RETAIL MANAGEMENT

LORENA L TABIOS APRIL 22, 2024

BSBA MM 3A TF/10:30AM- 12PM

1. Simply speaking, increasing inventory turnover is an important goal for a retail manager. What is
the consequences of a turnover that's too low? Too high?

When there is a significant decrease in inventory turnover in an establishment, it can have several
consequences. If this happens, it will have a negative impact on both parties involved, particularly on
your product, which will not be sold within its proper shelf life. It will reflect poor sales, blocking of
capital and it will make the business cycle inefficient to patronize customers. It can also be a sign of a
weak sales and could indicate a problem with a retail chain's merchandising strategy or inadequate
marketing which may be a challenging for a business because it can strained supplier relations. A retail
managers should aim to optimize inventory turnover to maintain a healthy and profitable business.

However, when an inventory turnover is too high, the consequences is good because it considers the
cost of goods sold, relative to its average inventory for a year or in any set of period of time. It generally
means that goods are sold faster. The higher the level of inventory turnover causes the company to be
faster in selling merchandise leading to a increase in operating profit and ultimately will increase net
income. Although higher turnover may have also consequences I'df the inventory may not be
replenished frequently. To optimize inventory turnover, a retail manager need to strike a balance
between avoiding excess inventory and preventing the negative consequences of turnover that is too
high. Effective forecasting, supply chain management, and inventory control systems are crucial to
maintaining an optimal turnover rate that meets customer demand while minimizing potential
drawbacks.

2. Provide examples of retailers that have done an outstanding job of positioning their stores on the
basis of some issues like variety, assortment, and product availability.

Three retailers known for successfully positioning their stores with a variety of assortment and product
availability to their customers are:

*Walmart- is one of the world's largest retailers and has built its brand around offering a wide variety
of products at affordable prices. The company has a vast assortment of products, ranging from groceries
and household items to electronics, clothing, and more. Walmart focuses on ensuring product
availability by maintaining a large network of stores and distribution centers, allowing customers to find
the items they need easily.

*Amazon- is a global e-commerce giant that has revolutionized the retail industry. The company offers
an extensive selection of products across various categories, including electronics, books, clothing, home
goods, and more. Amazon has differentiated itself by leveraging its vast distribution network and
advanced logistics capabilities to provide customers with a wide assortment of products and fast,
reliable delivery options.

* Target- is a retail chain that positions itself as a one-stop-shop for customers' needs. The company
offers a diverse range of products, including groceries, household essentials, clothing, electronics, and
home furnishings. Target focuses on curating its assortment to cater to different customer segments and
offers exclusive partnerships with popular brands. The retailer also emphasizes convenient in-store and
online shopping experiences to ensure product availability for its customers.

3. The fine jewelry department in a department store has the same GMROI as the small appliances
department even though characteristics of the merchandise are quite different.

The similar GMROI between the fine jewelry and small appliances departments in the department
store can be explained by factors such as pricing and profit margins, inventory investment, target
market and customer demand, and operational efficiency.

4. Calculate the GMROI and inventory turnover given annual sales of ₱20,000, average inventory (at
cost) of ₱4,000, and a gross margin of 45 percent.

GMROI = Gross Margin / Average Inventory

Inventory Turnover = Sales / Average Inventory

Annual sales = ₱20,000

Average inventory (at cost) = ₱4,000

Gross margin = 45% = 0.45

GMROI = (0.45 * ₱20,000) / ₱4,000

GMROI = ₱9,000 / ₱4,000

GMROI = 2.25

Inventory Turnover = ₱20,000 / ₱4,000

Inventory Turnover = 5

5. Using the 80-20 principle, how can a retailer make make certain that it has enough inventory of
fast-selling merchandise and a minimal of slow-selling merchandise?

The 80-20 principle, also known as the Pareto principle, suggests that roughly 80% of the effects come
from 20% of the causes. Applied to retail, it means that approximately 80% of a retailer's sales typically
come from around 20% of their products. By utilizing this principle, a retailer can ensure they have
enough inventory of fast-selling merchandise while minimizing slow-selling merchandise.
 By applying the 80-20 principle and implementing these strategies, a retailer can optimize their
inventory management to have enough inventory of fast-selling merchandise and minimize slow-selling
products. This approach helps maximize sales, reduce carrying costs, and improve overall profitability.

6. A buyer is trying to decide from which vendor to buy a certain item. Using the information in the
accompanying table, determine which vendor the buyer will buy.

The buyer should purchased a product/services to VENDOR A. Based on the information provided,
Vendor A has a high level of a vendor performance with their abilities to give the best for their
customers. The buyer will not hesitate to come and purchase to vendor A because he/she excells so in
the vendor's performance information.