Ali and Sim are retailers. Ali owns a small shop selling gold and silver jewellery in the jewellery area of a city. Sim leases a jewellery shop in a new shopping centre on the outskirts of the city.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2012). The mark or mark type is shown in brackets.

1. [4] (a) Any two functions explained x 2 marks each:
2. • to provide consumers with conveniently-sited shops such in a town centre
3. • to provide goods/services to consumers in the quantities they require
4. • to provide a variety of goods/services so that consumers have choice and do not go elsewhere
5. • to provide after-sales service e.g. delivery
6. • to provide advice/information about the goods/services sold e.g. technical advice on computers
7. • to display goods in order to attract consumers
8. • to add value to goods such as repacking, assembling goods
9. • to buy from manufacturers/suppliers/wholesalers and break bulk
10. • to offer credit/informal credit in order to give competitive edge
11. • to deal with complaints + example.
12. [2] (b)(i) Any two advantages x 1 mark each:
13. • all the jewellery shops are grouped together
14. • the area is known for this kind of shop
15. • so consumers wanting jewellery may go there/be attracted to that area
16. • the right size of shop may be available there
17. • people within the CBD have sufficient income to buy there
18. • likely to attract tourists
19. • greater footfall.
20. [2] (b)(ii) Any two advantages x 1 mark each:
21. • new area so buildings will be new
22. • as it is new, it is likely to attract consumers
23. • consumers visiting other kinds of shops may see the jewellery shop
24. • may have the benefit of security facilities for the shopping centre
25. • may have the benefit of advertising of the shopping centre
26. • has the advantage of large car parking space
27. • likely to attract tourists
28. • may be less competition
29. • allow cheaper rental.
30. [2] (c)(i) Any two points x 1 mark each or one well explained point x 2 marks:
31. • the number of times (each year) the average stock held is sold (2)
32. • formula cost of goods sold / average stock (at cost)
33. • these businesses sell their average stock held twice a year (2)
34. • rate of turnover measures how quickly stock is sold
35. • stock is sold twice during the year
36. • this rate of turnover is unsatisfactory.
37. [4] (c)(ii) Any two points explained x 2 marks or four points x 1 mark each:
38. • try to sell off slow-moving lines by advertising more/selling at a lower price
39. • look carefully at what is purchased – try to buy only those items that are likely to sell
40. • hold a special event/promotion that is well advertised
41. • look at new ways of selling e.g. selling online/create a website
42. • offer a variety of ways of paying for the jewellery e.g. accepting credit cards
43. • providing good after-sales service e.g. warranties, repair service
44. • improve window display
45. • offer better technical/personal service
46. • offer other services e.g. setting jewellery
47. • motivating staff to give a better service.
48. [6] (d) Level 2 (4-6 marks) Has discussed both owning and leasing a shop and has given a reasoned opinion. (If a candidate has discussed either owning or leasing a shop, award 4 marks max.)
49. Ali owns the shop he is using. This may have cost him a lot of money and he may still be paying a mortgage or loan for it. He does, however, have an asset which he may be able to sell if he decides to give up the business. Also if the business were to fold, he might be able to sell the premises and with the money raised, pay his debts and have some money left over. Ali will be responsible for his own repairs and maintenance but he can use the premises as he wishes.
50. Sim leases her shop and so does not own the premises. She has to pay rent for the shop and this rent may be much higher than any repayments might be. It is probable, however, that she would not have been able to buy the premises in the shopping centre as the owner of the shopping centre does not sell shop premises but only offers them for lease. By leasing the shop, Sim is not tied to a particular place for long for her shop. If she is not successful in the shopping centre, she could not renew the lease and move her business somewhere else. She has not had to make one large payment and so this helps to spread risk and also help her cash flow.
51. On balance it may be better to own a shop rather than lease one. Ownership gives the shop owner an asset that can be sold.
52. Level 1 (1-3 marks) Has commented on owning or leasing a shop with/without an opinion.
53. It may be better to lease the shop premises. You do not know if your shop will be successful. You may not be able to sell the shop if you need to. You only have to pay rent. This may cost quite a lot.