Andersons Department Store Rebecca Smith is assistant manager of Andersons in Ogallala, Nevada. This outlet is an independent retailer. She is responsible for the first floor of this multi-level building that houses the department store. This town has a population of 10,000 in its trading areas. The income level of the consumers in the trade area is slightly lower than the national average. About 10% of the workers are white collar employees with the remainder working in the blue collar types of jobs. Fifty-five miles away is a city of 200,000. Ms Smith is concerned that the 14,800 square feet of selling space on her floor may not be used in the best way. The current allocation of space, sales, % gross margin, % handling costs, and the average inventory value of each category is: Goods Square feet Gross Sales GM% Handling costs as % of sales Average Inventory in retail dollars Electronic games 3,000 $150,000 40% 7% $25,000 High fashion trendy womens attire 5,000 $320,000 30% 10% $330,000 M. work clothing 2,500 $550,000 35% 5% $250,000 accessories 1,500 $100,000 39% 4% $20,000 Shoes 800 $150,000 45% 7% $109,000 Linens 2,000 $300,000 30% 3% $200,000

Annual occupancy cost for the first floor is $10 a square foot of selling space. Given the fact that this is a small town the rents are lower and the sales and profitability are lower than one would expect for a national chain in a higher population area. One must consider the potential for outshopping in this community. The competition for the floor merchandise includes: 2 mail catalog outlets (one in the basement of the same building operated by the same chain) 1 small department store 9 womens shops 5 mens shops 1 hobby store 3 discount stores which sell all of the lines carried on the floor 1. Evaluate the merchandise offering of Anderson 's first floor. This is based on data and narrative in the case and what you know about consumer behavior. At this point, you have not done any calculations so dont use them, yet. 2. Calculate the return on inventory for each merchandise category.(profit/average inventory at cost or profit/tangible asset) 3. Calculate the stock turn for each category.(sales/average inventory) 4. Calculate the % of space each department has of the total. 5. Calculate the net space yield (profit per square foot) for each merchandise category. profit/square feet devoted to line) 6. Calculate the gross sales per square foot for each merchandise category. Gross sales are prior to returns. In this case, assume that net sales and gross sales are the same if you see both terms being used. 7. Calculate a space productivity ratio. (sales/industry average sales per square foot) 8. Compare stock turns, gross margins, and sales per square foot to industry averages/same store sales. If there are no same store sales to compare with something, then you dont compare, ie. Gross margins. 9. Make recommendations on what should be done based on your findings.