JUNE 2011 EXAMINATION
ITM332
IT Applications for Merchandising
Time: Three Hours
Maximum Works: 100
Note:
1.
2.
3.
4.
The paper is divided into three sections: Section A, Section B and Section C.
There are seven questions in Section A of 10 marks each. Attempt any four.
Section B has 5 questions of 15 marks each. Attempt any three.
All the questions of Section C (Case Study) are compulsory. This section is of 15
marks.
Section – A
1.
2.
10 marks each
What is merchandise management? Discuss the roles and responsibilities of a Divisional
Merchandise Manager in a departmental store.
“Assortment planning is critical to category management.” Justify.
3. Discuss the different factors that leave an impact on devising the merchandise plan.
4.
What are the methods of Tracking product / Market trends. Elaborate each one of them.
5. What are the product selection criteria’s? Discuss by using a product of your choice.
6. What is ECR? Explain the scope of ECR.
7.
Write short notes on:
i.
ii.
Electronic Data Interchange (EDI)
Vendor Managed Inventory (VMI)
Section – B
8.
15 marks each
Define the following terms and discuss how they affect purchase order:
a) Trade discount
b) Anticipation discount
c) Advertising allowances
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9.
What do you mean by category management? Explain the eight step process of category
management. What are the benefits of category management
10. Write short notes on:
i.
ii.
iii.
Staple merchandise
Fashion merchandise
Seasonal merchandise
11. What is the difference between the four methods of dollar merchandise planning used to
determine the proper inventory stock levels needed to begin a merchandise selling
period?
12. Describe the concept of open—to—buy as a buying tool for a retail organization. What
are the advantages of OTB plans for buying?
Section – C
Case Study (Compulsory)
13. Read the case study below and answer the questions following the same:
Costco Challenges Mighty Wal-Mart
Costco Wholesale Corp., the big national warehouse club based in Issaquah, Washington,
is highly profitable. The company is worth about $42 billion, which makes it only about
20 percent the size of Wal-Mart, but it ranks as one of the larger company’s biggest
competitors.
Sam’s Club, the warehouse arm of Wal-Mart, was founded the same year as Costco
(1983) and has 532 stores in the U.S. compared to 312 Costco outlets, but the average
Costco store earns nearly twice as much revenue as the average Sam’s Club ($112
million compared to $63 million).
Costco has curved out its market by appealing not so much to bargain hunters with
moderate budgets but to more sophisticated urban shoppers who look for the “new
luxury.” They appreciate bargains on expensive name brands and “treasure hunt” items,
but they also don’t mind buying money-saving private-label commodities like paper
towels, detergent and vitamins in bulk from stacked pallets in the store’s cavernous, nofrills environment. Small business owners make a large portion of Costco customers.
“We understood that small-business owners, as a rule, are the wealthiest people in a
community,” says chairman Jeff Brothman. “So they would not only spend significant
money on their businesses, they would spend a lot on themselves if you gave them
quality and value…You couldn’t entice a wholesale customer with 20-pound tins of
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mayonnaise; you had to romance him with consumer goods.” Costco’s customers pay a
small annual fee for a membership card that allows them to stop there; the annual renewal
rate is an impressive 86 percent.
Costco doesn’t offer unlimited choices. But by stocking fewer items and reducing the
number of sizes, brands and colours it carries, the company streamlines its distribution
process and turns over inventory faster. Thanks to its large volume and its ability to
attract affluent customers (who return to the store an average 11.4 times a year), Costco is
able to offer prestigious brands like Titleist, Cuisinart, and Levi’s labels that wouldn’t
ordinarily want to annoy their full-price retail customers by striking a deal with a
discounter.
Costco sees itself as an innovator in retailing. Among the goods and services it offered
before Sam’s Club did were the sale of fresh meat and produce and of its own premium
private-label brand (Kirkland Signature). Costco also started selling gasoline before
Sam’s Club did and is now one of the largest independent gasoline retailers in the state of
California. Costco has 61 stores in Canada, and Sam’s has recently opened four there
with more to come.
The two firms also differ in their employment practices. Wal-Mart pays an average of
about $11.50 an hour; Costco pays nearly $16. Wal-Mart offers its health plan to fewer
than half its workers; Costco covers 80% of its workers and pays 92 percent of their
healthcare costs. Wal-Mart’s employee turnover rate is 21 percent a year; Costco’s is 6
percent, the lowest in the retailing industry. Some Wall Street observers want Costco to
cut its employment costs to increase profits, but Costco has consistently high
productivity, and its labor and overhead costs are less than 10 percent of sales (Sam’s
Club’s costs are 17 percent). Says Costco’s CEO Jim Sinegal, “Paying your employees
well is not only the right thing to do but it makes for good business.”
a) Sam’s Club is adding more upscale merchandise, including pricey jewelry. Do you
think it can successfully capture many of the “new luxury” buyers in Costco’s target
market? Why or why not?
b) From the case, how could you characterize Costco’s merchandising and pricing
strategy?
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