Retail Operations Flashcards

A fashion retailer receives merchandise in March for a summer selling season. This is an example of what buying strategy?

Answer: Forward buying

Forward buying involves purchasing merchandise well in advance of when it will be sold, which is standard practice in fashion retail.

Which of the following is a variable cost for a retail store?

Answer: Cost of goods sold

Cost of goods sold varies directly with sales volume, making it a variable cost, unlike fixed costs such as rent or salaries.

A store achieves a 55% gross margin on a product priced at $40. What was the cost of the item?

Answer: $18.00

Gross margin of 55% means cost is 45% of retail: $40 × 0.45 = $18.00.

What is the purpose of a loss leader pricing strategy in retail?

Answer: To price one item below cost to attract customers who will buy other products

A loss leader is priced below cost intentionally to draw traffic, with the expectation that customers will purchase additional full-margin items.

Which component of the retail marketing mix is most directly controlled by store-level operations staff?

Answer: In-store customer service

In-store customer service is directly managed and delivered by store-level staff, making it the most operationally controllable marketing mix element.

What does a retailer mean by 'open-to-buy' (OTB)?

Answer: The dollar amount of inventory a buyer is authorized to purchase in a given period

Open-to-buy is the budgeted dollar amount remaining for purchasing inventory within a specific time frame, used to prevent overbought positions.

A retail store wants to reduce customer wait times at checkout. Which operational change would most directly address this?

Answer: Adding self-checkout lanes during peak hours

Adding self-checkout lanes during peak hours increases checkout capacity, directly reducing wait times for customers.