The compilation of these Internal Trade Notes makes students exam preparation simpler and organised.
Fixed Shop – Large Retailers and Chain Stores or Multiple Shops
When talking about retail stores, we have already discussed that the stores may be itinerant or fixed. Now fixed retail stores are a more common sight in urban areas and large cities. Surely you have visited your local supermarket or mall. These are also retail stores. Let us look at two very important types of fixed retail stores– large retailers and chain stores.
Departmental Stores
A departmental store is a classic example of a large retailer or large retailing business. It is, in fact, one of the mainstays of the retailing industry. These stores are generally incredibly huge stores and sell a very wide variety of products. These products are organized into categories, or rather into ‘departments‘. And all these departments are under the same roof.
Generally, a department store will sell everything from womenswear, menswear, electronics, toys, homeware, bed and linen, kitchen appliances, footwear, accessories, cosmetics, and many more such things. Every department will be an independent unit by itself, united under one roof in one store. A classic example of such a departmental store is Macy’s. In India, we could cite the example of Big Bazaar or Central stores.
Some other important features of such departmental stores are,
- They are generally located in a heavily populated area in the heart of a city, which provides them with heavy footfall.
- Departmental stores provide all necessary facilities to ease the shopping experiences of their valued customers. These include restrooms, parking, valet, etc.
- Since the size of operation and funding requirement for them is significant, they are generally companies with shareholders.
- Most departmental stores actually combine the functions of retailing and warehousing, eliminating the middleman from the process.
- Generally, all the different departments follow the method of centralized purchasing. One purchase department will purchase for the entire store.
Advantages of Departmental Stores
Convenience for Customers: One of the largest draws of the departmental store is that a customer can fulfill all their shopping needs under one roof. It saves the customer from the trouble of visiting numerous stores. It saves time and labour for the customers.
Variety of Choices: A departmental store not only sells a variety of products but also ensures their customers are spoilt for choices in every type of product. if one was looking to buy a TV, a departmental store would allow you the choice from dozens of different models.
Economies of Scale: Departmental stores are run on a huge scale. So they can enjoy all the benefits of a large-scale operation, like lower costs due to high volumes. This allows them to lower their overall costs and increase their profits.
Promotions: Departmental stores have financial capabilities to run their very own promotions and advertising campaigns. This helps them attract more customers and hence further boosts their sales.
Disadvantages of Departmental Stores
Operating Costs: These stores not only sell goods, but they also provide their customers with special services. And so the operating costs of a departmental store tend to be high. They cannot offer any discounts or offers and price themselves out when it comes to lower-income customers.
Lack of Personal Attention: Due to their large scale of operations and sheer size of their stores it may not be possible to provide each and every customer with personal attention and assistance while shopping. Even if an adequate number of employees and sales staff is hired, monitoring all their activities at all times is not feasible.
Difficult to Establish: Since they require very high financial commitment and also a large retail space, opening a departmental store is quite difficult. There are many barriers to entry and the losses in case of failure tend to be very high.
Chain Stores
Chain stores are multiple retail shops which operate under one brand name and have common ownership. Basically, they are all outlets or branches of the same brand/store. These types of retail stores actually originated in America but are now seen worldwide. One common example would be Croma or DMart.
One thing to note is that all chain stores are under one common ownership, the stores do not have individual owners (like in franchising). These shops often even have similar looks and designs. Even the display system, color schemes, and other arrangements are kept uniform. This helps the store retain its brand identity.
Often these chain stores will deal in standardized and packaged branded products. Let us learn a few other noteworthy features of chain stores,
- There is centralized purchasing by the head office or the main branch. The home office will then send the goods to the individual chain stores. This will allow them to order in bulk and cut down on costs.
- Such chain stores tend to be located in populist areas. The idea is to be as closely located in the customer’s house as possible.
- The control of individual stores will fall to the Branch/Store Manager. He will be answerable to the head office regarding the performance and all other matters related to the store.
- There is one head office. All the policy formation and control happen from this head office.
Example:
Question:
What are the limitations of a Chain Store?
Answer:
There are a few disadvantages a chain store has to face. Some of them are as follows:
- Unlike a departmental store in a chain store, the variety of products and the number of choices are limited.
- Individual stores become dependent on the home office and generally do not show any initiative or drive to ramp up sales.
- These stores are not well adapted to changing demand. Since they have huge inventories they may face losses if the market demand changes.