DECA Retail Merchandising Practice Exam

What term refers to the cost advantage realized by a large retailer?

1. Price competition

2. Economies of scale

3. Operational efficiency

4. Supply chain optimization

The correct answer is: Economies of scale

The term that refers to the cost advantage realized by a large retailer is economies of scale. This concept highlights how larger companies can spread their costs over a greater volume of goods sold, leading to a lower cost per unit. As a retailer grows in size, it can negotiate better prices with suppliers, reduce operational expenses through increased efficiency, and utilize resources more effectively. Large retailers often benefit from bulk purchasing, allowing them to acquire products at a discount, and they can implement advanced technologies and systems to streamline operations and reduce waste. These cost benefits enable them to offer competitive pricing to consumers, reinforcing their market position. In summary, economies of scale are crucial for large retailers as they directly impact profitability and pricing strategies.