good compared to other department and discount retailers. For example, Walmart’s Net Profit
Margin for the same year was 3.0%.
f. Inventory Turnover:
TJX’s inventory turnover (5.963) is eight times faster than Tiffany’s (.725). This means that
TJX sells and replaces its inventory nearly 6 times a year, whereas Tiffany’s sells and replaces its
inventory less than once in a year. TJX’s faster inventory turnover is expected due to the nature
of its fashion merchandise. Trendy apparel and home goods by their very nature have a short
lifespan. TJX brings in frequent smaller amounts of fashion merchandise that sell very quickly,
resulting in a high inventory turnover. A customer visiting a TJX store an average of 6 times
through a year would find almost completely different merchandise each time they visit. Tiffany,
g. Asset Turnover
Asset turnover ratio is the value of a company’s sales or revenues generated to the value of its
assets. TJX has a higher asset turnover (2.691) compared to Tiffany & Co. (.800). Generally, the
higher the asset turnover ratio, the better the company is performing since a higher ratio implies
that the company is generating more revenue per dollar of assets.
h. ROA
Return on assets (ROA) measures a company’s net earnings in relation to all of the resources it
3. Determine which retailer had the better overall financial performance.
Tiffany & Co. outperformed TJX in terms of Gross Margin, Operating Profit Margin, and Net
CASE 16: Choosing a Store Location for a Boutique
Synopsis: Stephanie Wilson is considering a number of different locations for a new ready-to-wear
boutique she is going to open. This is a hypothetical case.
Discussion Questions
1. List the pluses and minuses of each location.
PLUS
MINUS
Downtown
Arcade
Redevelopment might attract a
lot of customer interest and
traffic. Might attract tourist and
be able to get a prime location.
Risky , no information about
types of customers or amount of
Tenderloin
Village
Location of stores close to her
home.
Traffic limited to residents of
the village.
Low rent, no overage clause,
short lease.
Limited retailing doesn’t have a
big draw for outside
Traffic and nature of customers
known.
and store design.
Appletree Mall
Traffic and nature of customers
known.
High rent, overage charge, and
long lease.
Mall draws most people of
locations considered.
New mall might draw traffic when
it opens.
Other women’s stores may draw
in customers that could stop
into Stephanie’s.
Competitive stores close by in the
mall.
2. What type of store would be most appropriate for each location?
Downtown Arcade—Store would have to cater to working women who work downtown and/or
tourists. Merchandise might be more traditional, conservative with high service.
3. If you were Stephanie, which location would you choose? Why?
The answer to this depends on Stephanie’s interests. The mall has the highest risks due to the
high rental charge, but has the highest potential profit. However, Stephanie might not be able to
use her creativity as much due to the need to cater to a wider group of customers to maintain
high sales volume.
CASE 17 – Hutch: Locating a New Store
Synopsis: This case deals with a large chain of popularly priced women’s apparel stores that are
generally located in small towns in the Southeast, Midwest, and eastern fringe of the
Southwest. The company strategy is to sell to women between the ages of 18 and 40 who
Use:
Chapter 8 The principal objective of this case is to give students an opportunity to use concepts
learned in class to make location decisions. A second objective is to make students
aware of the available secondary data sources obtainable from marketing research
companies such as Claritas/UDS Data Services. Finally, the case encourages the use of
both qualitative and quantitative information in the student’s decision. This case should
be used after students have been exposed to location strategies. The questions at the
end of the case focus the student’s attention on the proper sequence.
Discussion Questions
1. How do the people living in the trade areas compare with Hutch’s target customer?
Hutch customers are price-conscious women between the ages of 18 and 40 who live in small
towns, like to wear the latest fashions, and are in the low- to middle-income range.
Dalton is a bigger market by every measurable standard, although Hinesville is growing at a
higher rate. Further, over 11 percent of the population in Hinesville probably lives in barracks
on the base.
2. How do the proposed locations, including the cities, tenant mix, and the locations within
the malls, fit with Hutch’s location requirements?
We should assume that these locations are within a 400-mile radius of one of their distribution
centers.
The stores should be located in communities with a population range from 10,000 to 50,000 and
a trade area of 50,000 to 150,000. Although both towns meet these criteria, Dalton is
significantly bigger (87,293 compared to 57,945 for the 10-mile ring in 2016). Both towns have
experienced significant growth.
The desired location for Hutch stores is adjacent to the center’s anchor. The location within the
center in Dalton is one spot from the Walmart. Although not perfect, this is acceptable. In
Hinesville, the location within the center is adjacent to Target and is therefore an ideal location.
3. Which location would you select? Why?
All things considered, Dalton is a stronger market from a demand perspective. Dalton has more
women within the target age categories. Dalton is also more affluent. It appears that the people
Back to cases
CASE 18– Avon Embraces Diversity
Synopsis: Avon, the largest cosmetics firm in the United States, sells primarily through the direct-
selling method using more than 6 million independent sales representatives in more than
70 countries around the world. The case describes Avon’s turnaround strategy since the
1970s when it started actively promoting diversity, by including more women and
minorities in the top and middle management levels.
Use:
Chapter 3 Describes the multichannel strategies of a large cosmetics firm, using a combination of
direct-selling and retail sales approaches.
Discussion Questions
1. Why is Avon so committed to diversity?
Avon’s target market is women consumers for all its cosmetics lines. It is to be expected that
women decision-makers would be able to understand the needs of women and explore new
market opportunities. This is evident from the historical problems at Avon, when an all-male
top management team ignored marketing research data on new market opportunities and also
2. Select another retailer that also values diversity. How does this commitment affect its
financial results?
Students’ responses will vary. Other retailers do not pursue the same target markets or use the
same direct-selling approaches as Avon does. But, in general, it is pragmatic for more retailers to
3. What values have helped Avon be a successful company even after 125 years?
Avon has been able to uncover new market opportunities, especially the cosmetics needs of
working and professional women. Women have also been instrumental in ensuring that the
firm’s push into international markets was done right. Diversity – in terms of more women,
Back to cases
CASE 19- Sephora Loyalty Programs: A Comparison Between France and
the U.S.
Synopsis: Sephora is a beauty products retail chain founded in France by Dominique Mandonnaud
in 1970 and owned today by Moët Hennessy Louis Vuitton (LVMH), the world’s leading
Uses:
Chapter 10 Customer Relationship Management-loyalty programs
Discussion Questions :
1. Identify the benefits for a company to implement a loyalty program
– Develop repeat purchase behavior
– Engender customer commitment and create a bond with the retailer (sense of community)
2. What are the design characteristics of an effective loyalty program?
– Identify each customer and provide rewards for their purchases
– Use a tiered program. Not all customers have the same value for a company, therefore
rewards should be tiered according to the volume of purchase.
– Offer customer choices because not all customers value the same rewards
3. What are the benefits of having a tiered loyalty program such as Sephora’s?
Not all clients have the same value. In general, 20 percent of the customers account for 80 percent
4. Describe Sephora’s loyalty program design characteristics in both countries. What
are the main differences? Which loyalty program is most effective at developing customer
loyalty? Why?
US loyalty program
French loyalty program
Common to all programs: $1 spent = 1 point
Common to all programs: 1€ spent = 1 point
Rewards Beauty Insider Program:
100 points = sample-sized product
500 points = full-sized product
Birthday gift
makeup style
Rewards White card:
150 points or 4 purchases = 10 percent discount for
next purchase
Premium program
V.I.B: minimum of $350 spent a year
Rewards in addition to the regular program:
Deluxe samples
Exclusive monthly perks and gifts
Access to prereleased products
Premium program
Gold card: minimum of 1500€ spent a year
Rewards in addition to the Black card benefits:
Exclusive private sales
Full-sized birthday gift of customer’s choice
Free shipping on website
The main differences are:
– Discount: in the French program, there is a mix of discount and rewards; whereas
the American program only offers rewards. Discounts are used to tease consumers at the
beginning of the relationship. This entry-level relationship, which is based on a lower price
point, does not garner loyalty because it is easily copied by the competition. As the
customer reaches higher levels, Sephora grants higher rewards and services, which creates a
stronger relationship.
– A different tiered program: American program is a two-tiered program and French
program is a three-tiered program. Adding one level might allow having customer segments
that represent different values for Sephora in order to differentiate marketing activities. The
three-level program echoes the customer pyramid developed by Zeithaml et al. (2001).
The French program is more effective at developing customer loyalty. It combines discount
and rewards. The more a customer is valued (in terms of purchase amount or purchase
frequency) the more he/she will get rewards rather than discounts. Discounts are used to
transform customer into good customers because it is a way to make them patronize the
retailer more frequently.
5. Are both Sephora’s French and American premium programs worth what they
spend to reward customers? Why do both programs have a limited time validity and
a specific requirement regarding the amount spent per year?
French premium program:
The costs include: (1) the costs of rewards; (2) the cost of shipping; (3) the costs of
newsletters; (4) the costs of salesperson’s training and time; (5) the costs of telephone line;
(6) the costs of additional gifts and private sales.
American premium program:
The costs include: (1) additional points and deluxe sample ; (2) discount of 10% as welcome
offer and special discounts; (3) event invitations.
Analyzing the costs and benefits of both premium programs, we conclude that they are
worth more than the costs incurred in the program.
6. Could the premium loyalty program implemented in France be adapted to the
U.S. market? Explain.
Since there is no information in the text, further information needs to be sought. Data about
the beauty market in both France and the U.S. are available on Datamonitor, on the websites
of the French National Institute of Statistics and Economic Studies, and the website of the
U.S. Census Bureau.
Back to cases
CASE 20– Attracting Generation Y to a Retail Career
Use:
Chapter 15 Managing the Store
Discussion Questions
1. How can Diva demystify what happens behind the scenes and make potential
Generation Y employees aware of the opportunities available to them beyond the shop
floor?
Generation Y seldom see retail as a career of choice, particularly given that many believe a retail
2. Diva has implemented a learning organizational culture in an attempt to attract and
retain staff. Discuss the possible pros and cons of this strategy for Generation Y.
On the positive side, Diva has developed a workplace environment that encourages goal-setting
and self-improvement through several initiatives, such as training plans, career development
3. Give examples of how other organizations (perhaps even nonretailers) attract a
Generation Y workforce. What could Diva learn from other organizations?
The fast-paced technology industry provides a good example of a sector confronted with a
predominantly Generation Y workforce. Google, for instance, engages staff in a variety of ways
CASE 21 – Active Endeavors: Analyzes Its Customer Database
Synopsis: Active Endeavors is an outdoor apparel and accessory retailer. The store has a database
of its customers’ transaction records including their name and address, transaction date,
Use:
Chapter 10 Customer Relationship Management
Discussion Questions
1. Describe the type of customers in each group.
The students need to understand what recency, frequency, and monetary values mean. Recency
is a measure of how recent the last purchase is. When the recency value is low, the likelihood of
making a purchase is expected to be high. Frequency is a measure of long-run purchase
frequency. It can be a cumulative number of purchases or an average frequency over a certain
period. In this case, it is a cumulative number. Finally, Monetary is a long-run purchase amount.
When the frequency and monetary values are high, the likelihood of purchase is expected to be
high.
2. What would you recommend Active Endeavors do to get more business from each
group?
Group 1:
The store should do everything it can to retain these customers. They can use the frequent
shopper program and offer new products and deals through regular communications such as
direct mail and e-mails.
Group 4:
Since the recency value is not too bad, it is important for the store to entice them to come back
before they lose them altogether. The store should contact these customers with a special offer
to entice them to come back. But if they do not respond, it may not be worthwhile to spend any
more time and effort on them.
Group 5:
The store should contact these customers with a special offer to entice them to come back. But
if they do not respond, it may not be worthwhile to spend any more time and effort on them.
Back to cases
CASE 22– Mel’s Department Store under New Management
Use:
Chapter 13 Calculating markup, initial markup, and maintained markup, Markdown and vendor
relationships, Delivering value to the consumer and the role of pricing
Discussion Questions
1) Given the soft-goods targets, are these marked correctly? If not, what should the initial
retail price be to obtain her 60 percent minimum initial markup percentage?
Elise received 200 units at a cost of $16. She also received 100 units costing $17.50. The first
step is to calculate the initial markup based on her plan. The plan asks for a 60 percent initial
markup on any soft good. Therefore:
2) By noon another shipment arrives. This time it is from SNEAK HERS, delivering her
preholiday sneakers. Elise notices that the high tops do not have tags and need to be
priced for the floor. She has her associate calculate the retail price. The invoice indicates
the cost is $8.75. What should the initial retail price be, given her markup target?
For shoes her initial markup target is 54%. She uses a similar formula to the above:
3) Elise has been analyzing her sell through and saw that the “hot” T-shirts from back to
school have not been moving, and she has sweater shipments due in the next two weeks.
She decides to mark down the T’s to make room for the anticipated shipment. The cost
of the T’s was $2.25, and they were on the floor at a 62 percent markup. If Elise takes a
33 percent markdown, what is the new selling price?
The first step is to find out the price they were initially. The information in the problem gives
you the cost of $2.25 and the initial markup % of 62%. Using the formula:
4) After six weeks passed, Elise analyzes her sales of the FUNWEAR prewashed jeans. Of
her original 200 units this is what she found:
50 units sold at the original retail
34 units sold at a 38 percent markdown
116 units sold at a 44 percent markdown
What was her average maintained markup percentage? Did it meet her goals? Explain
how this was possible.
Maintained Markup is the actual sales realized for the merchandise, minus its costs.
a. First calculate what all of her sales were.
b. Now, the student needs the following:
Actual sales were = $2,000 + $952 + $2,598.40 = $5,550.40
Actual costs: Back to Question #1 where we originally bought 200 units at
$16 cost. Original cost of goods was 200*16= $3,200.
So, the Actual sales-actual cost= $5,550.40-$3200= $2,350.40
5) Using the information in question 4, explain to management the possible reasons
multiple markdowns could have been taken and why we compare to plan.
Multiple markdowns are taken for many reasons in retail. One reason is a bad buy. As the store
manager, you brought in the merchandise your buyer thought would sell, but due to color, style,
A second reason for making multiple markdowns could be competition. Price pressure from
competition can create the need for a store manager to take an additional markdown to stay
competitive. This could especially be the case with prewashed jeans as these are not so unique
and could face head-to-head competition from other retailers, making price comparisons a
reality for the consumer.
6) FUNWEAR is a long-time vendor of Mel’s. It provides markdown dollars to help defray
the lost gross margin dollars. Why would it provide this money to Elise?
Markdown dollars are one way that a vendor communicates that they are a partner with the
retailer. They then take on some of the responsibility to deliver undamaged goods and
7) Seventy-five toy trains were bought for the toy area at $3.50 each and were then priced at
$10.00 each. Elise is running a department promotion and wants to reduce the price of
the trains. To what can she reduce the retail price in order to meet her maintained
markup goals?
Cost of the toy trains was $3.50 and they retailed at $10. Her targeted maintained markup % is
25%. The question then is what can she drop the price to so that (new retail price- cost)/new
8) Mel’s wanted to create unique assortments and increase customer service. How does
this strategy allow for better markup percentages? How are these related to perceived
value?
Back to cases
CASE 23 – Developing an Assortment Plan for Hughes
Synopsis: A department store needs to develop an assortment plan for imported merchandise.
Use:
Chapter 11 This case gives students an excellent chance to experience how a buyer must break
down an open-to-buy allocation into SKU’s, specifically sizes and fabrics of oriental
rugs. The students should be divided into teams of retailers representing Hughes
Discussion Questions
1. Work up a buying plan to use when buying from Ghuman’s.
Decide how to distribute the allotted open-to-buy dollars among the available sizes, colors, and
fabrications. Since it’s an overseas manufacturer, consider additional costs such as duty and shipping,
2. How should Hughes distribute the allotted open-to–buy dollars among the
available sizes, colors, and fabrics?
Exhibits 2,3, and 4 are sample assortment plans for silk, wool, and cotton, respectively. They were
developed from one large spreadsheet. For purposes of illustration, we will examine the assumptions
and calculations for Exhibit 2:
• Column 2 is taken directly from Exhibit I in the case.