Merchandising and Pricing Strategy Questions and Answers Flashcards

What pricing strategy does Walmart primarily use, as opposed to a high-low pricing strategy?

Answer: Everyday Low Price (EDLP)

Walmart's EDLP strategy maintains consistently low prices rather than fluctuating between high regular prices and deep promotional discounts.

A category review shows that Brand X has 15% of shelf space but generates 25% of category sales. What action should be considered?

Answer: Increase Brand X shelf space to better align with its sales contribution

When a brand's sales outperform its allocated space, increasing its space can capture additional sales and reduce out-of-stocks.

What is a 'loss leader' in retail pricing strategy?

Answer: A product intentionally priced at or below cost to attract customers who will buy other profitable items

Loss leaders sacrifice margin on specific items to drive store traffic, with the expectation that customers will also purchase higher-margin products.

Cross-merchandising places complementary products together. Which is the best example for a Walmart store?

Answer: Displaying salsa next to tortilla chips

Salsa and tortilla chips are natural complements that trigger impulse purchases when displayed together.

What does 'GMROI' (Gross Margin Return on Inventory) measure for a product?

Answer: How much gross profit each dollar invested in inventory generates

GMROI measures the profit return on every dollar tied up in inventory, combining margin and turnover into one metric.

A seasonal product (back-to-school supplies) still has 40% of inventory remaining two weeks before the season ends. What markdown strategy is appropriate?

Answer: Implement progressive markdowns now, starting at 25-30% off, increasing weekly

Progressive markdowns maximize recovery by starting moderate and increasing as the deadline approaches, balancing speed of sale with profit preservation.