Chapter 3: Retail Strategy and Structure

Disintermediation occurs when a manufacturer sells directly to consumers bypassing retailers.
True False
The consequences of security breaches are worse for the retailer than the consumer if a credit card number was stolen from their place of business.
True False
The greatest constraints facing a store based retailer are the quality of their stores and visual display of the merchandise.
True False
Cannibalization occurs when a retailer steals away customers from a competing retailer.
True False
Browsing on the Internet channel and purchasing the merchandise at a store is the most common use of multiple channels during a shopping occurrence.
True False
Channel migration occurs when a customer collects information about a product through one retailer, but then purchases the product at a competitor.
True False
Macy’s is a multi-channel retailer.
True False
Automated retailing is based on the idea that social relationships influence buying habits.
True False
Direct selling is a retail channel where salespeople interact with customers face to face.
True False
A multi-channel retailer is one that:
A. is a combination of single channel retailers.
B. channels all assortments through the stores.
C. works with other retailers who are in the channel.
D. sells merchandise or services through more than one channel.
E. buys merchandise from multiple channels to sell in the stores.
Which of the following retailers is an example of a multi-channel retailer?
C. J.Crew
D. Outback Steakhouse
E. 7- Eleven stores
Which of the following is an example of a single-channel retailer?
Which of the following is NOT a benefit of store channel shopping experience?
A. Browsing
B. Immediate gratification
C. Personal safety
D. Personal service
E. Risk reduction
Which of the following is ONLY a benefit of store channel shopping?
A. Convenience
B. Personal safety
C. Personalization
D. Immediate gratification
E. Broad and deep assortments
Margaret went to the mall on her lunch hour to eat with her sister, Val. While they were there, they witnessed a back-to-school fashion show in Kohl’s. They took a walk and watched the children play in the center arena. What benefit of store shopping were Margaret and Val enjoying?
A. Detailed information
B. Entertainment and social interaction
C. Convenience
D. Personal service
E. Touch and feel products
Which of the following statements does NOT describe online retailing correctly?
A. Perspectives on electronic retailing have changed dramatically over the past 10 years.
B. Electronic retailers who have niche target markets are more likely to be successful.
C. Online retail sales continue to grow much faster than retail sales through stores and catalogs.
D. Traditional store-based retailers are using the Internet to evolve into multichannel retailers.
E. It has been realized that the Internet is a revolutionary new retail format that will replace stores and catalogs.
A party plan system:
A. is a form of direct-response advertising.
B. is based on the idea that social relationships influence buying habits.
C. may be illegal if it develops into a pyramid scheme.
D. uses a master distributor as lead salesperson.
E. is a recruiting tool for multilevel networks.
Retail websites typically offer _____________ than the retail store channel.
A. deeper assortments
B. better service
C. less information on merchandise
D. cheaper prices
Direct selling is described as all of these EXCEPT it is not _____________.
A. a highly interactive form of retailing
B. most often taking place in the home
C. mainly performed by independent agents
D. a low cost method of retailing
E. effective in less developed countries
When multilevel direct selling becomes a pyramid scheme ________.
A. annual sales of products often double
B. the salespeople are no longer independent agents
C. the use of the party plan becomes more commonplace
D. the selling format is usually franchised
E. relatively little merchandise is sold to end users
A. are 60-second commercials.
B. usually solicit orders placed by telephone.
C. use testimonials rather than demonstrations to sell products.
D. are not shown on broadcast television.
Ben saw a 30-minute TV show with George Foreman on it. During the show, Foreman was showing how to prepare a variety of foods so that they would be totally fat-free. Each item was prepared using a special cooker. During the show the TV audience was given several opportunities to buy the cooker. Ben was watching:
A. an infomercial
B. direct selling
C. a sales promotion
D. outbound telemarketing
E. interactive online retailing
The major advantage of TV home shopping compared to catalog retailing is:
A. its ability to create time and place utility
B. the lack of federal regulation of the media
C. the easy return policy for unsatisfactory products
D. its ability to schedule when certain types of merchandise will be shown
E. that customers can see the merchandise demonstrated on TV
Ayesha went to to see the latest book by her favorite author. When she opened the website, greeted her by name, and recommended books based upon the purchases and books she viewed in the past. was utilizing:
A. shopping bots
B. cookies
C. broad-band Internet access
D. limited information
E. repeat customer service strategy
Automated retailing:
A. is most effective in high traffic areas.
B. is based on the idea that social relationships influence buying habits.
C. uses a master distributor as lead salesperson.
D. is a recruiting tool for multilevel networks.
Redbox, who competes against Netflix and Blockbuster uses what channel of retailing?
A. Internet
B. Stores
C. Direct Selling
D. Automated
E. Party Plan
Which of the following is NOT a direct selling approach?
A. a party plan system
B. a multilevel network
C. an infomercial
D. a pyramid scheme
Compared to other retail formats, the greatest benefit that store shopping offers is:
A. the ability to touch and feel the products
B. acceptance of multiple forms of payment
C. cash and carry
D. broader and deeper assortments
Which of the following statements about Internet retailing is TRUE?
A. E-retailers have lower prices.
B. Electronic retailing can offer superior benefits in comparison to those of which other channels offer because it has the ability to personalize information to each customer economically.
C. Retail sales through the electronic channel are growing at the same rate of sales growth as through the catalog channel.
D. The electronic channel offers a less satisfying shopping experience than catalogs.
By obtaining information about customer preferences, and past purchase behavior, retailers operating an electronic channel are able to:
A. design more secure sites for credit card users
B. develop faster download times
C. offer lower prices
D. respond immediately to consumer inquiries
E. tailor merchandise and recommendations
Which retail channel has the least perceived risk when purchasing products?
A. Internet
B. Stores
C. Catalog
D. Automated
E. Party Plan
The percentage of total purchases made by a customer in your store is called:
A. share of wallet
B. worth of wallet
C. share of value
D. profit logic
E. potential wallet
Which retail channel has the ability to economically provide the most product information for the consumer purchasing products?
A. Internet
B. Stores
C. Direct Selling
D. Automated
E. Party Plan
If a retailer plans to use the online channel synergistically with other channels, it can expect:
A. its multichannel customers to make more purchases
B. massive cannibalization
C. a decrease in sales from all of its other channels
D. customers to research on the website and shop in competitive stores
E. sales to stabilize equally among the channels
A retailer that sells merchandise and/or services through more than one channel is called a/an:
A. computerized retailer
B. direct seller
C. electronic retailer
D. single-channel retailer
E. multi-channel retailer
If L’Oreal cosmetic products wanted to sell exclusively through the Internet channel, it would most likely have a difficult time because:
A. of the competition from other manufacturers.
B. it doesn’t have name recognition.
C. the manufacturer doesn’t own the rights to the brand name.
D. the manufacturer doesn’t have the appropriate systems to fulfill individual orders.
E. the demand would overwhelm the supply.
Disintermediation occurs when ____________.
A. a manufacturer sells directly to a wholesaler who then sells to a retailer
B. a retailer purchases from a few wholesalers resulting in increased competition and price
C. a manufacturer sells directly to other manufacturers who distributes to an array of wholesalers
D. a manufacturer sells directly to consumers, bypassing retailers
E. wholesalers disagree about the agreements between the manufacturer and the retailer
____________ and personalized recommendations of complementary merchandise on Internet shopping sites imitates a well trained store salesperson.
A. Live chats
B. Cookies
C. Magalogs
D. Tête-à-tête
E. Multi-level networks
What are two constraints facing store retailers today?
A. leveraging existing assets and pricing
B. offering unique merchandise and efficient fulfillment
C. size of the store and inconsistent execution of services
D. inflation and sale inconsistency
E. supply chain management and market presence
Matt used to shop for electronics at the closest Best Buy store. But now that he has his iPad, he does his electronic shopping online at instead of in a Best Buy store. This is an example of ___________.
A. leveraging
B. efficient fulfillment
C. inconsistent execution of services
D. cannibalization
E. market presence
Store channel information systems are typically product-centric while non-store channels are __________________.
A. multi-centric
B. customer-centric
C. variable
D. mass customized
E. segmented
________ occurs when a manufacturer sells directly to consumers bypassing retailers.
A. Disintermediation
B. A distribution detour
C. Leapfrog marketing
D. Distribution disruption
E. Customer circumvention
Levi’s sells its jeans through its website on the Internet and has received complaints from its retailers who were concerned about the negative effects of:
A. leapfrog marketing
B. a distribution detour
C. disintermediation
D. distribution disruption
E. customer circumvention
Why are retailers concerned about disintermediation?
A. Manufacturers can offer broader assortments.
B. Retailers believe that manufacturers know more about the consumer since they manufacture the products that the consumer demands.
C. Manufacturers have a lot of experience in distribution.
D. Retailers believe that manufacturers could take sales away from them by allowing customers to buy products through the manufacturer’s web site.
If manufacturers begin to sell direct to consumers, they can be viewed by retailers as:
A. Competitors
B. Wholesalers
C. Multi-channel users
D. Entrepreneurs
E. Electronic agents
JCPenney carries sizes for big and tall men, but all sizes are not available in all stores. What should JCPenney do in order to communicate this message to their customers?
A. They should advertise big and tall men’s merchandise on all of their newspaper supplements and commercials.
B. JCPenney should train their sales associates to mention this when closing sales with each customer.
C. JCPenney should advertise this by featuring big and tall men on its Holiday Catalog.
D. JCPenney should actively advertise these assortments to competitors.
E. A database should be developed of those who purchase merchandise for big and tall men. Then, JCPenney should market specifically to those shoppers.
Which of the following assets can K-mart utilize to attract shoppers to its website?
A. Persuade investors with positive sales forecasts.
B. Encourage vendors to deliver the assortments.
C. Focus on bankruptcy proceedings to create a trustworthy image.
D. Print the website on signage, bags and in advertising.
E. Prime its sales associates to use its website.
Which of the following is NOT true in describing issues in multichannel retailing?
A. Many retailers are struggling to integrate the shopping experience across all their channels.
B. Legacy systems along with disconnected customer and inventory databases hamper retailers’ ability to maintain consistency across channels.
C. Technology upgrades are inexpensive for retailers to integrate all systems at once.
D. Multichannel retailers try to provide features and services that offer a good customer experience.
When consumers collect product information on a retailer’s website but buy the product from another retailer’s store it is referred to as ________.
A. channel migration
B. cross-shopping
C. multi-channel users
D. entrepreneurs
E. electronic agents
What is a way that retailers can reduce channel migration?
A. Promote private-label merchandise that can be purchased only from that retailer.
B. Persuade suppliers to increase their sales forecasts.
C. Encourage vendors to deliver complete assortments.
D. Increase efficiencies of supply chain management.
E. None of the above
Catherine was interested in purchasing a digital camera so she went on Best Buy’s website to learn more about the different features and capabilities of the device. Since she was going to Target to buy her groceries anyway, she decided to just buy the digital camera at Target. This is an example of:
A. channel migration
B. cross-shopping
C. multi-channel users
D. entrepreneurs
E. electronic agents
Judy invites her friends over to her home for an evening of socializing along with everyone getting makeovers. Afterwards, the invited women were all shown the product that was used for their makeovers and they were given the opportunity to purchase the product and browse through a catalogue for additional products to purchase. This is an example of:
A. a party plan system.
B. a multilevel network.
C. an infomercial.
D. a pyramid scheme.
McKenna was shopping for a new electric mixer. Online she found the perfect one at, but when she went to the Williams-Sonoma store, she found the same mixer for $15 more. The retailer has a problem with:
A. depth of merchandise prices
B. a corporate problem between channels
C. price inconsistency across channels
D. product inconsistency
E. None of the above
What are the advantages of shopping on the Internet versus using a catalog or stores?
The advantages available to the customer include a broader selection of merchandise, more information to evaluate the merchandise, personalization in using electronic agents to tailor the information for a more satisfying purchase, and the accessibility to problem solving information centers.
What is disintermediation; and should a retailer be concerned?
Disintermediation occurs when a manufacturer sells directly to consumers bypassing retailers. Retailers are sometimes concerned about disintermediation because manufactures may take away business from them if the customer would choose to purchase directly from the manufacturer. However, retailers can most often perform more efficiently in dealing with customers, distribution, providing assortments, collecting information, and offering assistance and services to solve customer problems. Manufacturers are working to improve in these areas, so there is still some concern.
Why are traditional store-based and catalog retailers placing more emphasis upon their electronic channels, as well as evolving into multichannel retailers?
There are five reasons for this evolution. (1) The electronic format gives the retailer the format to overcome the limitations of their existing format. (2) Increases customer satisfaction and loyalty. (3) The electronic channel enables retailers to gain valuable insights into their customers’ shopping behavior. (4) Retailers can reach new markets more economically. (5) Provides the bases for building a strategic advantage.
Explain multichannel retailers’ impact on cannibalization and share of wallets.
By adding more sale outlets through offering an electronic channel, retailers may lead to some cannibalization, with which current store or catalog sales can be reduced by adding online channels. However, using an electronic channel synergistically with other channels may result in consumers making more total purchases from a single retailer.
What are the perceived risks in electronic shopping and are these concerns valid?
Some consumers are worried about buying products online thinking that their credit card information could be stolen and/or that their personal information and privacy may be violated. All major credit cards have protection for consumers as long as the customer reports any fraudulent charges in a reasonable amount of time. A retailer has motivation to protect the consumers’ credit card information because if they do not, they risk being held liable as well as risk their reputation. Retailers use sophisticated technologies to encrypt communications so there really is little need for concern for security or privacy today.
Describe how multichannel retailers have the opportunity to have a strategic advantage over single-channel competitors.
There are two strategic resources that multichannel retailers have that are not easily detected or duplicated by store based, single channel competitors. Those are

(1) propriety information about customer purchase history and shopping behavior and
(2) unique “how-to” knowledge about coordinating the activities across channels.

Multichannel retailers have a greater opportunity to develop extensive information about their customers and can use this information to more effectively target their offerings and marketing activities.

What is m-commerce and how is it different from e-commerce?
m-commerce is the purchase of products and services through mobile devices. Retailer’s Internet sites are often too large to operate with a mobile device so many have developed simpler sites for their mobile customers.
Discuss what channel migration is and two approaches that multichannel retails can use to reduce channel migration.
Channel migration is when consumers collect information about products on other channels and then buy the product from a competitor. Ways to reduce channel migration are (1) to offer uniquely relevant information based on propriety data the retailer has collected about the customers and (2) promote private-label merchandise that can be purchased only from the retailer.
Describe the direct selling channel along with the two different types of direct selling.
The direct selling channel is when salespeople interact with customers face to face in a convenient location. The product is often demonstrated along with benefits or an explanation of the product and then the product is delivered to the customer’s home.

The two different types of direct selling is a (1) a party plan system, where sales people encourage customers to act as a host and invite friends to a “party”, and a (2) multilevel system where independent businesspeople serve as master distributors, recruiting other people to become distributors in their network.

Describe what automated retailing is along with new opportunities in this channel.
Automated retailing is when the product is stored in a machine and dispensed to customers when they deposit cash or use a credit card; it is also known as vending machines. In the past it has been used primarily for cold beverages, candy and snacks. As of late, more products such as DVDs, cosmetics, electronics and other merchandise is now being vended.