Chapter 15—Managing Retailing, Wholesaling, and Market Logistics
True/False Questions
1. Retail stores pass through a retail life cycle that parallels the product life cycle of products. True
(moderate) p. 285
2. It does not matter how or where goods are sold, it is considered retailing if it is sold to the final
consumer. True (difficult) p. 285
3. Discount stores are large stores that combine the principles of supermarket, discount, and
warehousing into one store. False (easy) p. 286
4. An example of a retail store positioned to offer a broad product assortment and high value added
would be Wal-Mart. False (moderate) p. 286
5. The slowest growing segment of retailing is nonstore retailing. False (moderate) p. 287
6. The wheel-of-retailing hypothesis is that as current store types go up the scale in price and service
offerings, they create an opportunity for new, low-price, low-service competitors. True (moderate)
p. 285
7. A Subway sandwich store offers a narrow but deep assortment of products. True (moderate) p. 286
8. Stores with high value added and a broad product assortment tend to focus on centralized buying and
advertising to keep costs low. False (difficult) p. 286
9. Some manufacturers feel threatened by Direct Product Profitability (DPP) because it gives retailers a
powerful argument for selecting or rejecting existing or new products. True (moderate) p. 288
10. Wholesaling includes all of the activities involved in selling goods or services to those who buy for
resale or business use. True (moderate) p. 290
11. Global expansion, lower levels of competition, and selling an experience are all important trends in
retailing. False (moderate) p. 290
12. Drop shippers sell bulky goods like coal and lumber from their inventory. False (difficult) p. 292
13. Some wholesalers do not take title to the goods they handle. True (easy) p. 292
14. Wholesalers rely primarily on sales promotions to achieve their promotional objectives. False
(moderate) p. 293
15. A supply chain management perspective leads to ideas for improving productivity versus the more
traditional view of wholesaling as a demand chain. False (difficult) p. 294
16. Cross-docking is the most effective way to describe a firm’s market-logistics objective of “getting the
right goods to the right places at the right time.” False (difficult) p. 295
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17. Fishyback, airtruck, and flyship are examples of containerization methods mentioned in the text, and
each uses two modes of transportation. False (moderate) . 299
18. The optimal inventory ordering quantity can be determined by observing how order processing costs
and inventory carrying costs sum up at different order levels. True (moderate) p. 298
19. A private carrier is one that is owned and controlled by the firm. True (moderate) p. 299
20. Deciding on transportation modes means shippers are choosing from private, public, and contract
carriers. False (moderate) p. 299
Multiple Choice Questions
21. Which of the following is not one of the four levels of retail service mentioned in the text?
a.) staffed service (moderate) pp. 285-286
b.) self-service
c.) self-selection
d.) limited service
e.) full service
22. A concept in retailing that helps explain the emergence of new retailers is called the
_______________ hypothesis.
a.) retail life cycle
b.) wheel-of-retailing (moderate) p. 285
c.) service-assortment
d.) product life cycle
e.) retail profitability
23. Convenience goods, such as snack foods, are sold through _______________ retailing.
a.) the wheel-ofb.) self-selection
c.) limited-service
d.) full-service
e.) self-service (moderate) p. 285
24. Which of the following best describes the retailers that carry more shopping goods, and where
customers need more information and assistance?
a.) self-service
b.) self-selection
c.) limited service (moderate) p. 285
d.) full service
e.) automated service
25. In which of the following retailers are salespeople ready to assist in every phase of the locatecompare-select process?
a.) self-service
b.) self-selection
c.) limited service
d.) full service (easy) p. 286
e.) automated service
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26. Best Buy stores carry a deep assortment of the latest electronics gadgets. They offer buyers a great
deal of assistance and advice in making selections. Best Buy would be an example of a
_______________.
a.) specialty store (moderate) p. 286
b.) factory outlet
c.) department store
d.) superstore
e.) combination store
27. Which of the following is the BEST example of a limited-line specialty store?
a.) The Precious Moments Store stocks all currently produced Precious Moments statuettes, cards,
plates, and any other items related to the Precious Moments line.
b.) Welcome to My Garden carries bulbs and seeds, natural fertilizing agents, ergonomic hand and
other types of tools, and patio furniture.
c.) Julie’s Toddlers is a retail outlet that carries children’s clothing. (difficult) p. 286
d.) The Candy Store is a small store that has a deep assortment of packaged and by-the-pound
candies.
e.) Circle K carries convenience snack foods and drinks, as well as local souvenirs.
28. McRae’s is a chain of stores found primarily in Mississippi and Alabama. Each store carries several
product lines, and each line is managed separately by a specialist buyer or merchandiser. McRae’s
offers many types of customer service, and its prices reflect that fact. McRae’s is an example of a
_______________.
a.) specialty store
b.) factory outlet
c.) superstore
d.) combination store
e.) department store (moderate) p. 286
29. Every night after working the swing shift, Sierra stops by the 24-Store near her house. She often buys
bread, cold cuts, and Dr. Pepper while she’s there even though the prices at the 24-Store are higher
than at her local supermarket. The 24-Store is an example of a _______________.
a.) specialty store
b.) superstore
c.) warehouse store
d.) convenience store (moderate) p. 286
e.) combination store
30. When Cyler goes to do his grocery shopping for the week, he also likes to drop off his finished rolls
of film and visit the bank at the same time. He would also like the idea of having a package-mailing
service to use while he is shopping. Cyler would enjoy doing his grocery shopping at a
_______________.
a.) combination store
b.) category killer
c.) superstore (moderate) p. 286
d.) hypermarket
e.) warehouse store
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31. The fastest growing segment of retailing is _______________.
a.) nonstore retailing (moderate) p. 287
b.) chain store retailing
c.) warehouse stores
d.) hypermarkets
e.) category killers
32. A businesswoman has agreed to buy the right to use a process and a system from a company that also
sells the same thing to other businesspeople. The woman is a _______________.
a.) wholesaler
b.) member of a voluntary chain
c.) corporate chains store
d.) franchiser
e.) franchisee (moderate) p. 287
33. The citizens of North Cheshire Village, Massachusetts, got tired of having to drive 18 miles to buy
gasoline and sundry items. They have decided to open their own store. All have contributed money
to purchase the initial inventory and open this store, which will carry gasoline and a small amount of
related accessories and lubricants. Each participant will have a vote in store policy, will elect
someone to operate the store, and will receive dividends based on any profits. They are engaged in
a(n) _______________.
a.) consumer cooperative (difficult) p. 287
b.) retailer cooperative
c.) merchandising cooperative
d.) voluntary store
e.) independent superspecialty store
34. A _______________ consists of a wholesaler-sponsored group of independent retailers engaged in
bulk buying and common warehousing.
a.) retailer cooperative
b.) voluntary chain (moderate) p. 287
c.) consumer cooperative
d.) retailing franchise
e.) merchandising conglomerate
35. A _______________ is a free-form corporation that combines several diversified retailing lines and
forms under central ownership, along with integration of distribution-and-management functions of
those retailing lines and forms.
a.) voluntary chain
b.) retailer cooperative
c.) consumer cooperative
d.) retail licensing arrangement
e.) merchandising conglomerate (moderate) p. 287
36. The most important retail marketing decision a retailer has to make is to _______________.
a.) choose a positioning strategy
b.) identify its target market (moderate) p. 288
c.) choose the service level it wants to support
d.) select the product assortment
e.) develop an effective store atmosphere
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37. Josie is choosing the mix of products and determining how many product lines she will carry in her
teacher supply store. Josie is making the _______________ decision.
a.) target market
b.) market segmentation
c.) product-assortment (moderate) p. 288
d.) store atmosphere
e.) service level
38. Which of the following product differentiation strategies would NOT allow retailers to significantly
distinguish themselves from others?
a.) feature the latest or newest merchandise before any other retailer can
b.) offer a broad merchandise assortment (moderate) p. 288
c.) feature mostly private branded merchandise
d.) offer merchandise customizing services
e.) feature exclusive national brands not carried by competitors
39. Check cashing is an example of what type of service, related to the services mix of a store?
a.) prepurchase
b.) full-coverage
c.) ancillary (moderate) p. 288
d.) postpurchase
e.) profitability
40. Which of the following is NOT a part of a store’s atmosphere?
a.) the music played by the speakers located throughout the store
b.) the way merchandise is displayed
c.) the lighting system used in the store
d.) the employee that helps you carry your purchases to your car (moderate) p. 288
e.) the smell from potpourri containers scattered throughout the store
41. The pricing decision in retailing is _______________.
a.) made independently of the product-assortment decision
b.) increasingly based on sales pricing
c.) key to the retailer’s positioning strategy (difficult) p. 289
d.) the least important of all the retail marketing decisions
e.) not an effective tool for store differentiation
42. Jorge owns an equine sports equipment superstore, and wants to open a second store in nearby
Paducah, Kentucky. He wants it to be the second anchor store at that location. He believes the
store’s product line needs to draw customers from 5-20 miles away to be successful. The best
location for this retail outlet would be in a _______________.
a.) regional shopping center (moderate) p. 289
b.) community shopping center
c.) central business district
d.) neighborhood shopping center
e.) strip mall
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43. Which of the following describes a significant trend in retailing?
a.) Competition today is increasingly intratype.
b.) Retailers are going smaller to chase smaller target segments.
c.) Superstores and combination stores are putting an end to nonstore retailing’s growth.
d.) Retail life cycles are growing longer.
e.) Retailers are increasingly selling an “experience.” (difficult) p. 290
44. _______________ includes all of the activities involved in selling goods or services to those who buy
for resale or business use.
a.) Retailing
b.) Wholesaling (easy) p. 290
c.) Bartering
d.) Purchasing
e.) Distributing
45. Wholesaling excludes all of the following types of companies EXCEPT _______________.
a.) manufacturers
b.) farmers
c.) retailers
d.) distributors (moderate) p. 290
e.) consumers
46. Which of the following is not a function of wholesalers?
a.) bulk-breaking
b.) selling and promoting
c.) transportation
d.) risk bearing
e.) final customer segment selection (moderate) p. 291
47. Which of the following is an example of a merchant wholesaler?
a.) a mail-order wholesaler
b.) a food broker
c.) a drop shipper (moderate) p. 292
d.) an industrial distributor
e.) a commission merchant
48. Which of the following products would be most likely handled by a drop shipper?
a.) fresh tulips
b.) paperback books
c.) snack foods
d.) coal (moderate) p. 292
e.) Dell servers
49. Which of the following products would a rack jobber most likely handle?
a.) Dell servers
b.) eggs and dairy products
c.) industrial shelving
d.) fresh tulips
e.) magazines (moderate) p. 292
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50. _______________ do not carry inventories, are paid by the party who hired them, and their chief
function is bringing buyers and sellers together.
a.) Brokers (moderate) p. 292
b.) Industrial distributors
c.) Rack jobbers
d.) Producer’s cooperatives
e.) Commission merchants
51. _______________ have long-term relationships with buyers and make purchases for them. These
wholesalers often receive, inspect, warehouse, and ship merchandise for their buyers.
a.) Brokers
b.) Purchasing agents (moderate) p. 292
c.) Drop shippers
d.) Commission merchants
e.) Selling agents
52. A manufacturers’ agent would be most likely to handle _______________.
a.) coal and cotton
b.) books on tape and Stanley tools
c.) Mars candy products and Arrow shirts
d.) High blood pressure medicines and camping gear
e.) wheelchairs and orthopedic braces (difficult) p. 292
53. Which of the following statements about manufacturers’ branches and offices is true?
a.) Sales branches do not carry inventory.
b.) Sales offices carry inventory.
c.) Sales branches perform a role similar to one performed by agents and brokers.
d.) Sales offices are prominent in the dry-goods industry. (difficult) p. 292
e.) Sales offices are not part of the manufacturer’s organization, while sales branches are.
54. Which form of marketing communications is most likely to be used by wholesalers?
a.) print advertising
b.) in-kind promotions
c.) sales promotions
d.) personal selling (moderate) p. 293
e.) broadcast advertising
55. _______________ logically looks at the creation of a product. It begins with the examination of the
procurement of inputs and raw materials and then examines how suppliers obtain their inputs. It sees
the market as a destination point for the manufactured goods.
a.) Physical distribution
b.) Supply chain management (moderate) p. 294
c.) Demand-driven management
d.) Market logistics
e.) Distribution management
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56. Marketing logistics _______________.
a.) is the process of getting goods to customers
b.) includes all the activities involved in the selling of goods and services directly to final customers
c.) is also called materials management
d.) involves planning, implementing, and controlling the physical flows of materials and final
goods from points of origin to points of use (difficult) pp. 294-295
e.) is getting the right goods to the right places at the right time
57. Integrated market logistics involves all of the following EXCEPT _______________.
a.) materials management
b.) material flow systems
c.) physical distribution
d.) information technology
e.) financing (moderate) p. 295
58. Some goods arriving at Wal-Mart at a delivery dock are moved directly onto a truck going out of
another dock, they are never put into inventory. This saves money and is called _______________.
a.) just-in-time production
b.) an intermediary swap
c.) cross-docking (moderate) p. 295
d.) supplier willingness
e.) dual handling
59. By definition, a(n) _______________ warehouse receives goods from various company plants and
suppliers and moves them out as soon as possible.
a.) storage
b.) automated
c.) field
d.) common
e.) distribution (moderate) p. 297
60. An order point of 20 means _______________.
a.) orders are batched in parcels of 20s
b.) reordering when the stock falls to 20 units (moderate) p. 297
c.) order processing costs rise greatly when ordering more than 20 items
d.) there is a 20 percent cost increase in out-of-stock costs when the order point is not complied with
e.) inventory turns 20 times per year
61. If speed is a concern, the two best modes of transportation are _______________.
a.) rail and truck
b.) water and rail
c.) water and air
d.) pipeline and water
e.) air and truck (easy) p. 298
62. If the transportation goal is low cost, then _______________ should be used.
a.) truck and rail
b.) pipeline and water (easy) p. 298
c.) water and rail
d.) truck and water
e.) pipeline and truck
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63. As Chin sat in his car waiting for the barges to pass through the drawbridge, he noticed several semitrailers being carried on the barges. This is an example of _______________.
a.) encapsulation
b.) trainship distribution
c.) dual distribution
d.) fishyback distribution (moderate) p. 299
e.) bimodal distribution
64. People who live alongside the Mississippi River often see barges hauling rail cars. They are seeing
_______________.
a.) railwater distribution
b.) dual distribution
c.) bimodal distribution
d.) piggyback distribution
e.) fishyback distribution (moderate) p. 299
65. A _______________ provides services between predetermined points on a schedule and is available
to all shippers at standard rates.
a.) private carrier
b.) contract carrier
c.) drop shipper
d.) common carrier (moderate) p. 299
e.) freight forwarder
66. Planning the infrastructure to meet demand, then implementing and controlling physical flows of
materials and final goods from place to place to meet customer needs at a profit is called
_______________.
a.) market logistics (moderate) p. 295
b.) demand chain planning
c.) sales forecasting
d.) supply chain management
e.) value-added services
67. Which is true of market-logistics systems?
a.) So-called cross-docking systems are likely to add costs and value.
b.) They cannot simultaneously maximize customer service and minimize distribution cost.
(moderate) pp. 295-296
c.) As long as a logistics strategy is in place, no specific tactics are necessary.
d.) Voluntary value chains tie distribution to production.
e.) Transportation is a part of logistics, but storage is not.
68. Which of the following is not one of the major decisions related to market logistics?
a.) How should orders be handled?
b.) Where should stocks be located?
c.) How much stock should be held?
d.) Should a particular line be carried? (moderate) p. 296
e.) How should goods be shipped?
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69. The order-to-payment cycle may include all of the following except _______________.
a.) order entry
b.) salesperson soliciting order (moderate) p. 296
c.) customer credit check
d.) order shipment
e.) receipt of payment
70. Albertson’s, a large western and southwestern chain of grocery stores, sometimes stocks up on Hi-Lo
brand paper products when the prices are extremely low. They are likely to store these products in
_________ warehouses.
a.) distribution
b.) cross-docking
c.) antiquated
d.) central
e.) storage (moderate) p. 297
Essay Questions
71. Retailers can position themselves at four levels of service. In a short essay, list and describe those
levels.
Answer:
(1 )Self-service is the cornerstone of all discount operations. Many customers are willing to carry
out their own locate-compare-select process to save money. (2) With self-selection, customers find
their own goods although they can ask for assistance. Customers complete their transactions by
paying a salesperson for the item. (3) With limited service, the retailers carry more shopping goods,
and customers need more information and assistance. The store also offers services such as credit and
merchandise-return privileges. (4) With full-service, salespeople are ready to assist in every phase of
the locate-compare-select process.
(moderate) pp. 285-286
72. Patty Allegro has a summer intern job at a manufacturing company that makes guitar strings. Patty
works in the shipping department. All summer she has heard her immediate boss (who’s been there
for years) be negative about the distributors the company uses. In a short essay, discuss the reasons a
manufacturer would talk in negative terms about its wholesalers?
Answer:
Manufacturers’ major complaints about wholesalers are as follows: Wholesalers do not aggressively
promote manufacturers’ product lines. They often act more like order takers. Often wholesalers do
not carry enough inventory and therefore fail to fill customers’ orders fast enough. Wholesalers often
do not provide manufacturers with up-to-date customer and competitive information. Manufacturers
believe wholesalers do not attract high-caliber managers. Finally, manufacturers often believe
wholesalers charge too much for the services they provide.
(moderate) p. 290
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73. Whitney is thinking about opening a new high-end collectibles store along the historic Route 66,
which goes through her town of Winslow, Arizona. She knows that the services mix she offers will be
a key tool for differentiating her store from others in the area. She hires you to advise her on the
services mix possibilities. What do you tell her?
Answer:
The three main types of services are: prepurchase services, postpurchase services, and ancillary
services.
a.) Prepurchase services for the store might include telephone and mail order capabilities, advertising
in travel brochures, even the store’s window displays and the way the interior looks with its
displays. Whitney may accept trade-ins of other antiques for hers. The hours the store is open and
possible events are all part of the list of prepurchase services Whitney might provide.
b.) Postpurchase services should include shipping assistance or assistance with delivery, gift
wrapping, and a returns policy. Also possible are engraving services, installations, and alterations.
c.) Ancillary services might include: check cashing, parking, credit, and rest rooms in the store.
(moderate) p. 288
74. When considering logistics and the ways to minimize the associated costs, the text gives the
following equation: M = T + FW + VW + S, where the goal is to minimize M.
Explain the model, and what trade-offs are associated with marketing logistics objectives.
Answer:
M = total market-logistics cost of proposed system
T = total freight cost of proposed system
FW = total fixed warehouse costs of proposed system
VW = total variable warehouse cost (including inventory) of proposed system
S = total cost of lost sales due to delays in the system
The variables on the right need to be minimized in order to minimize M.
As the text says, “no market-logistics system can simultaneously maximize customer service and
minimize distribution cost.” Maximum customer service implies large inventories, fast
transportation, and multiple warehouse locations—all of which raise costs. Most logistics systems
have cost reduction as a major goal.
(difficult) p. 296
75. In a short essay, discuss supply chain management.
Answer:
Supply chain management takes a broader perspective than physical distribution. It is concerned with
the manufacturer’s procurement of the right inputs (raw materials, components, and capital
equipment), how the inputs are efficiently converted into finished products, and how the finished
products are dispatched to their final destination. An even broader perspective calls for studying how
the company’s suppliers themselves obtain their inputs all the way back to the raw materials. The
supply chain perspective can be used by a company for identifying superior suppliers and distributors
and helping them improve their productivity. This process will eventually bring down the
manufacturer’s costs. The drawback to the supply chain perspective is the fact that it views markets
as destination points.
(moderate) pp. 294-295
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Mini-Cases
Mini-Case 15-1
Big Lots! sells a wide variety of goods that have been clearanced to them (close-out merchandise,
products that represent overruns in production, etc.). Although consumers never know what will be on the
shelves at Big Lots!, they know that the prices are typically 40 percent to 75 percent less than what those
goods go for elsewhere. Big Lots! Corporation owns all the stores. They like to house the stores along
major thoroughfares of large cities, clustered with other stores in long buildings. They have had good
success with this business model since the beginning.
76. Refer to Mini-Case 15-1. What type of organization is Big Lots!?
a.) voluntary chain
b.) corporate chain (moderate) p. 287
c.) retailer cooperative
d.) consumer cooperative
e.) franchise operation
77. Refer to Mini-Case 15-1. What type of retailer is Big Lots!?
a.) factory outlet
b.) warehouse club
c.) independent off-price retailer (moderate) p. 286
d.) superstore
e.) specialty store
78. Refer to Mini-Case 15-1. Big Lots! tends to favor what type of retail location?
a.) general business district
b.) regional shopping center
c.) community shopping center
d.) location within larger operation
e.) strip mall (moderate) p. 289
Mini-Case 15-2
Elliott and Robin want to open a store and call it The Home Shop. They have decided that it will feature
household items such as decorative vases and planters, sheets and towels, bathroom accessories, and
pictures. Their offerings will change from week to week depending on what’s available from their
wholesalers. Initially, they plan to sell irregulars and factory overruns, but they are flexible. Elliott has a
real knack for spotting items others admire. People are always telling him what good taste he has. They
must, however, be careful about how they spend the small amount of capital they have. One of their
goals is to find an inexpensive location.
Once the store is up and operational, they hope they can use their cash flow to meet expenses. They plan
to have no more than two full-time employees other than themselves and possibly some part-time help as
the need arises. Customers will be allowed to make their own selections, but either Elliott or Robin will
be there if they request some advice. Elliott and Robin plan on letting their customers use credit cards.
They also feel it is important to have a generous merchandise return policy. Because Elliott and Robin
are retailing novices, they want to join a retail organization for advice and support and to share the costs
of promotions. Elliott and Robin think that word-of-mouth will be their most powerful advertising tool.
They expect to attract customers that appreciate the merchandise found at major department stores and
mall specialty stores, but who would like the lower prices.
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79. Refer to Mini-Case 15-2. The Home Shop will offer what level of service?
a.) self-service
b.) self-selection
c.) limited service (moderate) p. 288
d.) full service
e.) relationship service
80. Refer to Mini-Case 15-2. Elliott and Robin should join what type of retail organization?
a.) retailer cooperative (moderate) p. 287
b.) voluntary chain
c.) consumer cooperative
d.) wholesaler-sponsored cooperative
e.) merchandising conglomerate
81. Refer to Mini-Case 15-2. What would be the best location for this outlet, given Elliott and Robin’s
perspective on their business.
a.) central business district
b.) regional shopping center
c.) stand-alone destination site
d.) strip mall (moderate) p. 289
e.) a location within a larger store
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