Retail Strategic Analysis Flashcards

A retailer's gross margin is 42% and its operating expense ratio is 38%. What is its operating margin?

Answer: 4%

Operating margin equals gross margin minus operating expense ratio: 42% - 38% = 4%.

Which competitive strategy focuses on a retailer dominating a narrow customer segment rather than the broad market?

Answer: Focus strategy

Porter's focus strategy concentrates resources on a specific niche segment to achieve competitive advantage within that segment.

A retailer's sales per square foot declined 15% year-over-year while total sales increased 5%. What most likely explains this?

Answer: Significant store expansion increasing total floor space

If total sales rise but sales per square foot fall, the denominator (total square footage) must have grown faster than sales, indicating store expansion.

What does a retailer's 'private label penetration rate' measure?

Answer: Percentage of total sales generated by store-brand products

Private label penetration rate is the share of total net sales attributable to the retailer's own store brands.

In SWOT analysis, a major competitor closing stores in your trade area would be classified as:

Answer: Opportunity

An external positive development—such as a competitor's exit—represents an opportunity that the retailer can capitalize on.

A retailer uses a 'hub-and-spoke' distribution model. What is the primary strategic benefit?

Answer: Centralizes inventory and reduces per-unit distribution costs

Hub-and-spoke consolidates inventory at central distribution centers, enabling bulk purchasing and efficient last-mile delivery to stores.

Which metric best measures how efficiently a retailer converts customer visits into purchases?

Answer: Conversion rate

Conversion rate is the percentage of store visitors who complete a purchase, directly measuring sales effectiveness per visit.