In this post, we shall delve into the concept of multiple shops. At the end of this lesson, students should be able to:
- define multiple shops;
- identify the features of multiple shops;
- highlight five advantages of multiple shops; and
- discuss at least three disadvantages of multiple shops.
Multiple shops, also known as chain stores, are large-scale business units that operate with similar stores scattered across a country. These stores have a centralized administration, and they typically deal in one type of product in all their branches. Multiple shops have become a prominent retail format.
Features of Multiple Shops
- Scattered Branches: Multiple shops have several branches distributed throughout the country, often located in urban and suburban areas.
- Specialization in Product: Each branch of a multiple shop deals in one specific type of product, providing expertise in that particular category.
- Centralized Administration: A central head office manages the operations of all branches. The head office handles manufacturing, purchasing, and sets predetermined prices for goods.
- Cash and Carry System: Multiple shops operate on a cash and carry basis, where customers pay for their purchases in cash and take the goods immediately.
- Fixed Prices: Goods are displayed on open counters with fixed prices, reducing the need for bargaining.
Advantages of Multiple Shops
- Easy Identification: Multiple shops are easily recognizable by their uniform store layouts and branding.
- Specialization: They excel in the sale of a specific product, attracting customers seeking quality and variety in that category.
- Reduced Bad Debts: The cash and carry system minimizes bad debts as customers pay upfront.
- Risk Distribution: Losses in one branch can be offset by profits from other branches, reducing overall risk.
- Economies of Scale: Small profits from multiple branches accumulate to generate significant overall profits due to economies of scale.
- Cost Savings in Advertising: Nationwide advertising allows multiple shops to save costs by using centralized advertising campaigns.
- Large-Scale Manufacturing: Multiple shops often engage in large-scale manufacturing, enabling cost efficiencies.
- Bulk Purchasing: Purchasing in bulk directly from manufacturers results in cost savings due to reduced rates.
- Resource Flexibility: Staff and stock can be easily transferred from one branch to another based on demand and requirements.
- Expertise in Management: Multiple shops employ experts in various fields such as administration, purchases, accounting, and advertising.
Disadvantages of Multiple Shops
- Lack of Personal Initiatives: Branch managers may have limited authority to exercise personal initiatives due to centralized decision-making.
- Ignorance of Local Conditions: Centralized management may overlook prevailing local conditions, leading to potential mismatches in product offerings.
- Limited Variety Under One Roof: Customers may miss out on the convenience of one-stop shopping, as multiple shops focus on specific product categories.
- High Capital Requirements: Establishing and running multiple shops require significant capital investment.
- No Credit Purchases: The cash and carry system may not allow customers to make credit purchases.
- Insensitivity to Local Needs: Fixed prices and purchasing decisions may not align with local needs and price variations.
- Transport Costs: Managing dispersed branches can lead to increased transport costs.
- Impersonal Customer Service: Impersonal relationships between customers and sales attendants can affect the shopping experience.