Assignment Business Economics

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ASSIGNMENTS

You are required to complete both below. The word limit is 2,500 words for each assignment but this does not include the stimulus material given here, the questions that follow it, or the bibliography that you are required to include at the end of each assignment. Specific guidance will be given on how to approach each assignment in class but the style to be adopted is strongly analytical. This means that your points must be supported by reasoned argument. Wherever possible, appropriate data should be used to support your arguments and diagrams that support and illustrate your arguments are encouraged. Please note that although your submission will be judged in a holistic manner and credit will be awarded wherever the discussion merits it, you should try to answer each question fully within the appropriate section. Within this general guideline, allocate your time and effort as you think appropriate. Assignment 1

Retailers Are Slashing Prices Ahead of Holiday
By STEPHANIE CLIFFORD New York Times, Published: December 22, 2011 Half off at the entire store at Ann Taylor. Sixty per cent at Gap. Forty per cent off almost everything at Abercrombie & Fitch. Going into the holiday season, inventories had grown much faster than sales at several retailers including Urban Outfitters. Aggressive last-minute deals in the days before Christmas are good for procrastinators, but they could be an alarm bell for the retail industry. While scattered markdowns are standard every year, discounts across entire stores — which analysts say are more widespread than last year — suggest merchants are stuck with too much merchandise. “It’s really a game of chicken,” said David Bassuk, managing director and head of the retail practice at the consultant firm AlixPartners. Many retailers entered the season “with pretty optimistic plans” that shoppers would rush into stores and pay full price, Mr. Bassuk said. But that did not pan out, and the final days before Christmas have retailers being “much more aggressive in terms of promotions being offered,” he said. Shoppers are filling their holiday lists against the backdrop of an uncertain year, with stubbornly high unemployment, increased food prices, volatile gas prices and unpredictability for stocks and Europe’s debt crisis. The government on Thursday said that third-quarter economic growth had

Business Economics 2012-13

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not been as brisk as it previously estimated, because of a drop in consumer spending on services like health care. Toys “R” Us announced on Thursday new deals on dozens of items for Friday and Saturday, including ‘buy one, get one half off” on popular toys like Legos. A sampling of other promotions: Up to 70 per cent off toys at Amazon; up to 50 per cent off gifts at Restoration Hardware; 40 per cent off almost everything at American Eagle Outfitters, Talbots, Limited and Wet Seal; and 30 per cent off everything at J. Crew. “There’s been kind of a waiting game with retailers,” Gerald L. Storch, the chief executive of Toys “R” Us, told CNBC last week. “And it looks like the consumer wins.” Paul Lejuez, an analyst at Nomura Equity Research, surveyed mall deals over the weekend and said he was concerned. “It looks like 40 per cent is the new level you have to be at, 40 per cent off, to drive traffic. Those that weren’t at that level weren’t getting their fair share,” he said. Going into the holiday season, inventories had grown more than three times as fast as sales at several retailers, including American Eagle Outfitters, Aéropostale, Gap Inc., Urban Outfitters, Chico’s and Talbots. “If inventory is growing ahead of sales growth, there is a need to be more promotional to move the goods,” Mr. Lejuez said. Although sales over Thanksgiving weekend were surprisingly strong, Mr. Lejuez said they seemed to have cut into shopping that more typically would occur in December. Sales were sluggish the first two weeks after Thanksgiving, though they improved in...
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