Beauty Business Inventory and Retail Strategy 3 — Questions and Answers
Question 1: A salon buys a product for $6 and sells it for $18. What is the gross profit margin?
- About 67% (Correct answer)
- About 33%
- About 200%
- About 12%
Correct answer: About 67%
Margin = (18-6)/18 = 12/18 ≈ 67%.
Question 2: Which approach helps a beauty business decide which retail lines to carry?
- Match products to the client base's needs and price sensitivity (Correct answer)
- Carry only the most expensive brands
- Stock whatever a distributor pushes
- Choose products based on packaging color alone
Correct answer: Match products to the client base's needs and price sensitivity
Aligning products with actual client needs maximizes sell-through.
Question 3: What is 'backbar' inventory in a salon context?
- Professional products used during services, not sold to clients (Correct answer)
- Products displayed for retail sale only
- Expired stock awaiting disposal
- Free samples given to new clients
Correct answer: Professional products used during services, not sold to clients
Backbar refers to professional-use products consumed in services.
Question 4: A store's 'ABC analysis' would classify which items as 'A'?
- High-value items contributing most revenue (Correct answer)
- The cheapest items in stock
- Items that never sell
- Only newly launched products
Correct answer: High-value items contributing most revenue
In ABC analysis, 'A' items are the high-value, high-priority products.
Question 5: Why should a salon track expiration dates on retail cosmetics?
- Selling expired products risks safety issues and legal liability (Correct answer)
- It increases the retail price automatically
- It reduces the need for insurance
- Expired products sell faster
Correct answer: Selling expired products risks safety issues and legal liability
Expired cosmetics can harm clients and expose the business to liability.
Question 6: Which pricing strategy uses a rounded figure like $19.99 to appear more affordable?
- Charm (psychological) pricing (Correct answer)
- Cost-plus pricing
- Penetration pricing
- Premium pricing
Correct answer: Charm (psychological) pricing
Charm pricing ending in .99 makes prices feel lower to buyers.
Question 7: A retailer wants to move seasonal stock before it becomes obsolete. What is most effective?
- Time-limited promotional bundles (Correct answer)
- Ignoring it until next season
- Raising the price to seem exclusive
- Hiding it in storage
Correct answer: Time-limited promotional bundles
Limited-time bundles create urgency and clear seasonal inventory.
Beauty Business Inventory and Retail Strategy 3
A salon buys a product for $6 and sells it for $18.
What is the gross profit margin?