Merchandising and Pricing Strategy Flashcards

What is the primary advantage of Walmart's high-volume, low-margin business model?

Answer: Profit comes from selling large quantities at low prices

Walmart relies on massive sales volume rather than high per-item margins.

Why might a store create a dedicated 'value' or 'opening price point' section?

Answer: To offer the lowest-priced option in a category for budget shoppers

Opening price points give budget-conscious customers an affordable entry choice.

What does a 'negative on-hand' inventory count usually signal for merchandising?

Answer: An inventory accuracy problem that can cause out-of-stocks

Negative on-hand counts indicate data errors that disrupt replenishment and availability.

How does demand-based pricing differ from cost-plus pricing?

Answer: It sets prices based on customer demand rather than just adding a markup to cost

Demand-based pricing reflects what customers will pay, not simply cost plus margin.

Why are top-selling staple items often placed at the back of a grocery section?

Answer: To route customers past other products, increasing impulse buys

Placing essentials at the back leads shoppers past more merchandise along the way.

What is the main goal of a 'feature/display' compliance audit?

Answer: To verify promotional displays are set correctly and priced as advertised

These audits ensure displays match the promotional plan and advertised pricing.

How does first-in, first-out (FIFO) stocking support merchandising and pricing?

Answer: It sells older stock first, reducing markdowns from expired or aged goods

FIFO moves older inventory first, minimizing spoilage and forced markdowns.