No More Annoying Sales People
Subject Non-Price Competition Among Department Stores
Topic Production and Cost; Monopolistic Competition; Profit Maximization and the Firm
Key Words Efficiency, Non-Price Competition; Marketing
News Story

Federated Department Stores, in an attempt to compete more vigorously with discount stores like Target and internet sales, is introducing a number of amenities in its stores around the country. For example, vending machines and plasma TV's have been added to encourage customers to remain longer in the stores, which could increase sales. While reducing the number of human interactions, stores have added centralized checkout areas, price-check stations, and are currently testing holster-like checkout tools that salespeople can use while moving around the store. A Lazarus store in Columbus was recently outfitted with a child-care center, in addition to other amenities that have been extremely successful.

(Updated September 10, 2003)


How does the introduction of amenities like these help Federated Department Stores compete with online vendors, such as amazon.com?

2. What does Federated's move to greater automation within the stores do to its cost structure? Use a graph of marginal cost, average variable cost, and average fixed cost to support your answer.
3. How does this approach--engaging in non-price competition-- give Federated more control over its own pricing? Explain carefully.
Source Shelly Branch. "Forget 'May I Help You?'" The Wall Street Journal. 8 July 2003.

Return to the Production and Costs, Monopolistic Competition , and Profit Maximization and the Firm Index

©1998-2004  South-Western.  All Rights Reserved   webmaster  |  DISCLAIMER