Canada’s Hudson’s Bay Company to Close All Stores

Answer the following questions to check your understanding of the story.

What does Hudson’s Bay Company produce?

Hudson’s Bay Company produces ____________.

a) retail services

b) Hudson’s Bay branded merchandise

c) Canadian souvenirs

d) furniture and appliances, towels, bedding, clothing, and footwear

Wrong! - Hudson’s Bay Company sells Hudson’s Bay branded merchandise, furniture and appliances, towels, bedding, clothing, footwear, and Canadian souvenirs, but what does it produce?

That's Right! - Hudson’s Bay Company sells many goods, but it produces retail services.

Why is the market in which the Hudson’s Bay Company competes a competitive market?

a) Hudson’s Bay is often located as the anchor store in a large shopping mall.

b) Hudson’s Bay sells services that aren’t available from other brick-and-mortar stores.

c) Other stores can easily enter the market, Hudson’s Bay has no advantage over new competitors, and everyone is well informed about prices.

d) Hudson’s Bay competes with a small number of brick-and-mortar retailers and each retailer charges the same prices.

Wrong! - What is a competitive market? Would a competitive market have few brick-and-mortar retailers? If Hudson’s Bay is an exclusive seller of some services, is it operating in a competitive market? Is the location as the anchor store in a large shopping mall required for Hudson’s Bay to compete in a competitive market?

Well Done! - If new stores face no restrictions on entry into the industry, existing stores have no advantage over them, and everyone is well informed about the prices these stores charge, then Hudson’s Bay competes in a competitive market.

How does the convenience of online shopping change the bricks-and-mortar retail market?

____________ bricks-and-mortar shopping.

a) Changing preferences are decreasing the supply of

b) Changing preferences are decreasing the demand for

c) The rising relative price of bricks-and-mortar shopping with respect to online shopping is decreasing the demand for

d) The rising relative price of bricks-and-mortar shopping with respect to online shopping is decreasing the supply of

Wrong! - The convenience of online shopping changes buyers’ preferences. Does this change the supply of brick-and-mortar shopping? What is relative price, and does a rising relative price change demand or supply?

Good Job! - The convenience of online shopping shifts buyers’ preferences away from brick-and-mortar retailers, and the demand for brick-and-mortar shopping decreases.

Why is the Hudson’s Bay Company exiting the bricks-and-mortar retail market?

Hudson’s Bay Company is exiting the bricks-and-mortar retail market because _____________.

a) the amount of online retailing competition is increasing

b) it is losing more than half of its customers to online retailing

c) a permanent decrease in customers is resulting in economic losses

d) a decrease in customers is making it difficult for Hudson’s Bay to retain employees

Wrong! - When does a firm exit a market? Does it necessarily exit a market if it loses its customers to competitors, can’t retain employees, or faces rising competition?

Correct! - The decrease in customers’ decreases demand for Hudson’s Bay’s services, lowers price below average total cost, and creates economic losses. Hudson’s Bay is exiting the bricks-and-mortar retail market because it expects these economic losses to be permanent.

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