Ross Stores Case Study

1188 Words 5 Pages
As a leading off-price apparel and home fashions retailer, Ross chooses only one type of distribution channel. Ross only distributes products through its brick and mortar stores. Ross was founded in 1957 and its headquarters is in Pleasanton, California (Pan, 2013). Ross now has 1,253 stores in 33 states of the United States (including big states like Arizona, Florida, Texas), the District of Columbia, and Guam (Pan, 2013). Ross stores, which are average 26,100 square feet, reside in strip shopping malls in urban and suburban areas (Vault, 2016). Physical stores allow Ross to have one-on-one contact with customers. Insightful sales associates give customers an opportunity to get advice or recommendations while shopping. A wide range of designer, …show more content…
are eliminated. For Ross, online stores would not be a good option. Michael O’Sullivan, the president and chief operating officer of Ross Stores, states that Ross operates within the moderate off-price space (Bailey, 2015). Also according to O’Sullivan, the average retail price of an item at Ross is normally around $10; there are not much merchandise of Ross whose price is higher than $20 (Bailey, 2015). Posting such a low-priced item on an e-commerce platform does not seem like a fruitful premise for Ross. For example, in the case of an average price around $10, O’Sullivan states if the company is left with the gross margin of $4 or $5 after removing the cost of goods sold, from the selling price, that gross margin would still be deducted from other costs, such as shipping costs, processing costs, and costs associated with product returns (Bailey, 2015). Additionally, Ross’s discount-apparel business originally buys merchandise in relatively small lot sizes (Bailey, 2015). Generating a variety of models in an online environment in which a particular item does not vary in size would be really complicated and not sufficient for …show more content…
Ross Stores are superior than other department store competitors, especially apparel discounters like Marshalls and TJ Maxx when it comes to this key factor, pack-away inventory. Pack-away inventory is typically manufacturer overruns and canceled orders. Pack-away inventory was estimated to be around 45% of the company’s inventory in the year of 2014 (Bailey, 2015). As an off-price retailer, Ross does not need manufacturers to give promotional allowances or return privileges like department and specialty stores usually do (Bailey, 2015). That means Ross is not necessarily bounded by any strict requirements from producers. As a result, Ross is more flexible making others with manufactures and delivering them to its distribution centers. Ross’s ability to purchase this kind of inventory makes it possible for the company to offer discounted prices to its customers on a timely basis. Ross tends to keep pack-away inventory in storage for less than six months (Bailey, 2015) because carrying unnecessary inventory is viewed as wasteful. Ross has a strict control on its inventory, which allows it to increase the receipts of new merchandise for customers and in turn raise the company’s sales. Keeping in mind, the faster the inventory turnover is, the greater the company’s merchandise margin (total sales less cost of goods sold) can be generated. Ross is applying that

Related Documents