Current Events & Retail Math

One of the best parts of teaching a retail class is that I never have a shortage of current news articles to use for examples and discussions.

Recently The Telegraph published an article concerning Walgreen Co.’s purchase of a stake in European retailer Alliance Boots (see “Walgreen to spend $6.7 billion on stake in health and beauty retailer Alliance Boots” by Harry Wallop.) Several great applications of this article come to mind (such as discussing it while covering international expansion, or using it while covering the retail life cycle.) But if you want to get creative, it can also be used in a discussion of retail math.

In an earlier post, I mentioned the three buckets and discussed how each one represents a category of retail math formulas. The buckets are: volume, profit, and asset efficiency. Each bucket is an area of financial performance retailers must constantly monitor. They are also the three areas management and merchandising will look to when needing to improve their performance.

When assigning an article like this one, I ask students to use the three buckets to determine how this move might affect Walgreen’s performance in the next 12 months.

The great part of this particular story is that there are multiple points for students to consider and comment on. For example, the expansion into a foreign market will increase Walgreen’s overall sales and therefore their volume in the short term. Other considerations could include how the addition of private label Alliance Boots products into Walgreen’s U.S. stores could affect their profit bucket, and what this very large investment could do to asset efficiency.

I’ll probably use this as an assigned reading this Fall, and then follow it up with a class discussion. It should be a lot of fun since there are several viewpoints to be argued concerning the financial impacts of this move by Walgreens.

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