Question

When fragrance sales recently went flat, retailers turned up the heat on fragrance manufacturers. They reduced the amount of floor space devoted to fragrances, and chose the fragrance with the highest contribution margin per square foot for a given period of time.

What is the limited resource for a retailer, and what implication does this have for sales mix?

Answer 1

The limited resource for a retailer is floor space, and this affects the sales mix.

Step-by-step explanation:

The limited resource for a retailer in this scenario is floor space. When fragrance sales went flat, retailers reduced the amount of floor space devoted to fragrances. To maximize their profits, retailers chose the fragrance with the highest contribution margin per square foot for a given period of time. This means that retailers prioritize fragrances that generate the most profit based on the space they occupy in the store.