 5 percent.

Each of the monthly stock-to-sales ratios were adjusted so that they would average 1.58. Using March as an example, 2.35  1.58 ÷ 2 = 1.856, where 2.35 = March’s preadjusted stock-to-sales ratio, 1.58 = projected average stock-to-sales ratio, and 2 = average stock-to-sales ratio from the NRF.

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CASE 37: American Furniture Warehouse Sources Globally Synopsis: This case reveals how retailers can reflect on and respond to values expressed by consumers through the merchandise bought. Then it enumerates ways that the buying process can be modified to trim costs without compromising quality. Global sourcing thus can be accomplished cost effectively; students should discuss how cost structures and manufacturing processes in foreign countries may be different than in the United States.

Uses: Chapter 6: Retail Market Strategy Chapter 13: Buying Merchandise Discussion Questions 1. Factories in many developing nations have lower cost structures, but that is often attributable to fewer benefits and lower wages for workers. What are the ethical tradeoffs for retailers and shoppers when merchandise is sourced from countries in which labor practices fall short of standards Americans deem acceptable? Do shoppers really care about workers halfway across the globe, or are they more concerned about how many dollars are flowing out of their own pockets?

Ethical trade-offs include:  Sending jobs and business to another country.  Supporting governments where workers are treated more poorly than they are in industrialized nations.  By infusing developing economies with jobs and revenue, giving the developing nations more opportunities to improve the living conditions for their citizens.

Do shoppers care about people halfway around the world?  Some do, while others do not think about them that much. There will always be those shoppers who are socially conscious while others are more budget-conscious.  Many consumers readily express a socially conscious attitude, but when it comes to actually paying more for an item, they tend to vote with their wallets.

2. The world is our marketplace. AFW employs global sourcing, uses many negotiating tactics, and shifts channel tasks to keep its costs as low as possible. Enumerate the tactics AFW uses to keep its prices low. What other strategies and tactics could a furniture retailer use to hold the line on retail prices?

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 On-site furniture repair  Global sourcing  Strategically placed buying offices around the world  Volume purchasing  On-time payments  No returns to vendors  On-site chair assembly  Accepts blanket-wrapped vs. carton-wrapped merchandise Other tactics:  Recycling and reselling of Styrofoam and other recyclables  Owning and maintaining a fleet of trucks  Taking delivery of merchandise at the factory or port and using its own trucking fleet for backhauling  Keeping a close lookout for upstart vendors willing to give good price breaks  Having the cash on hand to take advantage of deals when they present themselves 3. What criteria should AFW use when deciding whether to see a new vendor? How might it apply some of its best practices with its biggest vendors to new, smaller vendors? What strategies or innovations could it employ to stretch the productivity of its buying staff?

Criteria for seeing a new vendor:  The vendor appears to offer merchandise that suits its target market—its taste level, design aesthetic, price point, and so on  Uniqueness of merchandise  Quality for the price  Ability to deliver desired quantity according to specifications and timetable  Experience in the industry  Trustworthiness How to replicate best practices of large vendors with smaller vendors:  Use technology to its best advantage to communicate with and share information with vendor partners  Require even small vendors to employ technologies that are not prohibitively expensive but that keep the cost of doing business low for both parties  Communicate high quality expectations for small vendors Strategies to stretch the buying staff’s productivity:  Plan buying trips carefully. Schedule trips and visits efficiently while still allowing time for exploration. Give them a chance to discover new items, trends, and vendors.  Use tools such as the Internet, digital cameras, e-mail, and video conferencing to conduct business from a distance to the extent possible.  Use opportunities to ―go to market‖ efficiently. Take advantage of situations where multiple parties can come together in one place cost-effectively.

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CASE 38: How Much for a Good Smell?

Synopsis: An upscale gift store needs to set a price for potpourri. The case takes students through several seasons at Courtney’s gift shop. The focus is on one particular item, a best seller for the store in recent holiday seasons. The case focuses on determining an appropriate markup for the item, given its popularity with customers and the wholesale price from the vendor.

Use: Chapter 14: Retail Pricing Discussion Questions 1. What prices caused Courtney's new charges? $9.95—the same price as last year even though the cost has gone up. $12.50—increases margin. $12.50—with a plan to put the item on sale after a period of time dropping the price to $9.95.

2. Which price would result in the highest profit?

Price/unit $9.95 12.50

Cost/unit $5.50 5.50

GM/unit $4.45 7.00

Unit sales 750 400

Profit $3337.50 2800.00

Two-price scheme Price/unit Cost/unit $12.50 $5.50 9.95 5.50 Total

GM/unit $7.00 4.45

Unit sales 300 300 600

Profit $2100.00 1335.00 3435.00

3. What other factors should Courtney's consider?

Some other factors Courtney’s needs to consider in estimating demand are: a. Changes that might be occurring in customer tastes and styles. Will the demand continue to rise or are fewer customers going to be interested in potpourri this year compared with last? b. If Courtney’s raises prices, will customers see it as a sign that Courtney’s is becoming higher priced, or perhaps too high priced? c. If Courtney’s uses the two-tiered pricing with a sale, what will happen next year? Will customers remember the sale and wait until the price drops? Will customers who bought at the full price be upset when other customers are able to buy the potpourri cheaper by waiting for the sale? Will customers begin to think that Courtney’s will have sales on other merchandise and buy less merchandise at full price?

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4. What price would you charge, and how many units would you order?

This question encourages students to recognize the interrelationship between pricing and demand. It also illustrates why stores tend to buy more merchandise than they think will be sold and then sell whatever is left at the end of the season at a discount. Note that Courtney’s has been very conservative in placing orders for potpourri in the past. Because it has either priced the merchandise too low or bought too little, it has sold out before Christmas, which represents a lost opportunity. If it buys too much, it can always reduce the price to sell the remaining merchandise at cost. However, holding frequent sales trains customers to expect discounts and delay their purchases.

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CASE 39: Promoting a Sale Synopsis: A hypothetical department store needs to develop an advertising plan to promote a three-day consumer electronics products sale.

Use: Chapter 15: Retail Communications Mix Discussion Questions 1. Knowing that the company wants a mixed-media ad campaign to support this event, prepare an ad plan for the general merchandise manager that costs no more than $40,000.

The firm could use a mix of direct mail (flyers), TV advertising, radio advertising, and newspaper advertising. The direct-mail flyers would cost the firm $10,000. For the electronics products sale, the classical station with the wealthy audience could be selected; this audience may be more willing and able to buy higher priced electronics goods. The costs of radio advertising on the classical station are $3,000. About 85 percent of sales are expected on the first two days, so a majority of the customers likely would come on these two days. Thus, two days of newspaper advertising may be optimal. Two half-page insertions would cost the firm $12,000.

With a budget of $40,000, the firm has a balance of $15,000 to spend on TV advertising. The cost of creating the TV spot is $3000, and then all three channels, with a minimum of 8 spots per channel, could be used over all three days. It would cost the firm $12,000, bringing the total to $40,000.

2. Work out the daily scheduling of all advertising.

Saturday Sunday Monday Tuesday Wednesday Thursday Friday Saturday Sunday Monday

Direct-mail flyer arrives

sale day sale day sale day

Radio advertising Radio advertising Radio advertising TV advertising Radio advertising Newspaper ad TV advertising Radio advertising Newspaper ad TV advertising Radio advertising

3. Work out the dollars to be devoted to each medium.

Direct mail to charge customers 24 TV spots TV ad production Radio—classic station

$10,000 12,000 3,000 3,000 88

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Newspaper—Washington Post— 2 half pages

12,000

4. Justify your plan.

The direct mail, four-color flyer to 80,000 charge card customers appears to be very cost effective, based on the information in the case. If 3 percent of the 80,000 customers respond by going to the store, and half of the customers visiting the store buy a $300 consumer electronic product, the direct mail campaign will generate sales of $360,000, more than one-third of the target sales.

The TV campaign probably has the broadest reach of any medium, and it is particularly effective to convey simple messages like announcing a sale.

Radio is also effective for conveying simple messages. The target market for the electronics sale is probably middle- to high-income families. Younger singles probably will not buy a $300 electronic product. Thus, the radio campaign would be most cost-effective using the classical radio station rather than the station oriented toward the broad, general audience of 25- to 34year-olds or popular format directed toward 18- to 25-year-olds.

Finally, the newspaper ad can provide more information about the prices that will be offered and the type of merchandise.

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CASE 40: Target Marketing with Google AdWords Synopsis: Starting late in the last century, search engines began to develop interactive advertising models based on user interests, such as keywords typed into a search engine. The concept-sponsored search aligns online advertisements with search engine queries. David Jones, or simply DJs, has dozens of department stores, predominantly in Australia’s capital cities, and would like to test Google AdWords.

Uses: Chapter 3: Digital Retailing Chapter 4: Multichannel and Omnichannel Retailing Chapter 15: Retail Communications Mix Discussion Questions 1. On the basis of your review of the David Jones website, http://davidjones.com.au/, use examples to explain how different sections of the home page serve different audiences.

What other audiences would you suggest David Jones serve via its website? Why? Given the dynamic nature of websites, instructors should review the David Jones website for audiences and sections. Probable audiences and sections include: • Consumers, with sections for products, specials, store locations, store hours, contact information, gift registries, wine club, e-mail newsletter registration, and online shopping.

• Investors, with a section containing financial information • Media, with a section containing news items, press releases, company history, and contacts.

• Job seekers, with a section containing current jobs, employee benefits, and submitting online applications.

• Suppliers, with a section for selling products to David Jones.

• Partners, with dedicated sections for consumers or suppliers to log into a personalized account.

• Fans, with a section for social network applications such as Facebook and Twitter.

• Other? Students may have a good argument for another section.

- What do you particularly like about the website? Why? - What do you particularly dislike about the website? Why? There is no absolute correct answer to the above questions. Rather, students should present a clear argument to support their particular likes and dislikes.

2. Based on your review of the David Jones website, http://davidjones.com.au/, design three separate AdWords advertisement.

- Copy [e.g., ―call to action,‖ mention a specific benefit] - Keywords, keyword phrases, and negative keywords [Use the Keyword Tool to help select specific keywords.]

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- Geographical targeting - Landing page [aligned with your advertisement?]

- Use of the content network [tool to choose appropriate websites.]

- Cost per click [use Traffic Estimator to gauge your cost per click.]

Although there is no single answer, excellent students would support their answers with results from the applicable Google tools. Key points to review include:  The ads must follow Google guidelines. That is, the first line has a maximum of 25 characters. The next two lines and the final line with the website address each have a maximum of 35 characters.  Each ad should have a call to action, such as click here or call now.  Each ad should mention a consumer benefit.  The geographical targeting should align with the target market.  The landing page should not be the David Jones home page, rather a page on the DJ site that aligns with the AdWord copy.  There should be at least one negative keyword.  There should be keyword phrases as well as keywords.  There should be at least one Content Network website.

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Case Synopsis, Uses, Discussion Questions, and Answers

CASE 41: A Stockout at Discmart Synopsis: Discmart is a discount retailer similar to Target and Walmart. On a recent Sunday morning, an irate customer in the store was complaining about how the store was out of stock of an advertised special on the morning of the first day of the sale.

Use: Chapter 18: Customer Service.

Discussion Questions 1. Why did this service breakdown occur?

Generally speaking, the service breakdown occurred because Discmart was out of stock of an item that should have been in stock. The supply chain was not coordinated with its current promotion. Customers don’t like to make a trip to a store for a specific promotional item(s) only to find out that the store is out of stock in the first few hours of a sale. Their perception is that they have been lured in, and many customers would view a rain check in this situation as just a way to get them to make yet another special trip to the store.

2. How was this service gap related to the other gaps (standards, knowledge, delivery, and communications) described in the gaps model in Chapter 18?

The service gap, like all service gaps, is a combination of all of the gaps that comprise the gaps model, which are described below: Knowledge gap: The difference between customer expectations and the retailer’s perception of customer expectations.

Standards gap: The difference between the retailer’s perceptions of customers’ expectations and the customer service standards it sets.

Delivery gap: The difference between the retailer’s service standards and the actual service provided to customers.

Communication gap: The difference between the actual service provided to customers and the service promised in the retailer’s promotion program.

The communications gap is arguably the most important. Discmart’s advertised promotion on 100-ounce Tide Liquid Detergent represents an implied promise that the retailer will have the item in stock for a reasonable amount of time. While what constitutes a reasonable amount of time is debatable, it is definitely reasonable for a customer to expect the item to be in stock on the morning of the first day of the sale. Therefore, the fact that the item was not in stock means that there is an actual difference in the service provided to customers and the service promised in the retailer’s promotion program. The standards gap is what caused the problem in the first place.

Customers expect merchandise that is advertised to be in stock, plain and simple. Discmart’s 92 © MCGRAW HILL LLC. ALL RIGHTS RE SERVED. NO REPRODUCT ION OR DISTRIBUTION WITHOUT THE PRIOR WRITTEN CONSENT OF MCG RAW HILL LLC.

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service standard should therefore be to never be out of stock on advertised merchandise. Because it was out of stock, the standards gap occurred.

The delivery gap occurred because the employee was not empowered to solve the customer’s complaint. It would have been very simple and virtually costless for the clerk to give the customer exactly what he wanted. As it turns out, for a few pennies, the store has an irate customer who may never return and will probably tell friends and family about the bad experience.

In this case, the knowledge gap is probably the least significant gap. A store doesn’t have to do a great deal of marketing research to realize that it needs to be in stock on advertised merchandise.

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Case Synopsis, Uses, Discussion Questions, and Answers

CASE 42: Yankee Candle: Product Management and Innovation Synopsis: Yankee Candle (YCC) is a leading manufacturer, wholesaler, and retailer of premium scented candles and accessories in the $70 billion giftware industry. YCC has grown steadily since its beginning in 1969. This case highlights innovative retailing strategies as the company has gone from a publicly traded firm back to privately owned through turbulent economic times. The case can be used to examine strategic issues via SWOT analysis (which may include ratio analysis) or more tactical market segmentation definition from secondary data.

Uses: Chapter 5: Consumer Behavior Chapter 6: Retail Market Strategy

*Specific data for 2009 are available from Mediamark Reporter, to which your university library may subscribe. If not, an excel file of this data is provided to the textbook authors or is available from the case author, Elizabeth J. Wilson (ewilson@suffolk.edu).

Discussion Questions 1. Examine the Newell Brands website (http://www.newellbrands.com). How does Yankee Candle create value for Newell Brands? (Hint: Evaluate Yankee Candle using SWOT analysis to answer the question).

Students may offer suggestions for additional complementary products and also discuss the relatively upscale market of customers targeted by these offerings. Financial strength and weakness of the company can be evaluated by conducting ratio analysis using data available on the Morningstar 10K filing for 2010. The URL for this report is http://yankeecandle.investorroom.com/index.php?s=127. Part II, section 6 contains the income statement and balance sheet data.

2. Refresh your memory about marketing strategy by doing an online search of “BCG growth share matrix." Is this new strategic business unit (SBU) for Yankee Candle likely to be a star, question mark, or dog in terms of the BCG growth share matrix? Explain your answer.

Students’ answers will very. This SBU could be considered a question mark. For now it would have a low market share, but the market for this type of product may be growing.

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Case Synopsis, Uses, Discussion Questions, and Answers

CASE 43: Interviewing for a Management Trainee Position Synopsis: This case asks students to participate in a variety of professional development steps in the context of a retail management trainee position, including evaluating resumes, preparing his or her own resume and role-playing an interview.

Use: Chapters 1: Introduction to Retailing Chapter 16: Human Resources and Managing the Store Teaching note It is unreasonable to expect a college student to have a resume loaded with jobs and experiences, but it is perfectly reasonable to expect a college graduate to have a succinct resume that highlights education, job experiences, significant accomplishments, and honors.

A resume should be viewed as a brief, organized document of introduction. A student can use it to share immediate career objectives and emphasize skills obtained from job experiences. It should include information about a student’s education and affiliations. It is acceptable to include honors, awards, and leadership accomplishments. A college student’s resume should be easy to read and concise. It should be broken into categories such as objective, education, experience, and skills. Occasionally students can contribute such categories as relevant classes, leadership experiences, and volunteer work. Despite the options, keep the resume length to one page.

Again, the resume is a brief documentation of introduction. Additional details will be discussed at an interview.

1. Assume the role of the college recruiter for a national retail chain that is reviewing résumés to select candidates to interview for a management trainee position. Which of the three résumés on the following pages do you find effective? Ineffective? Why? Which applicant would you select to interview? Why? Marti Cox has a poor resume. Her objective is vague. She seeks a position in product planning but has no experience to uphold this ambition. The student does not offer any related courses or jobs to support her career objectives. Her work experience lists no responsibilities or tasks. Marti Cox has a poorly organized resume which requires a keen focus to understand dates of service.

There is no mention of skills she gained from her service to the many organizations she was involved with because she mentions nothing about what she actually did. To her credit, Cox listed the involvement in student organizations while she studied at the University and held leadership positions within these to substitute for lack of associated training. The details of her University memberships made the resume long and said very little.

Richard Kates has a better resume. He lists a more specific objective than Marti Cox and offers reasonable experience for a college student. He has a good amount of experiences to share, but Richard forgot that the resume should be brief, succinct, and uncluttered. Despite a more professional introduction, his resume is muddled and difficult to follow. He could improve it by 95 © MCGRAW HILL LLC. ALL RIGHTS RE SERVED. NO REPRODUCT ION OR DISTRIBUTION WITHOUT THE PRIOR WRITTEN CONSENT OF MCG RAW HILL LLC.

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bulleting the responsibilities he had in his positions and in his leadership experiences. By reorganizing the resume, it could be reduced to one page making an evaluation simpler for a recruiter.

Tina Acosta offers the best of the three resumes. Just a glance at the document shows a professional and proficient candidate. The resume is orderly, uncluttered, and simple. There is an appropriate amount of space surrounding the information which is organized in a suitable sequence for a college graduate. The information provided is available in easy to read bolded sections with bulleted points to highlight skill sets and responsibilities. This student considered the guidelines of resume development. A recruiter will not only appreciate it (you want to keep recruiters happy) but will consider this student for an interview.

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