CRA Retail Industry Foundations 2 — Questions and Answers
Question 1: Which retail format is characterized by a very broad product assortment and relatively shallow depth within each category?
- Specialty store
- Department store (Correct answer)
- Category killer
- Convenience store
Correct answer: Department store
Department stores offer wide breadth across many product categories but carry fewer SKUs per category than specialists.
Question 2: In retailing, the term 'shrinkage' refers to:
- Reduction in store square footage
- Inventory loss from theft, damage, or administrative error (Correct answer)
- Decline in customer foot traffic
- Seasonal markdown of slow-moving merchandise
Correct answer: Inventory loss from theft, damage, or administrative error
Shrinkage is the difference between recorded inventory and actual on-hand inventory, caused by shoplifting, employee theft, vendor fraud, or errors.
Question 3: A retailer's 'private label' (store brand) strategy primarily aims to:
- Reduce marketing costs by eliminating advertising
- Increase vendor negotiating leverage and improve margins (Correct answer)
- Comply with federal branding regulations
- Attract luxury-oriented consumers
Correct answer: Increase vendor negotiating leverage and improve margins
Private labels allow retailers to capture higher margins and differentiate assortments while reducing dependence on national brand suppliers.
Question 4: The 'wheel of retailing' theory suggests that new retail formats enter the market by:
- Offering premium services at high price points
- Entering as low-cost, low-margin operators and then trading up over time (Correct answer)
- Copying existing successful formats exactly
- Targeting only online channels first
Correct answer: Entering as low-cost, low-margin operators and then trading up over time
The wheel of retailing posits that entrants compete on low price and minimal service, then gradually add services and raise prices, creating space for new low-cost competitors.
Question 5: Which of the following best describes 'omnichannel retailing'?
- Selling exclusively through a company-owned website
- Providing a seamless, integrated shopping experience across all customer touchpoints (Correct answer)
- Operating stores in multiple countries simultaneously
- Using a single unified pricing strategy across all product lines
Correct answer: Providing a seamless, integrated shopping experience across all customer touchpoints
Omnichannel retailing integrates physical stores, e-commerce, mobile, and other channels so customers experience a consistent journey regardless of how they shop.
Question 6: A 'loss leader' pricing strategy involves:
- Pricing products above competitors to signal quality
- Selling certain items below cost to attract customers who then purchase other profitable items (Correct answer)
- Eliminating low-margin SKUs from the assortment
- Offering rebates only to high-volume B2B buyers
Correct answer: Selling certain items below cost to attract customers who then purchase other profitable items
Loss leaders sacrifice margin on select items to drive store traffic and increase total basket size with higher-margin purchases.
Question 7: The 'retail accordion' theory describes retail evolution in terms of:
- Fluctuating store hours based on consumer demand
- Alternating cycles between general merchandise and specialized assortments (Correct answer)
- Expansion and contraction of physical store counts
- Changing markdown cadences through the product lifecycle
Correct answer: Alternating cycles between general merchandise and specialized assortments
The retail accordion theory holds that retailing alternates between broad general-merchandise formats and narrow specialty formats over time.
CRA Retail Industry Foundations 2
Which retail format is characterized by a very broad product assortment and relatively shallow depth within each category?