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UBC Theses and Dissertations

Retail management and the U.B.C. bookstore Smith, Robert John 1971

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RETAIL MANAGEMENT AND THE U.B.C. BOOKSTORE by ROBERT JOHN SMITH Commerce, U n i v e r s i t y of B r i t i s h Columbia, 1968 A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION i n the F a c u l t y of Commerce and Business A d m i n i s t r a t i o n We accept t h i s t h e s i s as conforming to the r e q u i r e d standard THE UNIVERSITY OF BRITISH COLUMBIA J u l y , 1971 In present ing th i s thes is in p a r t i a l f u l f i l m e n t of the requirements for an advanced degree at the U n i v e r s i t y of B r i t i s h Columbia, I agree that the L ib ra ry sha l l make i t f r e e l y a v a i l a b l e for reference and Study. I fu r ther agree that permission for extens ive copying of th is thes i s fo r s c h o l a r l y purposes may be granted by the Head of my Department or by his representa t i ves . It is understood that copying or p u b l i c a t i o n of th i s thesis for f i n a n c i a l gain sha l l not be allowed without my wr i t ten permiss ion. Department of The Un i ve r s i t y of B r i t i s h Columbia Vancouver 8, Canada ABSTRACT A r e s e a r c h p r o j e c t "was undertaken to thoroughly examine the u n d e r l y i n g d i f f i c u l t i e s i n t h e ; r e t a i l o p e r a t i o n of the U.B.C. Bookstore and to r e s o l v e the q u e s t i o n of optimal s t o r e . l o c a t i o n . Merchandising policy.was examined and analyzed on the b a s i s . o f data o b t a i n e d from i n t e r v i e w s with,the s t o r e ' s ' management s t a f f . At the same time three p o s s i b l e s t o r e s i t e s were ev a l u a t e d by c o l l e c t i n g data r e l e v a n t to the o p e r a t i o n of a d i s t a n c e decay s i m u l a t i o n model which was. used to estimate the value of the s i t e s i n terms of t o t a l s a l e s . .. The e x i s t i n g s i t e was found to be the most s u i t a b l e w h i l e the problems i n r e t a i l management were.diagnosed as more f a r - r e a c h i n g than simply t h e , f u n c t i o n of space l i m i t a t i o n s . TABLE OF CONTENTS Page ABSTRACT i i LIST OF TABLES v i i LIST OF CHARTS v i i i LIST OF DIAGRAMS i x LIST OF EXHIBITS x ACKNOWLEDGEMENTS x i INTRODUCTION 1 CHAPTER I. MERCHANDISING POLICY AND LOCATION ANALYSIS: THE THEORY 3 PART .I - MERCHANDISING 3 A. Store Layout 3 1. Standards of Space U t i l i z a t i o n 4 2. Layout Patterns 4 3. Motion Study 5 B. Merchandise Assortment Decisions 6 1. Market Segmentation and Merchandise Assortment 6 C. Buying Decisions 7 1. Merchandise.Buying Procedures 8 2. Buying Staples 9 3. Buying Fashions 10 D. Store Organization Decisions 11 1. Requirements of R e t a i l Organizations 12 2. Functional Organization i n Ret a i l i n g 13 E. R e t a i l Promotion Decisions 14 1. Character of Re t a i l Promotion 14 2. Amount and Timing of Advertisements 15 F. R e t a i l P r i c i n g Decisions . 15 1. P r i c i n g Practices-and P o l i c i e s 16 2. Structural Dimensions of Price 20 G. Management - of R e t a i l Services. 21 1. Nature of Retai l Services 21-2. The Role of Nongoods Services 22 3. Personal S e l l i n g 23 PART II - LOCATION 24 A. Importance of R e t a i l Location 24 1. Benefits from Trading.Area Delineation 25 B. Determination of the Trading.Area 26 1. The Market Area for a Good 26 2. Mechanics of Application 28 Summary and Conclusions 29 II. MERCHANDISING ACTIVITIES AT-THE U.B.C. BOOKSTORE 31 A. An Overview. 31 B. Store Layout 32 C. Merchandise Assortment 41 D. Buying Decisions 44 E. Store Organization 47 F. P r i c i n g P o l i c i e s 52 G. Services 54 . H. Promotion 57 I. vSummary and Conclusions 58 II I . CONSUMER BEHAVIOUR ANALYSIS: 62 A. Data C o l l e c t i o n 62 B. Data Analysis 6 4 C. Describing Consumer Behaviour 66 D. Limitations of the Study 67 E. Summary.and Conclusions 67 IV. BOOKSTORE SITE EVALUATION 7 0 A. The Trading^Area 71 1. Physical Description 71 2. Socio-Economic Information. 73 B. Analyzing the Trading Area 75 1. Data C o l l e c t i o n 75 (a) c a l c u l a t i o n of the distance factor 75 (b) c a l c u l a t i o n of building population densities 77 (c) consumer o r i g i n and destination data 77 2. Data Analysis 77 (a) determining the market penetration s t a t i s t i c 77 (b) measuring the e f f e c t of distance on market penetration 79 (c) simulating the e f f e c t of Bookstore location on t o t a l sales 81 (i) l i m i t a t i o n s of the model 86 C. Summary and Conclusions 91 V. SUMMARY, CONCLUSIONS AND RECOMMENDATIONS - 94 A. Merchandising Policy 94 1. Store Layout . 95 2. Merchandise Assortment 97 3. Buying Decisions 99 4. Store Organization 100 5. P r i c i n g P o l i c i e s 102 6. R e t a i l Services 104 7. Promotion 105 B. Optimal Site.Determination 105 C. Recommendations 109 BIBLIOGRAPHY 111 TABLE Page I. ,MONTHLY FLOOR SPACE UTILIZATION IN SALES PER SQUARE FOOT 38 II . CONSUMER BEHAVIOUR CORRELATION MATRIX 65 I I I . , BUILDINGS, DENSITIES AND RESPECTIVE TIME. DISTANCES 76 IV. BIVARIATE FREQUENCY DISTRIBUTION,OF TEXTBOOK AND NON-TEXTBOOK CUSTOMERS BY BUILDINGS OF ORIGIN 7 8 V. PERCENT MARKET PENETRATION FOR THE BOOKSTORE AT ORIGIN OF CUSTOMERS 80 VI. BOOKSTORE EVALUATION SIMULATION 85 CHART Page -I. MONTHLY FLOOR SPACE UTILIZATION IN -SALES PER SQUARE FOOT 40 II. DISTANCE DECAY ON MARKET PENETRATION 82 II I . MARKET PENETRATION SCATTER DIAGRAM (SURVEY 1) 89 IV. MARKET,PENETRATION SCATTER DIAGRAM (SURVEY 2) 90 LIST OF- DIAGRAMS DIAGRAM Page I. BOOKSTORE LAYOUT: SCHEMATIC 33. II. U.B.C.- BOOKSTORE ORGANIZATION CHART 48 I l l s U.B.C. CAMPUS LAYOUT 72 IV. ORIGIN AND DESTINATION OF LIBRARY USERS 87 E X H I B I T p a g e I . CONSUMER SUR V E Y - C O M P O S I T E Q U E S T I O N N A I R E 6 3 ACKNOWLEDGEMENTS I wish to acknowledge the f i n a n c i a l assistance provided by the.University o f - B r i t i s h Columbia.- I would also l i k e to express 'my.appreciation.to the numerous people i n the administrative s t a f f of the University for t h e i r cooperation and i n t e r e s t . I am p a r t i c u l a r l y g r a t e f u l for the assistance and di r e c t i o n from-Dr. J.- Forbes, Chairman of my thesis committee. INTRODUCTION The U n i v e r s i t y o f B r i t i s h Columbia Bookstore has been the focus of c r i t i c i s m , a n d comment f o r a number of years. • Students and F a c u l t y have r e p e a t e d l y experienced f r u s t r a t i o n w h i l e the A d m i n i s t r a t i o n has been.unable to authorize,manage-ments 1 requests f o r expansion as long as the s t o r e i s unable to f i n a n c e the repayment of debt which would be i n c u r r e d by such a move. An almost .hopeless s i t u a t i o n has slowly developed u n t i l a l l p a r t i e s have now reached extremely tenuous p o s i t i o n s . T h e i r r e a c t i o n s have been to implement f o r c e f u l s o l u t i o n s to s p e c i f i c problems i n order to remedy the o v e r a l l s i t u a t i o n . I t w i l l be the, t h e s i s of ..this study to show that a p p r o p r i a t e r e s o l u t i o n of the Bookstore dilemma l i e s i n the o b j e c t i v e e v a l u a t i o n o f the fundamental elements which c o n s t i -t u t e r e t a i l management. The f o l l o w i n g r e p o r t p r e s e n t s the major t o p i c s contained i n merchandising p o l i c y and the d e t e r -minants o f s t o r e l o c a t i o n . They have been i d e n t i f i e d , e v a l u -ated and c r i t i c i z e d thereby p r o v i d i n g a sound b a s i s upon which recommendations f o r f u t u r e a c t i o n may be developed. Chapter I has been prepared to acqu a i n t the reader with the terminology.of merchandising and l o c a t i o n theory. Chapter II expands upon the elements of merchandising by r e l a t i n g the.theory to e x i s t i n g Bookstore operations. Each factor has been,identified, discussed - and c r i t i c i z e d . Chapter III.reports the methodology and results of the investigation into customer behaviour. The findings of this research.provide pertinent.data for the analysis of Book-store location. Chapter IV -draws upon the information concerning consumer behaviour and discusses the construction and operation of a model to simulate consumer patronage of the- Bookstore at various locations. The results are then discussed and placed i n perspective. F i n a l l y , Chapter V summarizes the re s u l t s of the research and makes recommendations for corrective action. CHAPTER.I MERCHANDISING POLICY AND LOCATION -ANALYSIS: THE THEORY The experience of r e t a i l managers and marketing analysts when brought together can provide .• valuable insight for the enterprising r e t a i l operation. The concepts drawn from the students of marketing theory and set.out i n this chapter are considered relevant to an analysis .of the Bookstore. I t should be noted however, that management ..of a r e t a i l operation remains larg e l y an a r t and the theory i s of use to the manager just-as the paint and brushes are of use to the painter. The success l i e s i n the ta l e n t of t h e . a r t i s t . PART I - MERCHANDISING1 A. Store Layout The objective of store layout i s to optimize the relationships.between customers, merchandise and employees. That i s , to arrange these relationships i n such a way that the maximum productivity from customer tr a v e l past merchandise•at the least expenditure of employee e f f o r t w i l l a t t a i n maximum sales volume. "'"For a more e x p l i c i t discussion of Merchandising Theory, ' the reader i s referred to Retail i n g : . Concepts and.Decisions, by R.E. Gist, John Wiley and Sons,,New York, 1968, 521p. 1. Standards of space u t i l i z a t i o n Layout i s of primary.importance during store renova-tions or i n i t i a l construction. B a s i c a l l y i t concerns i t s e l f with.the problem of .the-size of merchandise - zones and their r e l a t i o n s h i p or proximity.to one another. The most, r e a l i s t i c basis of-resolution l i e s in._the i d e n t i f i c a t i o n of the primary role of the store and the compari-son of average sales volume per merchandise item per square foot to the o v e r a l l area of s e l l i n g space measured i n square feet. A further point of reference, of secondary importance, i s to consider the s e l l i n g area by the cubic foot. In t h i s manner the significance of merchandise volume -and display can be incorporated into the consideration of space u t i l i z a t i o n . Whatever standards are determined,- they are only p r a c t i c a l insofar as they r e f l e c t the s t o r e 1 s unique experience. Such norms, for instance, may be influenced considerably by customer reaction to seasons.. 2. Layout patterns E f f e c t i n g an appropriate layout, of merchandise zones and a i s l e s can serve to enhance sales. Consider those items, which draw or p u l l customers to a store. In a bookstore i t i s the books; i n a drugstore, the drugs, and so on. The depart-ments handling these " p u l l " items can be considered to have g e n e r a t i v e p o w e r s a n d t h e i r p o s i t i o n i n g - c a n f a c i l i t a t e t h e . m o v e m e n t o f c u s t o m e r s t h r o u g h o t h e r d e p a r t m e n t s w h i c h a r e l o c a t e d , e n r o u t e t o t h e g e n e r a t i v e d e p a r t m e n t . T h i s a r r a n g e m e n t p r o v i d e s f o r i m p u l s e s p e n d i n g b y t h e c u s t o m e r a n d c a u s e s a h i g h e r t u r n o v e r o f m e r c h a n d i s e r e l a t i v e t o s p a c e r e q u i r e m e n t s . A n e t w o r k o f a i s l e s m u s t a l s o b e p l a n n e d t o a c c o m - " • m o d a t e t r a f f i c f l o w i n p r o p o r t i o n t o c u s t o m e r v o l u m e . T h i s . may v a r y i n a c c o r d a n c e w i t h s e a s o n a l . i n f l u e n c e s . E s s e n t i a l l y s u c h a n e t w o r k s h o u l d e n c o u r a g e - t r a f f i c f l o w i n t o a l l d e p a r t -m e n t s w h i l e . e n r o u t e t o m e r c h a n d i s e w i t h s t r o n g g e n e r a t i v e p r o p e r t i e s . F i n a l l y , l a y o u t s h o u l d m a x i m i z e t h e g e n e r i c s i m i l -a r i t y b e t w e e n p r o d u c t s — t h a t i s , t e x t b o o k s s h o u l d be. g r o u p e d w i t h r e f e r e n c e - b o o k s a n d p o c k e t b o o k s w i t h . m a g a z i n e s . T h i s t y p e o f a r r a n g e m e n t may t e n d t o i n d u c e s p e n d i n g w h i c h . i s c o m p l i m e n t a r y i n n a t u r e a s w e l l a s p r o v i d i n g a v a l u a b l e s e r v i c e t o . c u s t o m e r c o n v e n i e n c e . 3. M o t i o n s t u d y T h e u s e o f m o t i o n s t u d y t e c h n i q u e s c a n a l s o a i d - c o n - - , s i d e r a b l y i n t h e r e s o l u t i o n o f a s t o r e . l a y o u t p r o b l e m . T h e m e a s u r e m e n t o f t r a f f i c a n d t r a f f i c p a t t e r n s a s s i s t i n t h e i d e n t i f i c a t i o n o f e s s e n t i a l a c t i v i t i e s a n d - s u g g e s t s u i t a b l e relocation. • At the same time this data can. help.eliminate unnecessary elements and further enhance a more structured and generalized understanding of p r a c t i c a l combinations of-a c t i v i t i e s . B. Merchandise .Assortment Decisions 1. Market segmentation and merchandise assortment Market segmentation refers to the extent,to which the r e t a i l store constructs^, i t s appeal appropriately for the consumer through i t s assortment of merchandise. Such segmen-* tation may be apparent from geographic factors--consider . clothing. stores i n Canada versus Hawaii—or this aspect may be even more apparent within the general market for one class"of goods. More e x p l i c i t l y , market segmentation highlights the. differences i n merchandise assortments i n various r e t a i l outlets which, i n e f f e c t , cater to different^, socio-economic sectors of-society. Having some appreciation for}t'he,'relevance of market segmentation, concern must focus on those c h a r a c t e r i s t i c s of merchandise which can be altered to achieve the desired e f f e c t . -F i r s t , the number of brands and styles or the "depth" of a p a r t i c u l a r l i n e of merchandise must be determined. At the Book-store- there i s quite probably a multitude of brands of pens and pencils,and an even greater multitude of styles of s l i d e : r u l e s available; consequently discriminate purchasing i s a necessity, to prevent chaps. The second aspect-which provides for f l e x i b i l i t y i n merchandise,assortment i s the concept of "width." Width refers to the .number of generic classes of goods available; that i s , -the extent to which the Bookstore i s prepared to include additional items such, as leisure reading and l i s t e n i n g , merchandise. Third, f l e x i b i l i t y i s available through the characr t e r i s t i c of merchandise consistency--the•extent to which the difference products are related or unrelated i n use. i n fact,, then, there exists a set on a continuum composed of the three alterable c h a r a c t e r i s t i c s described above and therefore the merchandise assortment may be viewed as being shallow or deep,.wide or narrow, consistent or inconsistent, or, i n other words, some ideal combination of these factors which;provides an appropriate mix for the s p e c i f i c market seg-ment. The notion of "bazaars" or "bargain specials" on a daily.or weekly basis i s one aspect of the assortment dilemma which attempts to resolve the needs of a highly d i v e r s i f i e d market while minimizing the aspect of;product. consistency. C. Buying Decisions Within this section the a c t i v i t y of u t i l i z i n g proper procedures w i l l be examined as i t relates to the basic types of merchandise—staples and fashions. The significance of sound buying procedures l i e s i n the f i n a n c i a l aspects of-the store. Adequate control and investment i n inventories should be - achieved by this function. 1. Merchandise buying procedures. To begin with the merchandise may be envisioned as ranging - along a continuum from highly staple items to highly fashion items. By d e f i n i t i o n , staple items are considered to be necessities, "or items for which customers have l i t t l e con--cern for s t y l e . They are purchased frequently and customers' expect to find them i n any store .catering to s p e c i f i c needs, such as pencils i n a stationery store, whereas fashion items r e f l e c t considerable style distinctiveness"and may contribute to the customer's image of the store to a greater degree than staple items. Each item on this continuum exhibits a c h a r a c t e r i s t i c sales pattern which may or .may not be seasonal, and-which may be fas t or slow moving. Diagramatically then, one envisions a complex,.three dimensional•framework composed of staple or fashion items which, s e l l fast or slow, with or without seasonal-influences. I t i s to t h i s framework that buying routines must be designed. As i s the case i n a l l types of buying decisions, the determination of an economic order quantity (EOQ) i s the f i r s t step and can remain r e l a t i v e l y standard once i t i s established. E s s e n t i a l l y EOQ attempts to minimize the costs of acquiring, handling.and storing of the items. In other words, i t i s set from the vexamination of procurement costs: . buying, invoice -handling, receiving, paying and administration, and carrying, costs: loss of interest-on inventory, storage and r i s k of inventory.devaluation. 2. Buying.Staples Staple merchandise without seasonal influence allows for f a i r l y standard and automatic procedures. Once the EOQ has been established, the store need only determine at what point re-order should take place. The re-order point can be set quite accurately.from knowledge of the rate of sales for,the item and the average.length of time,required for the supplier to f i l l the order. Insurance by adding a "cushion" -to absorb instances where actual demand may exceed average demand-or when supplier delivery times may become upset, can a s s i s t i n maintaining, saleable stock on the shelves while maintaining an economically sound composition of inventories. The use of automatic procedures allows for a symmet-r i c a l ordering pattern; however, the pattern, becomes quite asymmetrical when adjusted to staple items which-are influenced by seasons. In cases such as t h i s , ordering i s altered i n both the optimum size of order (EOQ) or time span of re-ordering. The same procedure as described above i s followed only written into the procedure ,are considerations which govern the order-based oh the time of year where various-other optimum EOQ and re-order points have been determined. 3 . Buying Fashions The customer preferences which are lar g e l y dependent on the style d istinctiveness of the merchandise make buying procedures considerably more cautious than those for staples. Most c e r t a i n l y overbuying leads to inventory that will.never be sold; underbuying can cause situations which cannot .be r e c t i f i e d and bad timing means a permanent loss of.sales opportunities. Furthermore, the buyer must assess thoroughly the c h a r a c t e r i s t i c s of c l a s s i f i c a t i o n , style designation, price, l i n e , size and colour. These factors coupled with the caution required to avoid inventory disruption makes fashion buying much more of an art than that required for staple purchases. S c i e n t i f i c analysis has provided some topis .which i d e n t i f y and describe the phenomenon of fashion cycles. One type of cycle seems to e x i s t whereby i t i s accepted, then de-c l i n e s , and returns to acceptance again. In this case the cycle i s quite dependable and i s of substantial value because of i t s p r e d i c t i v e . p o t e n t i a l . The other main cycle simply finds considerable - acceptance and then declines completely never to return. Such a fashion cycle i s often referred to as a fad and i s of r e l a t i v e l y short duration, usually one.season, while, the f u l l fashion cycle extends over a longer period of time and may be many years between peaks. Textbook purchases by consumers are i n the fashion category. They are i n a highly acceptable position when pre-scribed by professors, but they decline completely when the instru c t o r s ' preferences change. I t i s usually more apparent which cycle actually applies to each -fashion item and consequently a s l i g h t decline in the rate of sales can usually provide reasonable notice to the-store of a change i n strategy. D.. Store Organization Decisions The resolution of the complex problems of having the ri g h t merchandise i n the r i g h t place at .the r i g h t time:cannot be achieved without considering the human element i n a . r e t a i l operation,; .. The organization of the people factor i s the single most important device by which the store implements i t s strategy and t a c t i c s to service i t s customers in an economic manner. Literature i n thi s area i s extremely.broad and exhaustive. Problems that people .create for the manager are s i m i l a r l y broad and exhaustive as well as being exceedingly complex and f r u s t r a t i n g . The ramifications of managing people cannot begin to be explored f r u i t f u l l y here but rather i t i s strongly suggested that the matter be underscored and noted for future study. What does bear mentioning i s the f a c t that many of the organization's problems may have their o r i g i n i n operational d i f f i c u l t i e s , par-t i c u l a r l y those operations which have strong growth patterns. Thus i t seems "quite necessary to c a r e f u l l y examine and u t i l i z e personnel i n a manner which w i l l meet the organization's objec-tives most e f f e c t i v e l y . 1. Requirements of Reta i l Organizations To meet the fundamental purpose.of a r e t a i l store, merchandise must be both available and presentable in order to serve the needs of the consumer. Thus the primary objec-tive i s to be sensitive to customer need and to make r e t a i l decisions accordingly. Secondly the store's organization must be f l e x i b l e -since i t i s rare that demand remains constant. There i s no straightforward route by which a sensi- ' t i v e and f l e x i b l e organization may be b u i l t . The most r e a l i s t i c s t a r t l i e s i n the preparation of written store policy and•the designation of supervisory positions and r e s p o n s i b i l i t i e s as well as subordinate positions and r e s p o n s i b i l i t i e s . 2. Functional Organization i n R e t a i l i n g Growth i n size requires changes in the e x i s t i n g s t r u c t u r a l requirements of the store. Most notably changes become apparent i n the areas of-previous s p e c i a l i z a t i o n and the o v e r a l l d i v i s i o n of labour. In the formative stages of development the store requires two basic functions to be performed--that of store operation or matters of maintenance, supplies, personnel and bookkeeping; and that of merchandising or deciding what to buy and how i t w i l l be sold. The f i r s t change -that becomes necessary i s for the addition of f i n a n c i a l control. This function incorporates the accounting and budgeting needs of the store. The next change to occur would be the addition of a sales promotion function which;would take place once the store reached a f a i r large s i z e . One other functional change may become necessary which,would subdivide the merchandising function into buying, and s e l l i n g functions. This pattern of development does not purport to be the only manner in which functional structure should evolve, i t i s rather a reasonably l o g i c a l format to consider within the framework of the resolution of organizational d i f f i c u l t i e E. R e t a i l Promotion Decisions Retai l promotion a c t i v i t i e s are directed to achieve. communication between s e l l e r and buyer and to meet competitive t a c t i c s from other r e t a i l e r s . There are three main aspects of promotion to be mastered in order to foster e f f e c t i v e communications. The f i r s t aspect i s that of personal .s e l l i n g or customer contact. In the context of promotion, attributes of-service provide for the establishment of store rapport which can quickly be communicated from consumer to prospective consumer throughout the trading area. The second aspect of promotion i s advertising. By d e f i n i t i o n t h i s form of promotion suggests a cash outlay and i d e n t i f i e s the r e t a i l e r . I t i s probably the most widely used method'of promotion and w i l l be discussed further i n thi s section. The f i n a l relevant-aspect i s that of p u b l i c i t y which u t i l i z e s the same media of communication employed by adver-t i s i n g ; .however, i t s message i s to publicize features of the store such as i t s location, name, etc. I t i s usually imper-sonal and makes no suggestion of cash .outlay. 1. Character of R e t a i l Promotion Promotional e f f o r t s are able to make use of both-the printed medium and the broadcast medium or some combination of both. The printed medium has two basic applications; through regular publications such as magazines and-newspapers or a more d i r e c t method of mailing s p e c i a l l y printed material to prospective consumers. The l a t t e r method, although often quite c o s t l y , can focus more d i r e c t l y on. s p e c i f i c markets and i t s effectiveness may more than o f f s e t i t s cost. 2. Amount and Timing.of Advertisements Advertising expenditures vary from store to store. The most r e a l i s t i c approach to t h i s form of expenditure i s to set some l i m i t such as a fixed percentage of gross sales and adjust i t • t o . the l e v e l which provides the,desired l e v e l of customer response. Appropriate planning of each department helps gener-ate the timing of the organization's promotional objectives. Furthermore, opportunities should be taken advantage o f ; - f o r instance, a large scale national publicity-programme offers the prime opportunity to advertise the similar a r t i c l e a v a i l a b l at the. r e t a i l e r 1s operation. F. R e t a i l - P r i c i n g Decisions For the r e t a i l e r p r i c i n g decisions mean minimizing c a p i t a l investment or ac q u i s i t i o n costs while.maintaining quality and ensuring a s e l l i n g price which w i l l be s u f f i c i e n t to cover s e l l i n g expenses and-provide for a reasonable rate of return on investment. A c q u i s i t i o n costs i s the term applied to the sup-p l i e r ' s p r i c e , the transportation charges and the receiving expenses associated with obtaining the merchandise. . S e l l i n g expenses refer to the remainder of -charges encountered while arranging . for the sale of the items and stock turnover,is the r a t i o of merchandise movement through time to net sales.;-. Return on investment may be considered as p r o f i t divided by investment. The following discussion delves into methods and problems of r e t a i l p r i c i n g . I t i s f i r s t necessary to be ac-quainted with the concepts as described below. To ensure that the s e l l i n g price w i l l cover- expenses and p r o f i t objectives a markup which may be. defined as a per-centage of the acquisition cost of a percentage of the s e l l i n g price, .is applied. This -markup i s often referred to as the gross margin and i s determined .on "before tax" cal c u l a t i o n s . In r e t a i l i n g the markup usually refers to percentage of s e l l i n g cost. A 30 percent markup on a $10.00 book means that the book costs $7.00 and the r e t a i l e r has a $3.00 margin out of which he has to pay for a l l his s e l l i n g expenses and make a p r o f i t . 1. P r i c i n g Practices and P o l i c i e s . Each of the following.basic techniques i n p r i c i n g practices and-policies must, by necessity, be tempered to re-f l e c t the positive r e s u l t s of marketing research. Over time research has given strong support to the fundamental p r i c i n g r u l e : "...that, for p r o f i t maximization, r e t a i l markups should vary inversely"with the price e l a s t i c i t y , 2 of demand." The following quotation provides the experienced insight into the r e s u l t s of operation of stores which either adhere to this rule or ignore i t : High p r o f i t stores were ,competitive on readily, i d e n t i f i a b l e items with high turnover rates...and took . higher margins on less important merchandise. This produced r e l a t i v e l y high average prices but at:the same time gave the appearance of competitiveness. Stores with lower p r o f i t s tended to be high-priced on items,in heavy demand and-lower on less v i s i b l e merchandise.3 The f i r s t and most common technique available to a s s i s t the r e t a i l e r i s to apply a uniform percentage or gross margin to the•acquisition cost or the proposed s e l l i n g p r i c e . This method i s r e l a t i v e l y simple to use and ensures a c o n t r i -bution to the target p r o f i t t o t a l from each item sold. However, i t tends to r e s t r i c t f l e x i b i l i t y i n p r i c i n g and consequently reduces the number of favourable marketing strategies. The second major method of setting prices i s the d o l l a r margin approach. This method does not f a c i l i t a t e an equitable contribution to p r o f i t s since actual gross margins would vary from item to item. The rationale behind t h i s method i s to 2 D.J.-. Dalrymple and D.L. Thompson, Ret a i l i n g : An  Economic View,. The Free Press, New York, 1969, p. 193. 3 I b i d . , p.193. introduce more f l e x i b i l i t y into the store's p r i c i n g strategy and i t r e l i e s on., a high turnover of stock to meet p r o f i t expectationsi The d o l l a r margin approach f a c i l i t a t e s the setting of leader, p r i c i n g strategies which draw t r a f f i c to the store. Leader'prices are usually set at, .or s l i g h t l y above, the ac q u i s i t i o n cost price,-and are suitably applied to indicate recognized values for the consumers. Another common va r i a t i o n of this strategy i s that of the loss leader p r i c i n g which deliberately.sets prices below the acquisitionraost: To some extent the above two p r i c i n g methods.can be affected by manufacturers' insistence on maintained prices., Although c o l l u s i o n i s not sanctioned.by law,~manufacturers may endeavour to r e s t r i c t supply to r e t a i l e r s whose p r i c i n g prac-tices-may destroy the manufacturers' qu a l i t y image. As a r e s u l t certain r e t a i l prices may be completely i n f l e x i b l e due . to the t a c i t agreements made between the various parties con-nected through the d i s t r i b u t i o n channel. One other form of manufacturer intervention i s throu the use of "suggested"-prices. To some extent t h i s technique provides useful assistance to the r e t a i l e r i n his own price setting and-clearly leaves him the opportunity to.operate i n accordance with market pressures. This method i s apparent i n a majority o f ^ r e t a i l - p r i c e s today. Psychological p r i c i n g methods intended t o . d i s t o r t the consumer's perception of actual prices are frequent i n many of today's marketing t a c t i c s . The most common forms are the taking of markdowns, usually made i n one step, and the setting of prices ending i n odd numbers or just, below the next highest d o l l a r . Although many of these forms cannot be demonstrated s c i e n t i f i c a l l y they are nevertheless in. extensive use and bear close scrutiny.when establishing p r i c i n g p o l i c y . One f i n a l feature of p r i c i n g practice which i s widely used i s that of p r i c e , l i n i n g . This practice attempts to mini-mize accounting frustrations and customer ambiguity.by grouping items of d i f f e r e n t styles from d i f f e r e n t suppliers into d i s t i n c t price categories. By t h i s practice a r e t a i l e r may have low, medium and high priced lines of merchandise. Not a l l p r i c i n g practices are straightforward and s i m p l i s t i c . As mentioned i n this discussion some techniques cause i n f l e x i b i l i t y or retard equal contributions to p r o f i t s . Manufacturers 1 influence may r e s t r i c t ease of movement and u n f a i r l y govern the d i r e c t i o n o f - p r i c e s . There remains the problem of "conversion"--the procedure by which the s e l l i n g price i s converted from the a c q u i s i t i o n cost. The manner by which this procedure i s accomplished i s subject to error and requires c a r e f u l i n s t r u c t i o n and supervision of personnel. 2. Structural Dimensions of Price The timing and convenience aspects of a price are the components which constitute the str u c t u r a l dimensions. This dimension has ramifications for both the r e t a i l e r and consumer. The -.structure quoted to the r e t a i l e r may contain any number or combination of discounts designed to achieve c e r t a i n objectives on the part of the supplier or manufacturer. The most common type, of discount i s the "cash discount" which acts as an incentive to pay promptly. The second form of discount i s the "quantity discount" which i s intended to encourage larger orders. Examination of quantity discounts may prove b e n e f i c i a l i f unit costs can be reduced and transportation economies obtained. Quantity discounts may, however, only serve to increase the r e t a i l e r ' s inventory. I t i s necessary to have procedures which allow for the analysis of the,effects of such discounts. The t h i r d discount form i s the "promotional discount." This form of manufacturer support acts as compensation for promotional e f f o r t s by the r e t a i l e r . , The f i n a l • standard d i s -count i s known.as the "trade p o s i t i o n discount" and i s often offered when the r e t a i l e r provides c e r t a i n wholesaling services for the,manufacturer. Another aspect of structure which i s s i g n i f i c a n t to the r e t a i l e r i s the terms of-shipping charges., Not only which party i s to pay the transportation costs but also which party i s . w i l l i n g to handle the claims.for damages, are factors which can be the source of considerable expense and the expenditure of extra time and e f f o r t . This dimension i s frequently subject to heated negotiation, but generally i s absorbed by the re-t a i l e r . For the consumer the s t r u c t u r a l dimensions quoted are often the f i n a l obstacle to be resolved before the deci-sion to buy an item i s made.. To a great extent this source of fr u s t r a t i o n has been resolved through the use of r e t a i l credit.-R e t a i l c r e d i t generally involves some degree of r i s k for the r e t a i l e r due to bad debts, but experience has shown a number of useful benefits. In the f i r s t place the c r e d i t cus-tomer becomes more t i e d to a p a r t i c u l a r store. Furthermore, he i s often less conscious of s l i g h t price.differences and i s even more susceptible to making impulse purchases. : The popularity of c r e d i t cards i s - a continually increasing phenomenon i n the North American culture and i t s acceptance i s due - to shopping convenience and an increasing emphasis on a time preference as a r e s u l t of impatience. G. Management of R e t a i l Services 1. Nature of.. R e t a i l Services There are three basic types of service that may be given to t h e - f i n a l consumer. The f i r s t . i s known as "rented:goods service which provides the consumer the use of an item but not the t i t l e of ownership. Examples of this type of service would include organizations providing items of furniture, t e l e v i s i o n sets, or tools for rent for a pre-arranged period of time. : The second form of service i s .known as "owned goods" services. • In t h i s case the user owns the item and services are rendered generally to maintain the item. A l l forms of repair shops--automobile, t e l e v i s i o n , etc.--are examples of this type of service. The t h i r d basic type i s that of "nongoods" services. This form, by d e f i n i t i o n , does not a l t e r i n any way, the physical nature of the products and i s by far the.most important area of service for the r e t a i l operation concerned - e x p l i c i t l y with the d i s t r i b u t i o n of merchandise to the.consumer. Examples of this type of service include personal s e l l i n g , c r e d i t , trade-i n p o l i c i e s , mail and telephone orders, customer parking, etc. 2. The Role of Nongoods Services The t a c t f u l application of certain nongoods services can become an e f f e c t i v e means to eliminate or control-competi-tors. However, i t cannot become the excuse for unacceptable markups o r - i t defeats i t s own purpose. There.exists as well, other j u s t i f i c a t i o n for the use of nongoods services such as the extent to which,they create l a s t i n g benefits i n terms of goodwill or the opportunity for creative distinctiveness.which may enhance the store's outward image. The. degree of market s e n s i t i v i t y to certa i n services may be extremely high and therefore become necessary for effec-. tive store operation. There may be services which are neces-sary complements for p a r t i c u l a r purchases such-as the delivery of durable goods (refrigerators,'stoves, e t c . ) ; 3. Personal S e l l i n g . Personal .selling i s an extremely controversial form of service both from the standpoint of the customer and the r e t a i l e r . For the r e t a i l e r a personal s e l l i n g service.means a q u a l i f i e d and well trained s t a f f . If they are too well trained then they may tend to move to more rewarding levels of sales and the r e t a i l e r faces an expensive turnover and .training prob-lem. What i s desired i s the achievement of an optimum mix of service to customer needs. In some r e t a i l outlets the l e v e l of service may be of a high order such as .required i n the pur-chase of.durable products. In other organizations i t may be almost e n t i r e l y nonexistent, i . e . , stores providing necessity items such as groceries. Personal s e l l i n g services which are misplaced or, i n other words, inappropriate:to the store's l e v e l (high c l a s s , low class) impose the feeling.of an obligation to buy on the part of the customer and. may prove .to be a negative device rather than a p o s i t i v e factor. S i m i l a r l y , a s e l f - s e r v i c e approach may be completely discouraging i n stores where customers expect and are w i l l i n g to pay .for service and i n stores merchandising tec h n i c a l l y complex products-. PART II - LOCATION4 Part I of this chapter was introduced by the discus-sion on store layout. The two remaining c h a r a c t e r i s t i c s of r e t a i l s p a t i a l competition are the trading area and the store site-within that area. The question of location has h i s t o r i c a l l y been deter-mined by the developer or r e t a i l e r s ' hunch, but with the. develop- . ment of the study of marketing geography r e l i a b l e tools have been created which help generate data relevant to p r a c t i c a l decisions. •>, The procedures designed have gain.edcconsiderable acceptance by progressive r e t a i l e r s and are now used as a matter of course. A. Importance of R e t a i l Location Observation of various r e t a i l locations over time quickly indicates the changes which), take place within the 4 A detailed discussion i s available i n Geography of  Market Centers and R e t a i l D i s t r i b u t i o n , by Brian J . L. Berry, Prentice-Hall Inc., Englewood-Cliffs, N.J.,. 1967, 139pp. store's market area.- In a macroanalysis the normal trading area i s -in a constant state o f - f l u x as c i t i e s become more u r b a n i z e d , t r a f f i c routes change and ma jor . building develop- : ments convert-residential family dwellings into high r i s e apart-ment-blocks. In e f f e c t this constant flux i s a r e s u l t of various socioeconomic, technical- and c u l t u r a l factors which continually i n t e r a c t to set the demand preferences of the prospective consumers. The magnitude of these factors i s far beyond the control of the private entrepreneur, consequently the onus i s on the r e t a i l e r to keep abreast of the changes. To do t h i s , frequent analyses must be made of the composition and delinea-tion of the trading area. The r e s u l t s of such study must be incorporated into the s t o r e 1 s p o l i c i e s and plans. 1. Benefits from Trading Area Delineation I n i t i a l l y , any.analysis of this type should have as i t s objective the?estimate of annual sales. This i s an extremely important s t a t i s t i c for the planning and budgeting of future operations. Secondly, such studies can be designed to provide valuable data r e l a t i n g to consumer sub-groups and their pre-ferences and demand trends. This information becomes an inte-g r a l part of the design of a proper product and promotion mix. F i n a l l y , the analysis should provide insight into the existence of additional opportunities which require c u l t i v a t i o n or, conversely, the lack of such opportunities and the need to consider relocation. B. Determination of the Trading Area 1. The Market Area for a Good The underlying concepts es s e n t i a l to the analysis of a trading area, are contained i n basic economic theory. The following discussion.employs the c l a s s i c a l concepts involved in order to give the reader a fundamental acquaintance with the theory and to appreciate the significance of assumptions made l a t e r i n i t s application to the analysis of the,U.B.C. Book-store. i n a given market area of uniform population density, there w i l l e x i s t certain relationships between the quantity demanded of a given product and the price,at which i t i s offered. Variations i n the price produce variations i n the quantity demanded and the charting of these relationships show a set of l o c i which, when connected, form a downward-sloping curve known as the demand curve for the p a r t i c u l a r product under study. In essence the curve demonstrates that as the price for an. item increases the quantity demanded w i l l decrease and. con-versely , ; as the price decreases, the quantity demanded w i l l increase. However, within the market area there exists another factor which a l t e r s the fundamental relationship described above. This factor suggests that there i s a cost to the consumer for his time and t r a v e l to the store which must be added to the, price requested for the product desired. Consequently, th i s r e l a t i o n s h i p suggests-that at a given price, the quantity demanded w i l l decrease as the. distance from the store inc-reases, : since the actual price i s higher to the more distant customers. Hence the r e l a t i o n s h i p between quantity demanded and distance may now be charted to show a cone shaped demand function. Variations i n the basic store.price for the item now result, i n a variety of. s p a t i a l demand cones of varying heights and distances and again the pattern they create can be charted to show an aggregate demand curve for the product. None of the relationships discussed thus far have been able to suggest the optimum price fortthe p a r t i c u l a r product. Once again c l a s s i c a l theory provides the answer through the con-sideration of the r e t a i l e r ' s costs. B r i e f l y described,-the theory suggests that the r e t a i l e r must incur the costs of pur-chasing the item from the wholesaler or manufacturer, as well as the administrative and handling expenses associated with i t . Part I described these costs as the a c q u i s i t i o n costs and s e l l i n g expenses. As the quantity of items sold increases the r e t a i l e r enjoys a per unit reduction i n costs due to economies of scale which are brought about by better u t i l i z a t i o n of the same exp e n s e s — p a r t i c u l a r l y the s e l l i n g expenses. Consequently this r e l a t i o n s h i p when charted over the long-run shows a cost curve which downward-sloping to a cert a i n point and then becomes upward-sloping as diseconomies•due to factors such as space and personnel constraints set i n . • When the long-run average cost curve for the r e t a i l e r i s plotted against the aggregate demand.curve determined for the market area, vthe inter s e c t i o n of the two curves indicates the optimum price at which the product should be offered for sale since at any other price there would be unmet demands or an excess of supplies. A similar procedure can then be ca r r i e d out with each item of merchandise offered for sale by the r e t a i l e r and i n this manner the market area may be delineated since the optimum cone size for each item w i l l d i f f e r iri*radius. 2. Mechanics of Application The c l a s s i c a l theory very n i c e l y solves the problem of determining the trading area and the actual store s i t e ; however, i t s assumptions are based upon a p e r f e c t l y uniform p l a i n populated i n a p e r f e c t l y even density with each i n d i v i d u a l acting i n a p e r f e c t l y r a t i o n a l and predictable manner with complete and instant product information. This i s not the case i n r e a l l i f e and the process of implementing the c l a s s i c a l pro-cedure becomes impossible. Nevertheless, i t s basic concepts are quite v a l i d and with interpretation they become a useful tool i n the analysis of r e t a i l s p a t i a l c h a r a c t e r i s t i c s . The normal procedure for the analyst would be to spend his i n i t i a l period of examination i n "sizing-up" the general trading area. The purpose of this endeavour i s . t o locate the various possible s i t e s for a store and to relate these.sites to p o t e n t i a l buyers. Methods are available to project sales, from buyers to s i t e s at various locations. The r e s u l t of these procedures provides information on the drawing power of the store -and the degree of market penetration the store has i n each area. Hence, one can then provide an estimate of sales p o t e n t i a l for the r e t a i l operation. In e f f e c t - t h i s procedure delineates the trading area for the store. By transforming the findings of the analysis into graphic representation, an i s o l i n e map of the trading area can be plotted to indicate how distance affects t o t a l store sales and how distance w i l l also a f f e c t the market share of each area. Summary and Conclusions-This chapter has been concerned with the t h e o r e t i c a l concepts relevant to r e t a i l management. The extent to which the multitude of factors suggested are i d e n t i f i e d and dealt with by today's managers constitutes the l e v e l of e f f i c i e n t and e f f e c t i v e store operation. The subjects of merchandising and location analysis have been presented separately for the purposes of future c' discussion; however, r e t a i l management i s obliged to view the two features as one. In everyday operations the constantly changing variables of these topics are intertwined i n a complex fashion with changes i n one component having repercussions throughout the organization. I t should be noted that r e t a i l management i s more than sales. I t i s the e s s e n t i a l component of s u r v i v a l and growth. Logical analysis coupled with p r a c t i c a l decision rules offers the modern day manager the opportunity to ensure the future. CHAPTER II MERCHANDISING ACTIVITIES.AT THE U.B.C. BOOKSTORE The purpose of this chapter i s to describe the existing operations of the Bookstore on the U.B.C. campus and compare the various a c t i v i t i e s to i d e a l store management sug-gested by the theory i n Chapter I. The information presented here i s from a series of interviews with the Bookstore's management team as well as the author's observations of store operations. A. An Overview The Bookstore operates under the auspices of the University of B r i t i s h Columbia Administration Branch as an A n c i l l i a r y Service. Its purpose and objective i s to provide a service to the 20,000 students and 10,000 faculty and s t a f f on the campus through the procurement and d i s t r i b u t i o n of mer- • chandise pertinent to t h e i r specialized needs for books and supplies. Store operations after rebates yielded $2,133,167 i n sales for the 1969-70 f i s c a l year. This sales t o t a l resulted from merchandising a c t i v i t i e s which include an eight month academic year and a six week academic summer session for students and-a twelve month operating year for the administration ser-vices and the.faculty. The i r r e g u l a r i t y of academic and administration demands on the store's services are c y c l i c . Peaks of various magnitude occur for short periods throughout the year as students, faculty and administrative departments present their requests for p a r t i c u l a r merchandise. Students descend on campus i n September requiring, texts and supplies for the winter session. To meet the demands of this sales peak, the Armouries i s used to . s e l l .textbooks. In 1970-71, $640,722 was r e a l i z e d from textbook sales during the three week Armoury sale period. This t o t a l represents 4 3.8 percent of the t o t a l sales volume from a l l book sales or 30.5 percent of t o t a l sales for the year. A l l other sales are handled from the store i t s e l f . There are two minor peaks i n January and July. Demands for stationery and supplies also tend to correspond with the text-book peaks although they are usually less pronounced and extend -over longer time i n t e r v a l s . B.• Store Layout Diagram I i s a schematic representation of the 11,4 00 square foot, main f l o o r of the store. Customers, enter through the,front doors behind.the.cashiers (1) and proceed through a turnstyle entrance (2) aft e r leaving t h e i r personal books and notes outside the main s e l l i n g area. ] BSD GO CO (6) CO 1ST /. C A S H I E R S a. ToRNsTvi.es & S T B T i o r » £ f i ^ 7. T f X T B o o K S <f. SToRftSS (3) CO 6-; (3) 0) 0) B O O K S T O R e Lflyowr S c n e ^ A T i c Adjacent to the turnstyle. i s a large Employee area (3) which serves to handle a l l textbook i n q u i r i e s , orders and administration of-textbook sales. On the other side.of the store are the cashiers and opposite them i s a wall displaying supplies (4) . . The customer then moves up the main a i s l e , which has a four step r i s e , to the major merchandising area. On his l e f t i s another Employee area (3) which handles a l l stationery, supplies and.sundry i n q u i r i e s , orders and the administration of sales i n these categories. In p a r t i c u l a r this area serves Engineering students who require additional assistance i n t h e i r purchases of specialty paper and - supplies. Opposite the "Engineering.counter" i s the Stationery merchandising area (5) and behind that, the Employee area (3) which includes the Accounting O f f i c e , the Assistant Manager and Manager's o f f i c e s and another C l e r i c a l o f f i c e . This bank of o f f i c e s extends along the whole north side of the building past the Stationery area into another Supplies area (4) and a Sundry area (6) . This Sundry area i s serviced by a second a i s l e while the.main a i s l e turns to the l e f t past the Engineering counter to another counter servicing another Sundry area ( 6 ) . Branching to the right of the main a i s l e are a set of secondary a i s l e s which allow the customer into-the Textbook area ( 7 ) . This i s the largest single department in the store and occupies the main area of s e l l i n g space. At the end of the main a i s l e i s another Employee area which administers the paperback sales, the l a s t main sales department (8) i n the store, located adjacent to the Textbook area. The outside wall of the Textbook and Paperback-area allows for perimeter storage of books (9) and the display of special reference books. This description of the store layout provides the image of the store which has generally prevailed for a number of years. Excluding small adjustments, the layout has been rather s t a i d . I t seems reasonable to describe the Textbook area as a generative department for the store. If th i s i s the case then customers are "pulled" past Supplies and Stationery areas, but not-necessarily the Sundry.areas. Sundry areas charac- ; t e r i s t i c a l l y have higher turnover, higher p r o f i t margins and are purchased more on impulse than are Stationery and Supplies which are more of a staple requirement and therefore sensitive to p r i c e . The Engineering counter.is another example -of a generator department i n the store. Since customers must report to t h i s counter for the i r specialized preferences i t can e a s i l y be located anywhere i n the store without'affecting i t s sales. In i t s present location i t requires a large amount of prime s e l l i n g space which could be converted to more p r o f i t a b l e sales merchandise such as .the impulse goods mentioned .above. The present store layout does not seem to give recog-n i t i o n to consumer buying.patterns that have been shown to exis t . Impulse items, for instance, must be seen to be pur-chased. Records — introduced this year—pocket novels and posters, a l l t y p i c a l impulse items, are presently located at the back of .the store. Since t h e i r quantity and the selection available does not rank them as generators of t r a f f i c , they are inaccessible to the average customer.. S i m i l a r l y sweat-s h i r t s and student "type" c l o t h i n g — a l s o impulse items — are inaccessibly located behind a counter; hence, th e i r sales are dependent upon -a personal s e l l i n g service. Floor space u t i l i z a t i o n comparisons have been shown to highlight the r e l a t i v e value of - departmental relationships. Although such calculations are not now presently made, the following analysis indicates how additional insight may be gained and e f f e c t i v e layout decisions made; Diagram I represents the a l l o c a t i o n of the 11,400 square feet of the main f l o o r . In the 1968-69 operating year t h i s space provided sales of approximately $1,297,800 or $113.8 per square foot a f t e r deductions for the Armouries sale of text books ($640,000) and Departmental Supplies ($220,000). The actual s e l l i n g space after the deduction of the Employee areas and Storage space i s 6,475 square feet. Of this space 4,825 square feet i s provided for textbook merchandise which yielded $885,250 i n sales or $183.47 per square foot. The.remaining.2,650 square feet allocated.to Stationery, Sup-p l i e s and Sundries provided sales of $412,600 or $155.69 per square foot. When storage space i s included i n the cal c u l a t i o n s , the r e l a t i o n s h i p i s s i g n i f i c a n t l y altered.- Stationery, Sup-p l i e s and Sundries now provide $632,600 in.sales from 4,900 square feet of space of $12 9.10 per square foot while Textbooks require 11,375 square feet of f l o o r space t o . s e l l $885,250 or $77.82 per square foot. The o v e r a l l - store 1s production becomes $70.92 per square foot on $1,517,800 i n sales. This type of assessment enables closer scrutiny of fl o o r space u t i l i z a t i o n ; however, these calculations are based on a yearly analysis causing the peaks and troughs of normal operations to be l e v e l l e d . A more appropriate basis provides insight which j u s t i f i e s the expansion and contraction i n departments commensurate with t h e i r varying contributions to sales. Table I and Chart I describe t h i s monthly analysis for the period from A p r i l 1970 to February 1971. The magnitude of the September-October peak dwarfs the peaks of July and MONTHLY FLOOR SPACE UTILIZATION IN SALES PER SQUARE FOOT (APRIL - FEBRUARY 197 0-71) Month Category Actual Sales $ Net Monthly Sales Per Square Foot $ Gross-Monthly Sales Per Square Foot $ Apr. Texts 26,797 5.55 2. 35 Non-Texts 14,912 5.63 Departments 769 3. 20 May Texts 29.755 6.17 2.62 Non-Texts 9.271 3.54 Departments 3,114 2.54 June Texts 25,253 5.23 2. 22 Non-Texts 14,384 5.42 • Departments 13,754 5.74 July Texts 70,914 14.70 6. 23 Non-Texts 22,363 8.44 • Departments 8,138 6. 22 Aug. Texts 38,629 8. 00 3 .39 Non-Texts 27,477 10.37 Departments 23,181 10. 34 Sept. Texts 752,562 34.48* 26.53 Non-Texts 104,083 39. 28 Departments 15,181 22. 29 • Oct. Texts 527,700 109.36 46.48 Non-Texts 49,915 18.79 Departments 4,825 11.17 • Nov. Texts 91,119 18.88 • 8.01 Non-Texts 31,146 11.75 -Departments 9,956 8. 38 (Cont'd.) TABLE I Continued Month Category-Actual Sales $ Net Monthly Sales Per Square Foot $ Gross Monthly Sales Per Square Foot $ Dec. Texts 55,079 11.41 4.85 Non-Texts 26,075 9.84 Departments 7,051 6. 76 Jan. Texts 128,223 26.58 11.72 Non-Texts- 33,585 12.67 Departments 14,697 9. 85 Feb. . Texts 102,065 21.15 9. 06 Non-Texts 29 ,687 11. 20 Departments 16,334 9. 39 *Includes $640,722 from Armoury of 17,000 sq. f t . January, but Chart I provides some appreciation for the degree of a c t i v i t y i n each month and suggests time periods in which merchandising emphasis may be placed i n different-departments. For instance, i f , during a peak period, the store can.realize $26.58 per. square foot from textbooks then merchan-dise consolidation may f a c i l i t a t e s i m i l a r sales i n a trough period-and the additional space can be used to-investigate the potential of other, more p r o f i t a b l e markets, such as the Chr i s t -mas g i f t market during October-November-December. C. Merchandise Assortment Proper selection of .merchandise i s an i n t e g r a l com-ponent of r e t a i l management. The role of th i s function has a d i r e c t bearing on sales, hence i t s importance cannot be emphasized enough., The. appropriateness of the selection of merchandise to-the needs of the market segment which the store intends to serve i s e s s e n t i a l l y a function of the factors of depth and width. Depth i s determined by the number of brands or sty l e available i n a p a r t i c u l a r class of merchandise and width i s • indicated by the number of classes of merchandise ava i l a b l e . The discussion i n th i s section i s concerned with the methods by which the Bookstore manages i t s assortment of mer-chandise and how i t attempts to maintain i t s selection at a l e v e l consistent with the needs of students and faculty. The Bookstore's merchandise assortment can be .grouped into f i v e broad categories which, for the purposes of ,this report; can be .defined as: Textbooks - b o t h hard and s o f t cover-books prescribed by.Professors as course requirements. Other Books - reference books and pocket novels. Stationery - paper materials for academic uses such as notes and reports. Supplies - pens, pencils, paints, binders, folders, etc. Sundries - student compatible items not necessarily for academic use. Items such as greeting cards, sweatshirts, study lamps, etc., are included here. These f i v e ; c a t e g o r i e s are treated somewhat d i f f e r e n t l y by the store for accounting and control purposes. They use four categories l a b e l l e d : . Textbooks, Paperbacks, Used books and Stationery. Future discussions w i l l make use of the f i v e categories discussed above. Within each-of the categories mentioned, there are a number of classes and-within each class a number of brands and st y l e s , a l l of which are subject to review by employees making the buying decisions. Merchandise assortment i n the Textbook category i s prescribed by. Professors and i s r e l a t i v e l y fixed from the stand-point of appropriateness. The remaining categories, however, are not constrained i n the manner of textbooks. Instead the employees performing the,buying a c t i v i t y — o f which there are a large number--tend to examine the stock card to determine the re-order quantity of the item. The e f f e c t of this procedure i s to perpetuate the merchandising.of an item without considering i t s sales per-formance over time. Consequently, poor buying decisions are perpetuated year after year instead of being c r i t i c a l l y examined and changed.. There i s also no concept of economic order - quan-t i t y , the e f f e c t of which i s - l a r g e and growing inventories of unsaleable merchandise. By the same token new merchandise which i s selected, often at the suggestion of a supplier, does not become involved i n a process of experimentation to test t h e i r appropriateness. Furthermore the existence of r e l a t i v e l y redundant merchandise, has saturated the available sales space and new items are i n -d i r e c t l y discouraged. The whole process, p a r t i c u l a r l y for the categories of Other Books, Stationery, Supplies and Sundries, requires the creation of-procedures which can provide turnover s t a t i s t i c s on a periodic basis so that items i n demand by the Bookstore users are kept i n stock and poor buying decisions are corrected so that new types of merchandise may be experimented with. In other words when turnover rat i o s are compared to predetermined r a t i o s , the a b i l i t y to decide,whether to continue or discontinue an item becomes operational. At the present time the lack of a useful accounting system defies i n t e l l i g e n t decisionmaking. The management of assortment through the manipulation of depth and width factors i s not presently made use of, and ne g l i g i b l e change occurs. Turnover analysis would enable management to i d e n t i f y "dead" stock and remove i t and then to experiment with new classes or styles depending on th e i r information sources or i n t u i t i o n without, running the r i s k of. over-buying and d i s t o r t i n g inventories.. D. Buying., Dec isions The preceding section suggested that appropriate merchandise assortment i s dependent upon procedures designed to i l l u s t r a t e the sales performance of a, p a r t i c u l a r item or merchandise c l a s s . S i m i l a r l y sound buying decisions are depen-dent upon procedures which consider the sales pattern of the merchandise. Where sales are c y c l i c or seasonal, quantities purchased should be indi c a t i v e of estimated sales. When these sales d i f f e r from actual sales, -discrepancies in quantities of stock occur and management i s required to take steps to elimin-ate overstock and understock positions. Buying decisions are clos e l y related to the control of inventories. Nearly every tiem i n the Bookstore i s influenc by c y c l i c sales patterns. The most outstanding example i s that of textbooks which gain immediate acceptance and then decline r a p i d l y . Good buying decisions i n this category are dependent on correct timing and order quantities. Once a book i s s p e c i f i e d as a course requirement i t i s i n urgent demand. But i f timing has become disrupted and the books are not available, students begin to improvise and the demand for the item f a l l s o f f . S i m i l a r l y an over-purchase of a textbook cannot be remedied by a sale of overstock— , except for l i m i t e d quantities--and- i n both cases inventory, problems a r i s e . In the case of overlbuying, most textbooks can be returned to the d i s t r i b u t o r , at some discounted rate, within a c e r t a i n time period, therefore the opportunity for management to restructure inventories i s immediately available. However, since there i s always t h e . p o s s i b i l i t y that the book may be designed i n the following.year as a requirement, management presently argues that i t i s tempted to r e t a i n the books rather than absorb the-expenses of the discount and return f r e i g h t charges. In fact, though i t i s doubtful that anyone, with the e x i s t i n g control systems i s capable of analyzing the point at which the cost of returning the book i s less than keeping i t . Consequently, most purchases remain i n stock i n the vain hope. of future sales. Under buying on a p a r t i c u l a r item i s equally frus-t r a t i n g since -demand i s not met and the store's major objective of providing a service.to the university community.is s i m i l a r l y u n f u l f i l l e d . Where the book must be re-ordered, the delivery-time may be of such length that the demand evaporates and an overstock position r e s u l t s once the books arr i v e . Again the analysis of a i r f r e i g h t i n g such items against potential sales losses i s not made. A more,- s p e c i f i c example of a fashion cycle can be i l l u s t r a t e d with the case of assignment folders. This merchan-dise i s used extensively by-, students and i s a staple item except for a yearly preference for colour. One year i t i s blue and the next red, while manufacturers continue to f i l l orders with assorted colours. As a r e s u l t a bu i l d up of unmovable stock occurs each year. The basic problem here i s that management should be restructuring t h e i r inventory by cutting prices to move colours i n less demand or they should be demanding.a s p e c i f i c colour from a. manufacturer and making him del i v e r s Constant surveillance of inventories i s not carr i e d out and the buying process continues almost independent of the need to recognize inventory management. Distorted inventories have been b u i l t up almost i n spite of themselves and t h i s s i t u a t i o n has reached alarmingly uneconomical proportions. At the present time, merchandise i s received at the store, priced and then stored i n "open stock"-in the basement. When i t . i s required in the main sales area any employee with-draws the required-stock and moves i t upstairs. The unlimited access to the storage area and the almost chaotic condition which re s u l t s from open stock storage y i e l d s the situ a t i o n where no one r e a l l y knows what i s a v a i l -able and where i t i s located. There i s no formal inventory, control whatsoever other than a running balance of what has been purchased and what i s . l e f t at the year end when a stock count i s taken. The open stocking of merchandise causes inventory shrinkage and further requires temperature controls - much i n excess.of normal requirements for a warehouse. I t i s very d i f f i c u l t , therefore, to fathom how r e a l i s t i c decisions can ever be.made concerning book returns and clearance.sales. Kt the time of writing plans have been set up to e l i v i a t e some of the textbook ordering problems. Providing these new procedures are coupled with r e a l i s t i c accounting and control procedures for the continuous management of inventories they should o f f e r a base for evaluating merchandising a c t i v i t i e s . E. Store Organization . Diagram II, U.B.C. Bookstore Organization Chart/ i s the unofficial,representation of the ex i s t i n g store hierarchy. Unfortunately a n . o f f i c i a l chart i s nonexistent as i s a p o l i c y manual. The chart i d e n t i f i e s the functional areas of Merchan-dising which i s further divided into two sections, Textbooks S o \-Nl - s . < 0 Z < < O h 0 0 CD 0 CD 3 < or O O CD lu o P >^ i CO Ui h < v/> < < 5: s o 0 8 & e 1 q r < £ 5 07 < < •(8 o o 1 e o 8 '3 _i l_ . IX ft! 9 vJj !h Vi I-CQ t y U. _i i i i e O o 1^ I. 2 ¥ _ 0 I/? s u. -I O 3 S o OB W .1 S w V -r and Stationery, Supplies and Sundries. The other functional area i s that of Control or Finance and Store Administration. Both the Textbook and Stationery, Supplies and Sundries sections are staffed with t h e i r own personnel respon-s i b l e for the operations of purchasing, receiving, shelf main-tenance and shipping. Within the Textbook section the d i v i s i o n of labour i s further divided into hard cover and sof t cover book merchandise. As a r e s u l t there i s a t o t a l of f i v e employees d i r e c t l y concerned with purchasing decisions, three with receiving, two with,shipping. As the workload increases, additional s t a f f are assigned to provide; assistance i n each area as required. The control function,is directed by.an Assistant Manager and aside from the r e s p o n s i b i l i t y of store operations she! i s also responsible for the r e c o n c i l i a t i o n of accounts payable and the r e c o n c i l i a t i o n of d a i l y sales transactions and monthly sales figures. To this extent :the control function i s t o t a l l y r e l i a n t upon the cleared invoices from the.receivers and pur-chasers. However, any number of employees may be involved with a p a r t i c u l a r order, from receiving to storage to stocking shelves to sales. In spite of t h i s , the only form of merchan-dise control i s based on the i n i t i a l receiving check and the clearance of the invoice. There i s no other means of-accounting for inventory balances other than the yearly inventory count held in March. Si m i l a r l y d i f f i c u l t i e s a r i s e i n the accounting and management of d a i l y r e ceipts. The three front cash registers are cleared on a d a i l y basis but the cash r e g i s t e r at the Engineering counter follows no set schedule. At the same time i t i s operated by as many as f i v e people i n one day.-Problems with cash control were r e a l i z e d when the author requested d a i l y transaction counts and t o t a l sales. With the e x i s t i n g undisciplined system,- such information was not available as a matter of course. Excluding the Manager,-his two Assistants and the • Administrative Assistant, a l l other employees are members of C.U.P-.E.', ,the union c e r t i f i e d to represent them i n c o l l e c t i v e bargaining. There are t h i r t y - e i g h t f u l l time employees and an additional f i f t e e n f u l l time hourly and part time hourly employees i n the store. The part time.hourly employees are students and usually work two or three hours per day. Organizational f l e x i b i l i t y i s the.essential objective in the store's ongoing operations. The various peaks and troughs i n the s e l l i n g cycles have made i t necessary to define employee's duties a n d . r e s p o n s i b i l i t i e s in broad terms. As a r e s u l t seven positions..have been i d e n t i f i e d through the use of job descriptions. These positions, as shown i n Diagram I I , are: Section Head, Senior Bookstore Assistant, Bookstore Assistant, Clerk, Cashier, F u l l time hourly Clerk ,and Part time hourly - Clerk. Within each position various duties have been defined with.respect to r e s p o n s i b i l i t y and authority as they rel a t e to supervision, shipping, receiving, -accounting, p r i c i n g , etc. As the workload increases, or s h i f t s , the nature of each job changes as emphasis s h i f t s from one element to another. Additional f l e x i b i l i t y i s obtained through the union contract which provides for the temporary r e c l a s s i f i c a t i o n of an employee during s p e c i f i c periods. . One highly unfavourable factor considerably l i m i t s an otherwise.highly f l e x i b l e organization. This i s the con--s t r a i n t r e s u l t i n g from the work day which i s 7 1/4 hours between 8:30 a.m. and-5:00 p.m. Monday to v F r i d a y . This l i m i t a t i o n means simply that any work performed at times other than those spe c i f i e d i s . t o be paid at the rate of double time. Such a rate i s often attributed to work i n excess of an eight hour day or forty hour week but i n t h i s case i t means that a part time Hourly C l e r k — a student—cannot work his two or three -hour s h i f t i n the • evening stocking shelves, unless he .is paid double time. Of even more int e r e s t i s that the Janitor, supplied-by Physical Plant, also works 7 1/4 hours between 8:30 a.m. and-5:00 p.m. Monday to Friday. The idealism of f l e x i b i l i t y achieved through contract negotiation and effective.design of job descriptions has in t e r e s t i n g ramifications for store operations i n a behavioural sense. What has tended to occur i s that each employee i n each defined position i d e n t i f i e s with the task that he considers to have the highest r e l a t i v e status for him. (And because he does this on an intermittent basis his proficiency i s question-able) . Consequently i f he i s expected to.function as a Shipper Receiver during a short period of the year he i s reluctant to return to the more menial task of maintaining the store's mer-chandise appearance or, e s s e n t i a l l y , stocking shelves. In e f f e c t , then, the store finds that its.formal d e f i n i t i o n i s soundly constructed and f l e x i b l e but the informal system i s highly r i g i d . The present store appearance -coupled with an apparent casual indifference by employees r e f l e c t s t h i s pheno-menon to a high degree. Stock i s never straightened, dusted, re-arranged or made otherwise presentable. I t appears that management i s unaware that i t s duties.are to d i r e c t personnel to perform these necessary tasks. F. P r i c i n g P o l i c i e s The Bookstore uses two standard forms of p r i c i n g . For the textbook category they use the manufacturers l i s t price The books are-sold by the manufacturer or d i s t r i b u t o r at 20 per cent o f f l i s t and hence, marked up a standard 20 percent. This p r i c i n g policy i s a constraint to the Bookstore's operation since the standard markup used currently,contributes a n e g l i g i b l e amount to p r o f i t . This i s due to a number of factors .arising from the a c q u i s i t i o n costs which include f r e i g h t charges from eastern Canada and-selling costs which include inventory, storage, movement and restorage as well-as employee expenses through handling, p r i c i n g and returning merchandise. The other method of p r i c i n g . i n use i s that of relying, on the manufacturer's suggested price. This strategy i s applied almost u n i l a t e r a l l y to the remaining categories of Other Books, Stationery, Supplies, and Sundries. There i s , unfortunately very l i t t l e l a titude for.diver-s i f i e d p r i c i n g p o l i c i e s by management. Not only are they res-t r i c t e d to u s i n g ; l i s t - prices for Textbooks but also they must remain r e l a t i v e l y competitive w i t h : a l l t h e i r other merchandise. Furthermore the P r o v i n c i a l Government's edict that a n c i l l i a r y services on the campus must be self-supporting. This factor i s contained i n the University Policy: Four of the s e r v i c e s — t h e Bookstore, Campus and Residence Food Services, and Housing Services broke even in keeping with the University,Policy of operating such services on a self-supporting basis.5 Although "self-supporting" does not necessarily mean "break even" t h i s .regulation coupled with the constraints of 5 U.B.-C. Reports, October 1, 1970, p. 10. p r i c i n g seems to have the e f f e c t of removing much of the e f f i c i e n t , aggressive merchandising behaviour usually associ-ated with the p r o f i t motive. If one .is to believe operating statements issued by the University,,prices should be raised since the Bookstore i s not r e a l l y , s e l f - s u p p o r t i n g . However, the data available are not r e l i a b l e and i t would be hazardous to proceed with a finan-c i a l analysis of the,operations without j u s t i f i c a t i o n of cer-, t a i n overhead charges. Since this i s not available no further analysis w i l l be made. G. Services Service i s the Bookstore's main purpose on the campus and over i t s operating experience a number of services have developed. The f i r s t i s the use of discounts. A l l students pur-chase Textbooks, Stationery and Supplies merchandise;without the inconvenience-:of the f i v e percent sales tax normally demanded by the p r o v i n c i a l government. Furthermore the Bookstore redeems ifive percent-of a l l student expenditures at the end of the school year i f sales receipts are presented. Faculty discounts are somewhat more lucrativ e amounting to a ten percent reduction i n the Textbook category at the time of sale. In conjunction with t h i s discount service the Faculty i s allowed to make a deferred payment. This i s a form of c r e d i t and involves separate b i l l i n g procedures on the part of the store's employees.. The third:discount i s .provided to. the Departments which request stationery supplies.during the year. This d i s -count i s more nebulous than that provided to students and Faculty since the Departmental purchases are sold at a 20 per-cent markup on s e l l i n g p r i c e . Most of the merchandise s e l l s to the students at the manufacturers' suggested price where the normal-markups are between 25 and 35 percent, consequently the. e f f e c t i v e discount i s somewhat vague. -. The additional service of packaging and shipping are also provided to the Departments i n conjunction with a service vehicle supplied by the Physical Plant Department. Each form of discount mentioned above has been c r i t i -cized vigorously i n the past and a l l are currently being d i s -cussed as to their effectiveness. The Bookstore management provided the following explanations: the student discount of five percent resulted from other University Bookstore's actions. Their intent was to encourage students to make complete use of the store's f a c i l i t i e s by o f f e r i n g a rebate on purchases.- The experience was not too successful and most stores have since deleted this service. For the U.B.C. Bookstore the rebates have not been shown to be e f f e c t i v e and at the same time the cost of t h i s service has climbed from $50,000 i n 1966-67 to an expected $60,000 in 1970-71. The rationale for the Faculty discount i s derived from the fact that manufacturers.give.Faculty a ten percent discount i f they order d i r e c t l y from the manufacturers. By providing this service, the Bookstore must also absorb the f r e i g h t , handling and n o t i f y i n g expenses which ar i s e : f r o m the Faculty member's spe c i a l order. The Departmental discounts,were formerly considered a wholesale-retail rel a t i o n s h i p and.the invoiced merchandise; was provided at cost. Although the relationship i s that of a wholesaler, the store now acknowledges that a 20 percent markup i s necessary to provide some coverage of their overhead expenses caused by this service. In describing the discount services other store services were also mentioned such as delivery of departmental supplies, Faculty cre d i t and special orders. Special ordering of s p e c i f i c books required by Faculty or Students i s the major pos i t i v e . service provided by the Store. Depending on the urgency of the customer's request such orders can be requested by return a i r - f r e i g h t and n o t i f i c a t i o n of i t s a r r i v a l i s sent to the i n d i v i d u a l as soon as possible. Another service s i m i l a r to special ©rde'ring, i s that of mail orders from the community, at large. Requests that cannot be f i l l e d from e x i s t i n g stocks become special orders. This service i s p a r t i c u l a r of use to Alumni and correspondence of extension course students. The f i n a l major service that of accepting Used Books which have been requested for courses the following year. The Store w i l l buy back the book (in reasonable condition) at 65 percent of i t s o r i g i n a l cost and r e s e l l i t at 81 percent of i t s -o r i g i n a l cost. The debate concerning services w i l l constantly a r i s e , and should be discussed as a matter of course since the needs of the trading area w i l l change over time and the,appropriate-, ness of services should be re-assessed. For instance the. mini-mum "wholesale"markup necessary for Departmental accounts ,is 20 percent. S i m i l a r l y a l l Textbooks are marked up 20 percent" but aft e r rebates the e f f e c t i v e markup i s only 15 percent for students and 10 percent for faculty. ' In essence these discounts represent an unearned " g i f t " since there is, no rationale a v a i l -able to j u s t i f y t h e i r existence p a r t i c u l a r l y - i n terms of th e i r f i n a n c i a l disadvantages. H. Promotion The U.B.C. Bookstore operates from a monopoly posi-t i o n on the campus. For this reason the need for promotional a c t i v i t i e s has not been as necessary as that required by other r e t a i l operations. The general practice has been to set aside a minimal budget, mainly for the purposes of p u b l i c i t y and the subsequent goodwill that can be achieved by supporting student sponsored publications. However, when considering the role.of store services, discussed i n Section G, the opportunity to promote the exis t i n g services such as spe c i a l ordering may actually have the e f f e c t of s u b s t a n t i a l l y reducing the overhead costs associated with the service. S i m i l a r l y . a more aggressive approach to adver-t i s i n g would support the testing of new service programs.. For instance, a program to promote "new a r r i v a l s " should include a d i r e c t mailing l i s t to faculty members and graduate students--perhaps even alumni. In t h i s manner the experimenting with new services could be thoroughly examined. Promotional-efforts have been shown to be ,an effe c -tive tool for r e t a i l operations. In spite of the monopolistic market s i t u a t i o n , benefits can s t i l l be gained through approp- • r i a t e application of-promotional techniques to the reduction of overhead costs and the introduction of new merchandise and services. I. Summary and Conclusions The U.B.C. Bookstore has continued to operate i n an increasingly demanding and d i v e r s i f i e d market with the same procedures developed some years ago. Although some small adjust-ments are constantly being made,, the methods have f a l l e n behind the le v e l s appropriate for e f f e c t i v e r e t a i l operations. Store layout i s s t a i d . I t does not change to r e f l e c t the various peaks and troughs i n the s e l l i n g cycles for d i f -ferent merchandise. A merchandise assortment .has evolved to r e f l e c t student and' faculty needs. Five departments can be i d e n t i f i e d as Textbooks, Other Books, Stationery, Supplies and Sundries. The Textbook assortment.is t o t a l l y r e l i a n t upon Faculty desig-nations of required course material while a l l other categories are f i l l e d on supplier's advise, tempered by the store's sales experience with the item. Textbooks sales are from a monopoly pos i t i o n i n the market and provided timing and quantities are accurate, l i t t l e remains to inter f e r e .with t h e i r sale. The other departments however, are considerably less .assured of sales and purchasing errors r e s u l t i n overstock situations which are d i f f i c u l t to r e c t i f y . The consequence of factors such as poor timing, i n -appropriate quantities, and the procurement of redundant mer-chandise has caused a steady.increase .in inventories over the years. As a stop-gap means of r e c t i f y i n g t h i s problem, buying decisions have become defensive rather than market oriented to the demand of the users. Reliance has been placed increasingly on items which are known to s e l l and as a r e s u l t of manufac-turer's product d i f f e r e n t i a t i o n these items have expanded i n depth while the o v e r a l l assortment has been reduced i n width. This si t u a t i o n retards thenexamination and - development of other p o t e n t i a l markets for student compatible merchandise. P r i c i n g procedures allow l i t t l e for latitude and to a great extent they are dictated by organizations external to the store i t s e l f rather than on the basis of the i d e a l response to supply and demand - conditions i n the trading area. The operation must ensure that i t remains self-supporting and i s obliged to r e l y on markups to the manufacturer's suggested price to r e a l i z e an.effective contribution to operating.expen-ses. The store's formal organization can be considered to have "grown-like-Topsy." The extent to which the functional d e f i n i t i o n i s e f f e c t i v e . i s questionable, however, the unionized employees are adequately grouped-by broad job descriptions and, on paper, the basis for a f l e x i b l e organization has been.estab-lis h e d . An informal organization characterized by a casual indifference also e x i s t s , which functions simply to negate, a considerable amount of the effectiveness thought to have been achieved. The services offered by the store range from highly appropriate to highly questionable. In the f i r s t place, d i s -counts should be o f f s e t by considerable increases in sales. The 5 percent student allowance and 10 percent faculty allowance cannot be•shown to be useful by t h i s c r i t e r i a and i t might be suggested that students and faculty are r e l a t i v e l y i n d i f f e r e n t -to t h i s form of inducement. Special ordering, mail orders and Faculty c r e d i t , on the other hand are ef f e c t i v e services and procedures should be examined-to maintain t h e i r cost to the store at the minimum possible l e v e l commensurate with a high degree of service. Promotional e f f o r t s are v i r t u a l l y non-existent yet ample opportunity to develop new markets, and test new services and merchandise require sound promotional e f f o r t s i f the areas i n question are to be evaluated thoroughly. The extent to which the topics dealt with i n thi s chapter, are currently handled raises serious question about the technical and administrative depth of the management team. CHAPTER III CONSUMER BEHAVIOUR ANALYSIS This chapter reports the method of c o l l e c t i n g and analyzing information about the people who patronize the Bookstore. The objective of this research was to c l a r i f y e x i s t i n g notions presently held by the Bookstore management about i t s customers as well as to provide information relevant to the study of proposed store locations, . The following study of consumer behaviour was carried out i n conjunction with one phase of the data c o l l e c t i n g pro-cedure concerned with s i t e evaluation which w i l l be discussed i n d e t a i l i n Chapter IV. A. Data C o l l e c t i o n A composite questionnaire; (Exhibit I) was prepared to record the actions of the store's customers as well as to gather the data pertinent to the location analysis. Of par-t i c u l a r i n t e r e s t to t h i s phase of the study was. data on the purpose of the customer's t r i p , the r e s u l t of i t and their expenditure c h a r a c t e r i s t i c s . The.questionnaire was administered to the customers during the f i r s t week of January, known as a peak sales period; EXHIBIT I BOOKSTORE-SURVEY QUESTIONNAIRE 1. Survey number ;. . . 2. Day .......... 3. Hour .......... 4. What Faculty are you. registered in? ... 5. What building did you come from just p r i o r . t o the Bookstore? 6. What building are you going to now? .......... 7. Did you stop at the Coffee Shop? . .; 8. What was the purpose .of your trip? a) Texts ...... b) Other Books ..... c) Supplies ..... d) Sundry e) Browse 9. What items.did you purchase? a) Texts b) Other Books ..... c) Supplies ...... d) Sundry ..... 10. How much did you spend? .......... 11. Was there anything you could not find? ........... 12. How much do you spend at the Bookstore per year? and the l a s t week of January, considered to be a period of normal operations. The survey lasted for three f u l l days of the week and each respondent was personally interviewed by students employed to,administer the questionnaire. During Survey 1, 1768 cus-tomers were interviewed and 1272 customers were interviewed during Survey 2. From two to three interviewers questioned people leaving.the Bookstore as r a p i d l y as they could. This i s a standard-in-store-interviewing sampling technique which has been shown to be a random procedure and very e f f e c t i v e for obtaining the type of information desired i n t h i s survey. B. Data Analysis \ Each of 3040 questionnaires were coded and keypunched so that the data could be analyzed on the U.B.G. 360/67 computer. I n i t i a l l y the MVTAB. l i b r a r y program was used to cross-tabulate the variables under study. This procedure provided data i n the form of frequency d i s t r i b u t i o n s which could then be used to make generalizations to the t o t a l population. Of more i n t e r e s t was the strength and dependence of one variable on another. The TRIP l i b r a r y program produced a co r r e l a t i o n matrix (Table II) which provided the basis for-forming a series of assumptions concerning consumer behaviour. C. Describing Consumer Behaviour From the data a set of seven hypotheses were sug- . gested: 1. Customers are usually enroute to a point other than from where they originated when they stop at the Bookstore-The re l a t i o n s h i p i d e n t i f i e d here suggests that while s p e c i f i c t r i p s are made to the store--more often during peak sales periods--this i s not the main method by which customers go to the store. Instead they use the store because i t i s convenient and th e i r presence there i s of secondary importance to t h e i r o v e r a l l intention of moving from one point on the campus to another. 2. Customers shop at the Bookstore for a s p e c i f i c item -There i s very l i t t l e , c r o s s - o v e r to the purchase of merchandise which was. not specified•as the purpose of th e i r t r i p to the Bookstore. Table II shows the s i g n i f i c a n t p o s i t i v e c o r r e l a t i o n between the purpose for a t r i p and the r e s u l t of i t while a negative c o r r e l a t i o n exists between the purpose of the t r i p and the purchase of other merchandise. 3. Customers experience more d i f f i c u l t y obtaining Textbooks than any other type of merchandise.-A posi t i v e relationship between customers seeking an item i n this category and not finding i t was observed, whereas more success i s apparent with the other categories of merchan-dise . 4. Customers who buy textbooks are less i n c l i n e d to supplement th e i r purchases with Stationery items than they are with purchases of Other Books and Sundries. 5. There was no apparent r e l a t i o n s h i p between expenditures at the Bookstore and o r i g i n r destination and distance. 6. The adjoining coffee shop i s a generator for browsing and casual shopping but not for Textbooks and.Supplies. • 7. People who come to buy Textbooks .spend more per v i s i t than those who come to buy other types -of merchandise. D. Limitations of the Study One.obvious l i m i t a t i o n to t h i s study i s the fact that customers were interviewed as they were leaving the store, thus inaccurate answers may have been given to questions regarding the purpose of th e i r t r i p s since.their - response may have been influenced by the r e s u l t of t h e i r shopping. It can reasonably be assumed however, that the res-pondent was i n d i f f e r e n t .to the survey and therefore would be i n c l i n e d to give v a l i d answers. E. Summary and Conclusions-The opportunity to interview consumers for the pur-pose of gathering information on buying behaviour became available during,the data c o l l e c t i o n procedure for determining an optimal s i t e for the Bookstore, A composite questionnaire was prepared to obtain information on the purpose of the customer's t r i p to the, store, the r e s u l t of i t and how much they spent. These questions were administered by interviewers to a t o t a l of 3040 people selected at random.during two survey periods i n the month of January which resembled peak sales a c t i v i t y and normal sales a c t i v i t y . The U.B.C. computer was used to cross-tabulate the variables under-examination and to produce a c o r r e l a t i o n matrix which could be used to i d e n t i f y relationships - among the.vari-ables . The analysis suggested seven hypotheses concerning consumer behaviour as follows: 1. Customers are usually enroute to a point other than from where they originated when they stop at the.Bookstore. 2. Customers shop at the Bookstore for a s p e c i f i c item, 3. Customers experience more d i f f i c u l t y obtaining Textbooks than any other type of merchandise. 4. Customers who buy Textbooks are less i n c l i n e d to supplement t h e i r purchases with Stationery items than they are with purchases of Other Books and Sundries. 5. There was no apparent r e l a t i o n s h i p between expen-ditures at the Bookstore and o r i g i n , destination and distance. The adjoining coffee.shop i s a generator for browsing and casual shopping but not for Textbooks and Supplies. People who.come to buy Textbooks spend more per v i s i t than those who come to buy other types of merchandise. CHAPTER IV BOOKSTORE SITE EVALUATION The purpose of this chapter i s to describe the procedures used i n c o l l e c t i n g and analyzing data pertinent to measuring the re l a t i v e ' d i f f e r e n c e among possible Bookstore locations. The study focuses on techniques which.attempt to provide estimates of Bookstore revenue at each of three locations: the e x i s t i n g s i t e the SUB location—proposed by the Physical Plant Planning Department, and the Ponderosa—proposed by the Bookstore Committee. Decisions based on estimates of Bookstore revenue provide a much more substantial basis for the planning and development of the Bookstore's future than the types of deci-sions generated by an.analysis concerned with minimizing c a p i t a l expenditures. In fac t an analysis of c a p i t a l expenses should be the second step i n a program for expansion once the revenue poten t i a l of various s i t e s has been determined. The two are not separable but must be analyzed together. A. The Trading Area -1. Physical Description The University of B r i t i s h Columbia i s located on the t i p of the Point Grey.Penninsula i n Vancouver, "B.C. Its location i s approximately seven miles from the center of Vancouver and one mile from the c i t y l i m i t s . Its separation from,the c i t y of Vancouver i s accen-tuated by a r e l a t i v e l y undeveloped s t r i p of land, approximately one mile i n depth, known as the Endowment Lands. Between the Endowment Lands and the actual campus a small r e s i d e n t i a l community.has been.developed which also emphasizes the exclu-sion of the University from Vancouver. The actual size of the campus i s approximately, eight by four c i t y blocks and the academic core i s a four by three block area located i n one corner of th i s rectangle (Diagram I I I ) . • The campus operates much as a small c i t y and pro-vides i t s own po l i c e and-fire protection as well as maintenance and service needs. The student enrollment,"faculty and s t a f f on the campus number close to t h i r t y thousand people during the eight month winter session and occupy the campus f a c i l i t i e s for nine hours a day f i v e days per week. For the most part students remain i n the area of campus set aside for t h e i r p a r t i c u l a r faculty and only move from these buildings during periods when no classes have been scheduled and they need to use the Library or other service locations on campus such as SUB or the Bookstore. The majority of academic buildings are multi-storied structures situated quite,spaciously on the campus. The remaining are considered temporary "huts" and are packed quite densely i n . c e r t a i n areas. Their use i s mainly for student study, research and o f f i c e space. -The three-sites considered i n this study were the present Bookstore,•located approximately one half block from the main Library, which i s considered to be the center of academic a c t i v i t y on the campus; the,SUB location, which i s one block to the east of the e x i s t i n g s i t e and close to the main Library; and the Ponderosa which i s one block west and one block south of the ex i s t i n g s i t e . 2. Socio-Economic Information Students constitute the vast majority of sales for the Bookstore. At the present time information concerning.the contributions of Faculty and Staff are not available, conse-quently the emphasis here w i l l be,concerned with socio-economic factors relevant to the student population within the trading area. The students were surveyed by questionnaire i n 1969 i n a study designed to provide addi t i o n a l insight into student attitudes towards university and society. The research conducted by Drs. Moore and M i t c h e l l of the-Faculty of Commerce, also provided additional insight into the socio-economic c h a r a c t e r i s t i c s of the student body. Their data led them to describe the t y p i c a l student as middle-class, educated i n the public school system, and as having been raised i n urban areas of B r i t i s h Columbia. The student contributes to his costs of -education.through summer employment and many of them have part time jobs. Their extra-c u r r i c u l a r a c t i v i t i e s are related to campus sports and clubs but not necessarily p o l i t i c s . Furthermore t h e i r major interests are related to t h e i r University education and vocational plans. Of the sources.of financing r e l i e d upon by the students, Dr. M i t c h e l l reported: Almost two-thirds of the,students i n our survey say they receive some assistance from t h e i r parents in financing their education. More than 82 percent have summer jobs and over 42 percent worked part time during the school year. Of those who worked during the-summer, one i n four had net earnings of less than $500, s l i g h t l y more than 25 percent earned between $500 and $1,000, another quarter earned between $1,000 and $1,500 and surpr i s i n g l y the remaining 25 percent earned better than $1,500 during the summer.7 U.B.C. Reports, Vol. 16, No. 4, January 29, 1970. Ibid., p.8. B. Analyzing the Trading Area The r e l a t i v e seclusion of the campus and i t s spacious layout along with the information that suggests students have limited funds available for expenditures on the i r educational and vocational interest,^suggested that a distance decay model was an appropriate tool for simulating the spending behaviour of the Bookstore customers. The concept suggested here, reasons that by r e p l i - . eating the present consumer behaviour with respect to the existing s i t e , the p r a c t i c a l i t y of other .sites could be assessed by a l t e r i n g the variable of distance. 1. Data C o l l e c t i o n The f i r s t step was to select a group.of buildings on the campus which would be representative of the whole and could reasonably account for the location of the thirty.thousand people at the University during the winter session. T h i r t y - f i v e locations were f i n a l l y selected to accomplish this purpose (see Table I I I ) . (a) c a l c u l a t i o n of the distance factor From each of the selected buildings the time distance, i n seconds,, was measured by walking known t r a f f i c patterns to each of the,locations suggested as pote n t i a l Bookstore s i t e s (Table I I I ) . BUILDINGS, DENSITIES AND TIME DISTANCES-Major Campus Buildings to Average Potential Bookstore Sites Density (Time-Distance i n Seconds) Mon-Fri Building 8:30-4:30 Bookstore Ponderosa SUB F. Wood Theatre 400 212 336 294 Lassere Building 300 135 305 240 Music•Building 56 173 291 322 Auditoriurn 1000 159 269 309 Geology Building 637 160 167 360 Math Building 800 108 241 309 Math Annex 200 14 184 222 C i v i l Engineering 582 38 170 239 Mech Engineering 68 109 64 320 H. Angus Building 1600 53 134 250 Education Building 1297 137 155 271 Metal Engineering 134 392 410 526 Elec Engineering 185 453 471 581 H.-R. MacMillan Bldg, 472 432 450 560 Ponderosa 100 208 1 363 Bookstore 600 1 208 201 SUB 4800 201 363 1 Law Huts 360 383 591 520 East Mall Annex 350 318 526 185 Buchanan Building 4200 175 383 215 Brock H a l l 600 248 456 115 Library 4800 133 341 130 Hennings Building 1000 122 330 101 Hebb .and Home Econ. 1100 201 269 85 Chemistry Building 1500 102 155 212 Rehab Nursing 62 310 361 315 Chem Engineering 76 310 361 315 Bio Science Old Bldg. 566 181 211 243 Bio Science New Bldg. 310 137 176 250 Cunningham Building 130 362 392 215 Medical Block A.C; 217 436 466 224 Medical Dentistry 450 499 520 276 Wesbrook Building 500 285 316 159 Memorial Gym-. 1197 389 410 96 Hut B8 105 182 221 295 (b) c a l c u l a t i o n of building population densities .The. population densities were determined through the use of the Department of Academic Planning 1s report on "Space Inventory of Buildings" which indicated the t o t a l number of seats for each academic building; and the Department of System Service's report, " B u i l d i n g . U t i l i z a t i o n " which indicated the percent usage per- hour. These sources of data did not provide information about, nonlecture- building capacities and popula-tions.-, Consequently estimates for the Auditorium, SUB, the Library and the Bookstore were obtained from the Architect's study on the new Library. Estimates of density, for other loca-s;: tions were obtained through interviews with Administrative per-sonnel concerned with the areas of campus i n question (Table I I I ) . (c) consumer o r i g i n and destination data The composite questionnaire, which was discussed-in Chapter III was prepared for the examination of variables per-tinent to both the attributes of consumer behaviour and location analysis. Of p a r t i c u l a r i n t e r e s t for the study o f . s i t e evalua-tion were the responses to the questions concerning the origins and destinations of the store customers.• 2. Data Analysis (a) determining the market penetration s t a t i s t i c MVTAB was used to.produce a biva r i a t e table showing the frequency d i s t r i b u t i o n of textbook customers and non-textbook customers by th e i r o r i g i n s (Table IV). BIVARIATE FREQUENCY DISTRIBUTION OF TEXTBOOK AND NON-TEXTBOOK CUSTOMERS BY-BUILDINGS OF ORIGIN Building of Textbook Non-Textbook Aggregate D i s t r i b u t i o n O r i g i n Customers . Customers of Customers Surv.1 Surv.2 Surv.1 Surv.2 Surv.1 Surv.2 Auditorium 138 85 70 91 228 176 Education 76 50 82 63 158 113 Geology- 34 16 32 24 66 40 Math Annex 1 1 4 3 5 4 Math 20 17 24 23 44 40 Bio.Sciences 24 6 16 22 40 28 Chem. Eng. 5 0 5 5 10 5 Hut B-8 0 0 1 2 1 2 Library 78 53 62 76 140 129 Ponderosa 11 7 8 8 19 15 C i v i l Eng. 26 16 42 45 68 61 Bookstore 15 3 23 12 38 15 Angus 117 65 78 77 195 142 Mech. Eng. 4 0 6 1 10 1 Brock 21 • 6 12 13 33 19 East Mall Nx. 9 5 • 5 2 14 7 SUB • 100 54 57 51 157 105 Buchanan 121 80 54 62 175 142 Law Huts 43 13 10 10 53 23 Chemistry 18 5 42 31 60 36 Hebb & H.Ecdn. 12 7 20 24 32 31 Hennings 9 8 12 12 21 20 Med. Blocks 3 1 . 3 2 6 3 Mem. Gym. 6 4 4 10 10 14 Wesbrook 35 11 16 4- 51 15 E l e c t . Eng. 5 1 3 2 8 8 MacMillan 15 3 15 16 30 19 Metal Eng. 1 0 3 3 4 3 F.W.Theatre 6 4 9 3 15 7 Lassiere 20 6 12 13 32 19 Music 8 5 9 10 17 15 Cunningham 18 12 10 8 28 20 Total 999 544 769 728 1768 1272 From t h i s information the percentage market pene-tra t i o n of the Bookstore at each of the predetermined buildings was . calculated from the following formula:-c[( n. x x 100).t] 32 P Z n. i = l 1 x 100 l D . l where: P^ = market penetration at Building i , -n^ =. number of respondents from Building i f En. = sum of a l l respondents from a l l 32 buildings (1 1 f 2 f 3 / • • • / 32) p t = t o t a l number of store transactions during. the survey period, = population density at Building i , and c.= a constant required to adjust the data to a common base ( i . e . to give r e s u l t s . i n terms of da i l y measures. In this case c = 1/3). The degree of o v e r a l l penetration was determined for each building for both Survey 1 and 2. S i m i l a r l y the s t a t i s t i c for.textbook and non-textbook market penetrations were also obtained for both surveys (Table V). , (b) measuring the e f f e c t of distance on market penetration In order to obtain an estimate of the relationship between market penetration and distance, the s t a t i s t i c s l PERCENT MARKET PENETRATION FOR THE BOOKSTORE AT ORIGIN OF CUSTOMERS, Percent Penetration Stationery Den- Supplies Building - s i t y . Aggregate Textbooks & Sundry Survey Survey Survey Survey Survey Survey 1 - 2 1 2 1 2 Auditorium 1000 47. , 3 22. , 6 28. , 6 10. ,9 18. .7 11. ,9 Education 1297 25. , 0 11. , 0 12. , 0 4. ,8 13. , 0 6. , 4 Geology 637 21. , 0 8. , 0 11. ,0 3. ,1 10. , 2 4. ;7 Math Annex 200 6. .0 2. ,5 1. .0 0. ,5 4. ,5 V 0. , 5 Math 800 11. ,4 6 . 2 5. ,1 2. ,6 6. , 2 3. ,6 Bio.Sciences 876 9. , 6 4. ,1 5. ,7 0. ,9 3. , 8 3. , 2 Chem.Eng. 138 16. , 0 4. ,3 8. , 0 0. , 0 8, , 0- 4. , 3 Hut B-8 105 3. . 9 2. , 9 0. , 0 0. , 0 3. ,8 2. , 8 Library 4800 4. .8 3. .4 3. , 3 1. , 4 2. ,7 2. , 0 Ponderosa 100 40. , 0 20. .0 . 23. , 0 9. , 0 17. , 0 11. , 0 C i v i l Eng. 582 24. ,0 12. .9 9. , 3 3. , 4 15. ,1 9. ,6 Bookstore 600 13. ,3 3. , 3 5. , 3 0. .7 8. , 0 2. ,7 Angus 1600 25. .0 11. , 3 . 15. , 0 5. ,2 10. , 0 6. , 2 Mech. Eng. 68 32. ,4 3. , 0 13. ,2 0. .0 19. ,1 3. , 0 Brock 600 11. .5 4. ;o 7. . 3 1. , 3 4. .1 2. ,7 East Mall Nx. 350 8. ,3 3.. 0 5. ,4 2. , 0 2. , 8 0. ,9 SUB 4800 6. . 9 2. , 9 4. ;3 1. ,4 2. .5 1. ,4 Buchanan1. 4200 8. . 6 4. .5 6. , 0 2, .5 2. ,6 2. , 0 Law Huts 360 30. .6 8, .1 2. ,2 4, .-4 5. .8 3. ,6 Chemistry 1500 8. .2 3. ,0 2. ,5 0. , 4 5. ,8 2. ,7 Hebb & H.Econ. 1100 6 . 0 3. ,5 2. , 3 0. .8 3. , 7 2. ,7 Hennings 1000 4. , 4 2. , 6 1. ,9 1. . 0 2. , 5 1. ,6 Med.Blocks 667 3. . 3 2. .1 1. ,9 0. .7 - 1. .3 1. ,9 Mem. Gym 1197 8. . 9 !. .6 .6. ,-r : i , .2 2. ,8 0. ,4 Wesbrook 500 11. . 6 5. . 2 7. ,4 3. , 2 4. ,3 2. , 0 El e c t . Eng. 185 9. ,7 1. .6 5. , 9 0, .5 3. ,7 1. ,1 MacMillan 472 . 6. ,8 5. .1 3. ,4 0. .8 3. , 4 4. ,2 Metal.Eng. 134 5, .2 2. . 2 1. .5 0. .0 3, .7 2. ,3 F.W.Theatre 400 8. .2 2. .5 3. .3 1, .5 5. . 0 1. .0 Lassiere 330 20. .0 7, .2 12. .4 2, .4 7. ,9 4. ,8 Music 56 66. .0 34, .0 30, .4 10, .7 35. .7 23. ,2 Cunningham 130 8. . 4 2. , 3 4. .6 0, .8 3. ,8 1. .5 generated i n (a) above,.were matched to the distance data gathered when measuring walking time.from each building to the Bookstore. By using TRIP, a regression routine, the re l a t i o n s h i p between penetration and distance was estimated such that: Y = a + b X where: Y-.= estimated percentage of market penetration a = Y-intercept-of the regressive l i n e b = slope of the regression l i n e , and X = distance i n seconds. Chart II depicts the e f f e c t of distance on market penetration i n the aggregate for both Survey 1 and Survey 2 as 8 well as for textbook and non-textbook markets. (c) simulating the e f f e c t of Bookstore location on t o t a l sales A simulation model was constructed to approximate the r e a l l i f e s i t u a t i o n presently e x i s t i n g with respect to the Bookstore. Elements of building density, time, distance, market penetration and t o t a l store sales.were brought together.. In addition, two major assumptions were made in i t s design: g In addition to the Y = a+bX equation two other equations were estimated, Y=a+b log X and Log Y=a+b log X. Neither equation predicted as.well as the non-log,form, by a factor of about four. :.XMJ.I MI..;:, \X JMJJX. cN^eT j r ;. .. •; JVJJ; . j\x\""" e z . I"":' : •' • -- "" "• -I-.- -•- •  i : ,....j_.,...P _ , .., — !-. "j - - \ -. v ; . - f < •--} - ; I-'- ;-; - : ; ;-;-r j • \ [•-•-7 r "r \MJJJJ.. •LS° \...'.. '. ':. ..'i. i p : r J M M I X J J J . I;...":JJI. ~~-M::'x; XI.,:..,JIX.M',.I:J. .:.: YjjMj; i : . .. : . l ; .100 i :i-j."-" 1"-".=: .^ I " . i = ~ "^t"-: r- -:" .":--i! r:r 1^ -1 .i -f.-~"1 .^-"t ::. - " - " ; " ; !.;..%.'v: • ^N. : ' • • • • • . \ .. ... , • . : j ...... ,.„...,, • T - r • - • : • • • • - • • : • ;. " ' ; " ' ' " (surfi/«y /) M. ' ; ' • ' ' ! i * • - i S : .. . ' „^ '^ . i iz ;_ ..^r^'j:;::::::.!^^^..'JJJUJ..\v XJUI(.JX.;.:. : M ' . . . . . . , >*o f •!- • - - '•-•\ ^ (suK&i o . .: I .'. ... ' ' ..' 1 .. {-•--• . . . r^^ C*">f>'ci'''> ^ 11..' .'...'MM. JIM 11 X \ . f i. . .... t . , \.-rl. o.So \ "}J JJ': XJl".." : LSvjevsY z) . ~~ — _ ...... . . ... . .-! '. . , . . . . . .. j .... j ! JIM.:' 'Mil, i . | csy^e/a^... rzr_ r— ...... !. ..... ^ ,r~ i I a. 000. /oo Zoo. .. ..... '3oo ... ... I Jyao So a 1. that the regression l i n e representing the aggregate average between market penetra-t i o n and distance would be a more accurate representation of the store's yearly opera-tions and 2. Hypothesis 5. There was no apparent r e l a -tionship between expenditures at the Bookstore and o r i g i n , destination and distance. The model u t i l i z e d the following procedures in i t s calc u l a t i o n s : 1. The corresponding time distance for.each of the three proposed locations were added to the data an computer storage; 2. From t h i s data f i l e the,respondents from each of the t h i r t y - f i v e buildings were i d e n t i f i e d and grouped - accordingly. 3. From the aggregate average regression l i n e , Y=a+bX the percent market penetration was. determined for each l o c a t i o n . 4. The penetration s t a t i s t i c was applied to the known building density to determine the actual number of possible customers from that building buying at the Bookstore.. 5. F i n a l l y a constant expenditure figure was deter-mined by the process of c a l i b r a t i o n and multi-p l i e d by the customer count, obtained i n pro--cedure 4, to produce a t o t a l sales figure. The c a l i b r a t i o n process was simply a method of sub-s t i t u t i n g d i f f e r e n t values for the constant expenditure.figure u n t i l the r e s u l t of the simulated sales t o t a l matched the present Bookstore sales t o t a l for the present s i t e . 6. The distance components for each campus s i t e to the two proposed store locations were calculated using the c a l i b r a t i o n sales value. The results of the simulation procedure are presented i n Table VI. The simulation procedure gives support, to the i n t u i t i v e f e e l i n g that a SUB s i t e would be similar to the. present s i t e for a Bookstore. The Ponderosa s i t e i s c l e a r l y i n f e r i o r because i t i s located away from the major.concentra-t i o n of customers. The Bookstore Sub-Committee, which studied the problem associated with a new store, recommended that the Ponderosa s i t e would be. the most suitable from the standpoint 9 of minimizing c a p i t a l costs. Given the prospective : developed i n this study-, such a move would be disastrous. The estimated pot e n t i a l loss to t o t a l sales would be about $300,000. This i s approximately 50 percent of;the t o t a l non-textbook sales per year. The loss i n gross margin would be over- $ 60,000 ($300,000 at over 20 per-, cent average markup). Consumers u t i l i z e the store because i t i s convenient, that i s i t i s enroute to their destination. Sales of textbooks are r e l a t i v e l y i n e l a s t i c consequently the loss of sales due to an inconvenient location would occur i n the merchandise which normally has the highest markup. 9 J.E. P h i l l i p s et a l , Report of Bookstore Sub-Committee concerning a new s t o r e U n p u b l i s h e d , 1970. BOOKSTORE EVALUATION SIMULATION Average Density. Estimated Sales From Building Mon-Fri Major Campus Buildings 8:30-4:30 $. Bookstore Ponderosa SUB F.Wood Theatre 400 17, 467 14 058 15 213 Lassiere Building 300 14 688 11 183 12 337 Music Building 56 2, 595 2, 141 2 ,018 Auditorium 1000 47, 312 39, 751 37 ,002 Geology Building 637 30, 092 29, 787 21 ,337 Math Building 800 . 40 654 33 341 29 ,601 Math Annex 200 11 455 9, 118 8 596 C i v i l Engineering 582 32, 376 27, 025 24 ,335 Mech. Engineering 68 3, 450 3, 661 2, 464 H.Angus Building 1600 87 r357 78, 449 65 692 Education Building 1299 63 r325 61-,720 51 ,379 Metal Engineering 154 4 ,193 4, 028 2 959 Elec. Engineering 185 5, 014 4, 785 3 ,386 H.R. MacMillan Bldg. 472 13 ,474 12 ,890 9 ,321 Ponderosa. '3, 100 4 r428 5 ,817 3 ,329 Bookstore 600 34 ,903 26 ,366 26 ,655 SUB 480 0 213 r243 159 ,795 279 ,228 Law Huts 360 11 ,489 6 ,342 8 ,099 East Ma-1 Annex 350 12 ,734 7 ,730 15 ,93 3 Buchanan Building 4200 194 093 134 ,046 182 ,546 Brock Hall 600 24 ,717 16 ,138 30 ,202 Hennings Building 1000 49 ,855 35 ,558 51 ,299 Library 6650 326 ,512 231 ,438 327 ,-.8 8 3 Hebb and -Home Econ. 1100 48, 868 43 ,726 57 ,638 Chemistry.Building. 1500 76 ,845 71 ,381 65 ,504 Rehab. Nursing 62 2 ,281 2 ,072 2 ,268 Chem. Engineering 76 2 ,806 2 ,540 2 ,78 0 Bio.Science Old Bldg. 566 25 922 24 755 23 ,510 Bio.Science New Bldg. 310 15 135 14 ,304 12 , 727 Cunningham Bldg. 130 4 , 336 4, 068 5 ,650 Medical Block -A&C 217 6 ,135 5 ,6 87 9 ,297 Medical Dentistry 450 10 ,774 9 ,84 6 17 ,671 Wesbrook Bldg. 500 19 ,291 18 ,260 23 p656 Memorial Gym. 1197 37 ,709 35 ,241 61 ,816 Hut B-8 105 4 ,801 4 ,520 3 r986 Total Annual Sales 1,500,350 1,191,650 1/197,327 A conservative average markup on this type of merchan-dise i s 25 percent or $75,000 per year and t h i s sum represents the loss - i n contributions to s e l l i n g expenses, overhead and funded d e b i t — t h e l a t t e r would arise from the financing necessary to provide for the renovations to the Ponderosa.building. . The SUB location can be considered to be at least as good as the present location. The implications of this r e s u l t suggest that any s i t e i n a d i r e c t l i n e between the present Bookstore and the SUB would be suitable. Further support for this statement i s evident i n Diagram IV1*"1 which shows the major t r a f f i c flow on campus, to be between the.SUB and the Library. Presumably the SUB and Library act as terminal generators (a department store at one end and a supermarket at the other) i n a shopping center and.locating between them or i n close proximity i s a good location. (i) l i m i t a t i o n s of the model The simulation model was forced to assume that the e f f e c t of a large construction project for the l i b r a r y exten-sion did not reduce.the normal a c t i v i t i e s of patrons from north and.east of the Bookstore. The construction project .completely disrupted known, t r a f f i c routes for the north side of the campus. . This s i t u a t i o n 1 ^ A r c h i t e c t s study: Buchanan/Library Extensions, Unpublished, 1969. i m p l i e d t h a t t r a v e l time, and t h e r e f o r e time d i s t a n c e , to the s t o r e .would be g r e a t e r than those measurements used i n t h e ; s i m u l a t i o n model and consequently the market p e n e t r a t i o n s t a t i s t i c used i s an understatement of the a c t u a l - p e n e t r a t i o n . The r e s u l t of t h i s type of e r r o r would be to under-estimate the number of p o t e n t i a l customers at-each of the l o c a t i o n s i n the north-end o f the campus and s i m i l a r l y under-, e s t i m a t e . t h e . a c t u a l s a l e s c o n t r i b u t i o n s from these l o c a t i o n s . Since the e f f e c t of the i n c r e a s e d d i s t a n c e on normal consumer behaviours had only been i n e x i s t e n c e f o r a p p r o x i -mately one month,.it was reasoned t h a t the a d d i t i o n a l f a c t o r of d i s t a n c e would be almost n e g l i g i b l e a t the time of the study. T h e r e f o r e the f i n a l r e s u l t s would be. more r e p r e s e n t a t i v e of the r e a l l i f e s i t u a t i o n than the estimates t h a t would have been achieved by a d j u s t i n g . f o r the i n c r e a s e d d i s t a n c e s . Secondly there was v a r i a b i l i t y - i n the data. In c e r -t a i n areas of the campus market p e n e t r a t i o n was p a r t i c u l a r l y -s t r o n g . S c a t t e r diagrams shown i n Charts I I I and IV i n d i c a t e what i s meant by t h i s .point. In p a r t i c u l a r , c a l c u l a t i o n s f o r the Law Huts, A u d i t o r i u m and Music B u i l d i n g are q u i t e h i g h . There are.a number of p o s s i b l e reasons t h a t may account f o r t h i s v a r i a b i l i t y . Fundamental problems which o c c u r r e d i n the d e t e r -mination of b u i l d i n g d e n s i t i e s would be r e f l e c t e d i n t h e ; c a l -c u l a t i o n , of the market p e n e t r a t i o n s t a t i s t i c . In cases where the d e n s i t y was underestimated the p e n e t r a t i o n would be q u i t e QMff/Z-r JZZ . .7ooo .dodo \?£RcetJj. [mftRner ! !....... .... .f/ct>d i - r H : - : - • - -•• •• - •, - -. i • • ! :] j — - -J ; • - ;;y; .... .. -SSoo.. i • ! L : • 7.'"....'C~••• '7"T.T~f.V~"~j "'"T ......... 1 — '•' ~ ••-•--••i- • - --  ; • - •! .i.A.... ' • • i-i-' >- - - • ' .l!li..LJ.',3o0o,' • .i r.".... . . \ ' ' : " ' • ' '• " ' ; " • "j ; '"" : '• " j <• •'- .'- — • - - — -; l ... ..... . i... .; ',. .'  - I ••; - -• P£fiC£A/T •i. • • '• ' . •  ••- - : - . -•• •! . . . . . . . . . . ' . ... ......... ' " * ' . . „ ^ . ... ; ; L.-.J. -X<aao,. 1 ... . . ..... - . • : • •• :• - - - •• L . ......./s'oo . 7-: — • - i j ..i..:.l.,_r„ ..: ... . _. „..,..._ r , ...... .,. ,. ... ... f ~ .Of/aS"* (-.0*><>/2*x?)X.„ . w; r ••: \-\- -[' 7" : "' t ^ ^j" " """ ] "" T ' ' ' ' r * " " \ t~-.'~""""" j : • "; i ' " ' ' ", . ..... ['.; :.'"p::::;.v. - « ~ " •-•i - - — • i - 1 - i • • • • ! • ; • - • - -9 • • # " ' I » —!-•-'•••.- : [ • - - ' h: . ;. ... i ' ' \. l.i. ..; : 1_ zoo 1 . j3oo ,*/oo |.. .... ..1. . ; high while the,converse would be true for buildings where densities were overstated. Another point may be that certain f a c u l t i e s are required-to make constant and extensive use of the Bookstore. For these f a c u l t i e s distance and therefore Bookstore location i s not as relevant as for other f a c u l t i e s . As a r e s u l t of the possible density error and peculiar consumer behaviour i n certain areas> the p r e d i c t a b i l i t y of market penetration i s not p a r t i c u l a r l y strong. However the results obtained do give a much better.idea of the probable effects to be expected from moving the store to one of the two proposed locations than have-previous studies. A t h i r d l i m i t a t i o n of the model was i t s scope of evaluation. Other possible sites.were not assessed at thi s time. It seems doubtful though that locations not within the area between the Bookstore and SUB would be desirable. C. Summary and Conclusions The- purpose of thi s chapter was to report the method-ology used i n the evaluation of the three potential Bookstore s i t e s on the campus at U.B.C.^ The results of thi s research were used to compare the relative:value of the sales potential of the s i t e s . I n i t i a l l y , . b u i l d i n g densities and time distance . were determined. A consumer survey of customer o r i g i n and destination was then carried out. From the data c o l l e c t e d a frequency d i s t r i b u t i o n of customer to building of o r i g i n was obtained and the percent.market penetration of the Bookstore at each building was calculated from this information. Regression analysis of market penetration provided a basic numeric.relationship from which the,percent penetration could be determined at a l l buildings on the campus. A simulation model relating.time-distance and sales produced an estimate of sales at the two proposed locations to compare with sales at the present s i t e . The r e s u l t s show that the SUB s i t e i s as good as the present s i t e for a Bookstore., The Ponderosa location would be c l e a r l y i n f e r i o r a s . t o t a l sales would decline by about $300,000. Most of this decline would be-merchandise that has higher mark-ups since textbook sales w i l l be r e l a t i v e l y i n s e n s i t i v e to location. The existence of .a major t r a f f i c flow past the Library to the SUB was noted. This factor, i n conjunction with the results of:, the . simulation, suggest that any s i t e between these, two major buildings or i n close proximity would serve to maxi-mize potential sales as well-as customer s a t i s f a c t i o n with Bookstore services. . The re s u l t s of the study also suggest that the re-dir e c t i o n of the store's objectives to include only the mer-chandising of textbooks .would have the.advantage of minimizing the e f f e c t of location. Since the demand for textbooks i s r e l a t i v e l y i n e l a s t i c , consumers would be i n d i f f e r e n t to the distance factor and the element of inconvenience of greater distance - to the Ponderosa. This type of decision however would have the decided disadvantage of requiring a l l overhead and s e l l i n g expenses to be absorbed by the.standard 20 percent markup taken on text-books. I t i s doubtful that such an operation.would break even. CHAPTER V SUMMARY, CONCLUSIONS AND RECOMMENDATIONS . The controversy surrounding the operations of the Bookstore on the University of B r i t i s h Columbia campus and the question of the store's relocaton provided the impetus for the research project reported here. I t was f e l t that a thorough evaluation of a l l aspects of store operations was necessary before major "stop- -gap" measures were taken which may tend to frustrate the resolution of other problem areas. From t h i s focus a research program was developed which would incorporate the basic theory of r e t a i l management into an analysis of the store's merchandising p o l i c i e s and the determination of optimal store locations. The purpose of this chapter i s to review the results of the research and i l l u s t r a t e how the conclusions drawn may be u t i l i z e d i n the development of a program for the store to achieve a,higher standard of service to the faculty and students while retaining.a f i n a n c i a l l y s e l f - s u f f i c i e n t p o s i t i o n . A. Merchandising Policy E f f i c i e n t merchandising policy i s not simply the maximization of sales or a periodic check of the f i n a n c i a l ; Balance Sheet. Instead i t i s the i d e n t i f i c a t i o n and t h e i r , administration based on a complete understanding of the funda-mental concepts involved. The experience of .other r e t a i l e r s and the r e s u l t of . academic research, provide the theory, of r e t a i l management which, by i t s unique nature, i s both an art and a science. From the.theory seven topics were selected to form the basis of the .investigation into merchandising p o l i c i e s . A series of.interviews with the management team and periods of store observation were the research techniques used-to analyze each of the components. The. r e s u l t s are reported below: 1. Store Layout The theory suggests that procedures, which r e f l e c t the r e l a t i v e value of space are the fundamental prerequisites,~ for developing an appreciation of the variable of store layout. Evaluations which i d e n t i f y the r e l a t i v e contribution to t o t a l sales,.by.department- or merchandise class, can be used to enhance departmental arrangements. By locating departments with generative or " p u l l " c a p a b i l i t i e s , i n the r e l a t i v e l y i n -accessible areas of the store, a network of a i s l e s can be created i n a manner which presents impulse, high p r o f i t items to customers enroute to these major departments. When this topic was analyzed the following observa-tions were made: -.management i s very concerned over the lack -of s e l l i n g space but they are uncertain as to how .they would u t i l i z e , a d ditional space i f i t became available. - the present store layout i s r i g i d . I t remains unchanged from year to year and sales peak to sales peak.. - -the basement of the store provides the warehouse and wholesale functions which require,a considerable amount of non-profit space and could be as e f f e c t i v e i f they were located away from the r e t a i l operation. - the main f l o o r of the store i s broken up with o f f i c e s and storage space which account for twenty-five percent of the f l o o r space. Their locations are near the front of the store which i s the prime area for the merchandising of high p r o f i t , ; high ;turnover, impulse .merchandise. ^  - the general appearance of the store i s s t a i d , d u l l , congested and disorganized. -"the major generator department--Textbooks--is ser-viced by a series of secondary a i s l e s which are too narrow for the passage of two customers. - the Engineering c o u n t e r — a l s o a generator department— i s located i n such a manner that no other merchandise i s exposed to the customer.. - Sundry or impulse items are displayed i n the back of the store or where they require personal s e l l i n g . In conclusion, the re s u l t s of this analysis suggests that there i s more than ample space available at the present, s i t e . t o service customers. The layout should be a e s t h e t i c a l l y pleasing and , f l e x i b l e . Offices should be streamlined and relocated away from the main s e l l i n g area. F i n a l l y procedures should be developed to aid i n the arrangement and .location of merchandise. 2. Merchandise Assortment Survival of a r e t a i l operation i s dependent-upon sales. To achieve this the selection of an.assortment of merchandise must be appropriate to the needs of the store's c l i e n t e l e and consistent with the store's objective and pur^ pose. I t i s important therefore to develop procedures which report the sales performance of every item i n the store. The most suitable procedure i s the measurement of sales over a specified.time.period known as turnover. In this ,manner the number of d i f f e r e n t brands .and styles or the depth of an item can be determined and s i m i l a r l y the appropriateness of d i f f e r e n t classes of the width of .the assortment can-be obtained. By. establishing target turnover figures, dead or redundant merchandise can be i d e n t i f i e d and cleared thereby providing the necessary space for thefexperimenting.with.new l i n e s . Furthermore i t ensures the continued management of c a p i t a l investment i n p r o f i t a b l e merchandise and reduces the ri s k , o f accumulating large inventories of non-saleable stock. The analysis revealed: - there are five major - categories of merchandise at the Bookstore—Textbooks, Other Books, Stationery, Supplies.and Sundries. - the merchandising of textbooks i s from.a monopoly position and the.assortment i s completely predictable. - normal competitive pressures and consumer preferences e x i s t for a l l other categories of merchandise. - turnover analysis i s not made use of on a r e a l i s t i c basis. The necessary.accounting systems for providing.the volume of merchandise on display or i n storage are non-existent, therefore.turnover can only be considered an annual basis when an inventory count i s made. - an aggressive merchandising.approach i s not apparent and-many - redundant lines are renewed causing inventories to rise;uneconomically. From these observations i t can be concluded that the methods used in,the annual selection of-textbooks are not applicable to the merchandise needs of the other major cate-gories. These categories provide a greater contribution to p r o f i t s per item than textbooks; therefore,, useful procedures should be established to achieve a better sales record commen-surate with providing a service to i t s c l i e n t e l e . Once an item has been selected the,buying decision, involving an investment of c a p i t a l , i s required. I t i s impor-tant, therefore, to predict the•sales pattern the merchandise, may take and order appropriate quantities. In an ongoing operations the buying decision i s linked c l o s e l y with the management of inventories since discrepancies causing•overstock or understock positions must be r e c t i f i e d i n order to maintain an economic working c a p i t a l position while meeting the needs of .the consumer. The,analysis indicated that: - a l l categories of merchandise are subject to a predictable sales pattern. - the t o t a l yearly requirements for an item are.pur- , chased at one time i n the :„ma j o r i t y of cases causing uneconomic inventory positions. - information on inventory balances i s not obtained as a matter of course. Instead, reliance i s placed on periodic -counts i n order to discover overstock or out-of-stock positions. - inventory balances have reached alarmingly un-economic proportions. This i s due largely to textbook supplies which f a i l to be returned to the manufacturer when t h e i r s e l l i n g cycle i s complete. - r i g i d controls on purchasing practices do not e x i s t in the form of written p o l i c y . As a r e s u l t the process lacks uniformity and consistency. The buying of .merchandise for the Bookstore i s a large job involving many people and considerable time and e f f o r t . To ensure sound f i n a n c i a l planning and constructive effort.the creation of functional guidance and procedures are required which would have the e f f e c t of centralizing.the buying decision process and thereby ensuring the control of inventory balances and t h e i r management. 4. Store Organization Store organization i s a broad and complex topic i n r e t a i l management. I t i s , however/ a necessary component"for the implementation of the store's strategies and objectives. There are two aspects of organization which must be dealt with.. One i s that of the functional d e f i n i t i o n of per-sonnel and the other i s the arrangement - of these personnel into superior-subordinate relationships which can be coordinated e f f e c t i v e l y to accomplish the,necessary tasks. The following c r i t i c i s m was made of the Bookstore's organization:-- there i s no formal organization chart showing_the functional d i v i s i o n s and reporting r e l a t i o n s h i p s . There i s , however, an organizational hierarchy which e x i s t s - i n every-one's mind. - the merchandising function i s divided ,into two. p a r a l l e l units. One deals with Textbooks and Other Books and the other deals with Stationery,"Supplies and Sundries. Each unit has its.own shipping, receiving, stocking and buying personnel. This arrangement requires more s t a f f than normally needed., - there are t h i r t y - e i g h t regular s t a f f and f i f t e e n f u l l t i m e and part time employees i n t h e ; s t o r e - - i t i s d i f f i c u l t to j u s t i f y the need for more than t h i r t y employees during normal operations. - the control function i s concerned with store main-tenance and the accounting a c t i v i t i e s involved i n accounts receivable and payable, as well as cash and bank r e c o n c i l i a t i o n s . I t does not r e l y on formal written.procedures to.ensure security. This lack of d i r e c t i o n allows one cash r e g i s t e r to be operated by as many as five;employees during the-day a n d i i t i s not normally cleared.on a daily.basis- Furthermore, i n f o r -mation such as the number of da i l y transactions i s not available as a matter of course and employees are allowed to cash personal cheques through the (cashiers. - the control function., i s not involved at a l l with the provision of - information pertinent to inventory management. The unlimited access to storage f a c i l i t i e s by employees makes the establishment of procedures to produce the information impossible, - job analysis has ..been used . to create . seven broad job descriptions for the unionized employees. In a formal sense th i s .provides for a f l e x i b l e organization which i s necessary due to the c y c l i c pattern of sales; however, the employees have created t h e i r own informal system which allows, them to perform tasks of - r e l a t i v e l y higher status than t h e i r normal po s i t i o n requires. Over time they have become casually i n d i f f e r e n t to such menial tasks as maintaining store appearance.. Unfortunately management seems unaware of i t s . r e s p o n s i b i l i t y to, d i r e c t and organize employee e f f o r t s . - there i s no programme to t r a i n personnel .to increase their a b i l i t i e s . Innate c a p a b i l i t y i s available to improve management but no.system has been devised to upgrade employee c a p a b i l i t i e s and-managerial s k i l l s . - 'wages are i n t o l e r a b l y low. 5. P r i c i n g P o l i c i e s In theory, p r i c i n g p o l i c i e s involve the a c q u i s i t i o n of merchandise at the lowest possible cost and by "marking up" the price r e a l i z i n g a contribution to s e l l i n g expenses and p r o f i t . There are numerous strategies used i n , s e t t i n g a markup-. I t may be a percentage of the cost price or the s e l l i n g , price or a fixed d o l l a r amount. However, i n many cases the opportunity to set prices may not be available to the r e t a i l e r . Manufacturer's o f t e n . i n s i s t on certain prices to ret a i n t h e i r quality.image and i n other cases .they suggest prices which they f e e l are r e a l i s t i c . The Bookstore uses the following strategies i n the i r p r i c i n g p o l i c i e s : -Textbooks are sold at the manufacturer's l i s t price, which i s a twenty percent markup on the s e l l i n g p r i c e . - Departmental supplies are sold at a.twenty percent markup on the s e l l i n g p r i c e . - a l l other merchandise i s sold at the , manufacturer-'s suggested prices which -range from twenty to forty-percent markups on.the s e l l i n g price.. - the present accounting system does not recognize many of the•overhead -charges which are absorbed by other service f a c i l i t i e s . . Consequently an analysis to i d e n t i f y . a c t u a l s e l -l i n g expenses i s not available. - f l e x i b l e p r i c i n g strategies are not used by the Bookstore and with the present-accounting systems the.oppor-tunity .to adjust prices r e a l i s t i c a l l y does not exist.-Procedures which would i d e n t i f y the actual s e l l i n g expenses-incurred by each l i n e of merchandise should be.developed in order that management e f f o r t s man be focused on s p e c i f i c areas and expenses reduced. This type of approach should make the present p r i c i n g p o l i c i e s more p r o f i t a b l e . 6. R e t a i l Services R e t a i l services i n an operation.such as the Bookstore may be grouped into two categories.- One category includes services which are expected by the customer- and are therefore a necessary part of the operation. For services of t h i s nature the onus i s on management to maintain the unit costs at a minimum while providing quality service. The other category includes services which are offered to the customer as an inducement to make greater use of the store and consequently increase sales. These forms of-service require that unit costs be minimized while benefits produced are-maximized. The following services are offered by the Bookstore: (a) required services special ordering of books . management of the Use Book market, accepting the return of unnecessary textbooks . (undamaged) packaging and delivery of departmental supplies (b) , promotional services f i v e percent student rebate ten percent faculty .discount faculty deferred payment system wholesaler for departments .>rimail-order service to the general public. The findings of.the research indicate that for many of the required services, the ex i s t i n g systems should be revised from the standpoint of reducing storage and handling expenses. The promotional services lacked the support of finan-c i a l analysis and on t h i s basis were d i f f i c u l t . t o j u s t i f y t h e i r continued existence.. 7. Promotion In the majority o f , r e t a i l operations.the management of this factor i s of c r i t i c a l importance. • I t s . c e n t r a l purpose i s to sustain the operation's competitive p o s i t i o n or advantage. The•BookstoreVs s i t u a t i o n d i f f e r s from the norm since the major portion of their sales r e s u l t from the monopoly posi-tion they have i n the textbook market. Since .their apparent need for promotion i s neg l i g i b l e their current budget for this item i s only $2,000 and.its expenditure i s mainly in. the form of p u b l i c i t y through student, faculty and administrative publications. Unfortunately the-opportunity, to promote new products and services i s not made use of and customers are generally unaware of the Bookstore's a c t i v i t i e s and new merchandise .offerings. B. Optimal Site Determination The second phase of the research project was concerned with the evaluation of three s i t e s — : t h e present store location, the s i t e of the Ponderosa Cafeteria, and near the Student Union B u i l d i n g - - a l l of which had been suggested for future expansion of the store. The central objective in this study was to .collect the data necessary.to evaluate a l t e r n a t i v e . s i t e s . A distance decay model was chosen to r e p l i c a t e con-sumer behaviour and provide r e s u l t s i n terms of estimated t o t a l sales. The f i r s t step was to select .a group of -campus buildings which would be representative of the trading area for the store. Then the .average hourly building densities were determined such that the t h i r t y - f i v e buildings represented the 30,000 campus, population. ; The time-distance i n seconds from each building to each of the proposed locations were then measured by walking known t r a f f i c routes. F i n a l l y a composite questionnaire was developed to obtain data on the o r i g i n and destination of customers as well as their behaviour patterns concerning the store. The question--naire was administered i n a random manner to a t o t a l of 3,040 customers during the f i r s t week, a peak sales period, and the l a s t week, a normal sales period, of January. The 360/67 computer's TRIP l i b r a r y program was then used to correlate the variables examined and produce a s t a t i s -t i c a l c o r r e l a t i o n matrix from which a set of six hypotheses concerning.consumer behaviour were drawn: 1. Customers are usually enroute to a point other, than from where they originated when they stop at the Bookstore. 2. Customers shop at-the Bookstore for a s p e c i f i c item. 3. Customers experience more d i f f i c u l t y obtaining Textbooks than any other type of-merchandise. . 4.. Customers who buy Textbooks are less i n c l i n e d to supplement their purchases with Stationery items than they are with purchases of-Other Books and Sundries. 5. There was no apparent relationship between expen-ditures at the Bookstore and o r i g i n , destination and distance. 6. The adjoining coffee shop i s a generator for browsing and casual shopping but not for Text-books, and Supplies.-7. People who come to buy Textbooks spend more per v i s i t than those who come to buy other types of merchandise. At the {same time:the MVTAB program was used to cross tabulate the. variables. The biva r i a t e frequency d i s t r i b u t i o n of Textbook and Non-Textbook customers to buildings ;.of o r i g i n was used to determine the percentage of market penetration the Bookstore has at each building. The.TRIP regression routine was then used to re l a t e the percentage of market .penetration to distance. At this point a l l the data was brought together to develop the simulation model. B a s i c a l l y the procedures used involved the c a l c u l a t i o n of the percent market penetration at -each .building r e l a t i v e to i t s distance from the store. This s t a t i s t i c was then applied against the building's density figure to :determine the actual number of customers patronizing the Bookstore. F i n a l l y the customer count from a l l t h i r t y - f i v e buildings was.totalled and m u l t i p l i e d by a constant sales figure which was c a l i b r a t e d to f i t the sales t o t a l from the simulation model to the t o t a l sales of the present Bookstore. The l a s t step was to use the variable of distance to estimate the potential•sales at the proposed SUB and Ponderosa s i t e s . The results indicated that the SUB a l t e r n a t i v e was about equal to the present s i t e but that the Ponderosa s i t e was c l e a r l y i n f e r i o r as a Bookstore s i t e . That the difference between the present s i t e and the Student Union Building was n e g l i g i b l e i s r e a l i s t i c when one considers that the major t r a f f i c flow on campus i s between the Library.and SUB. The simulation model estimated a drop i n t o t a l sales of approximately $300,000, which i s almost f i f t y percent of the t o t a l non-textbook sales per year, i f the,Bookstore were moved to the Ponderosa. C. Recommendations On the basis of the research findings,, i t i s apparent that many of the fundamental management factors must be improved i n order to a l i g n Bookstore operations with the objective of providing.a service;to the students and faculty. The r e s u l t s recommend that the following action be taken: 1. Do not relocate the store.-2. Reduce inventories. 3. Undertake an expansion program at the e x i s t i n g site--the present structure can support a second f l o o r . Concentrate i n i t i a l l y on improving store layout by relocating o f f i c e s to the base-ment area and creating a more f l e x i b l e approach to the display of - merchandise. 4. R e s t r i c t access to the warehouse and set up pro-cedures to provide a check on inventory control. Consider relocating the warehouse and converting that space to s e l l i n g merchandise. 5. Restructure the administrative,organization to provide more d e f i n i t e functional r e s p o n s i b i l i t i e s and a f i r s t l i n e of supervision. 6. Study the wage structure with the objective of r a i s i n g wages to a l e v e l which.will a t t r a c t and r e t a i n a higher q u a l i t y of personnel. 7. Immediately supplement the existing s t a f f with technical and administrative s k i l l s not now existent i n the organization. 8. Provide for the development of an accounting and information system which w i l l allow timely control -of operations as well as providing information for making sound decisions. 9. Establ i s h r e l i a b l e p o l i c i e s and procedures for ef f e c t i v e application and management of customer based merchandising programmes. BIBLIOGRAPHY BOOKS. Berry, Brian J.L. Geography- of Market Centers and R e t a i l . D i s t r i b u t i o n . Prentice-Hall .Inc., Englewood C l i f f s , N.J. : '. 1967, 139pp. Dalrymple, Douglas J. and D.L. Thompson.• Ret a i l i n g : An, Economic View. The Free Press, New.York:- 1969, 374pp. Gist, Ronald R. R e t a i l i n g : . Concepts and Decisions. John, Wiley and Sons,Inc., New York: 1968, 521pp. PERIODICALS U.B.C. Reports, Vol. 15, No. 16, September 25, 1969 and Vol. 16 No. 4, January 29, 1970, The University of B r i t i s h Columbia. UNPUBLISHED REPORTS. P h i l l i p s , ,J,E. , et a i . Report of Bookstore Sub-Committee  Concerning a New Store, ( F a l l , 1970). Rhone and Iredale, 1969. Arch i t e c t s . Buchanan/Library Extensions. 

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