DECA Retail Merchandising Practice Exam

What is the term for a retailer that engages in wholesaling activities?

1. Vertical integration

2. Horizontal integration

3. Decentralization

4. Franchising

The correct answer is: Vertical integration

The term associated with a retailer engaging in wholesaling activities is vertical integration. This concept refers to a business strategy where a company controls multiple stages of production or distribution within the same industry. In the context of retail, when a retailer also takes on wholesale functions, it signifies that the retailer is not only selling goods directly to consumers but is also involved in the distribution of those goods to other retailers. This control can lead to increased efficiencies, reduced costs, and a more streamlined supply chain, as the retailer can manage both the sourcing of products and the selling of those products to end customers. This integration helps in maximizing profit margins and providing better pricing to consumers, fostering a competitive advantage in the marketplace. The other options represent different business strategies or concepts. Horizontal integration refers to a company acquiring or merging with other companies at the same level of the supply chain, while decentralization deals with the distribution of decision-making power across different levels or departments. Franchising involves a specific business model where a franchisee operates a business under the brand's name and systems of the franchisor but does not inherently involve wholesaling activities.