A departmental store is a big establishment having a wide variety of goods, categorized into well-defined departments, aimed at satisfying practically all the customer's requirements under one roof. It has many departments, each one carrying out activities to a specific type of item like for example, and departments for toiletries, medicines, furniture, groceries, electronics, clothing and dress material. Hence, they satisfy different market sections with a large variety of goods and services. It's not weird for any departmental store in the United States of America to carry 'needle to an aero plane or 'all shopping under one roof.' In India these departmental stores are not yet present in a big way in the retailing business. But still, some stores of this type in India include 'Akberally' in Mumbai and 'Spencer's' in Chennai. Some important points about them are given below:
- A modern departmental store can give all facilities like a restaurant, travel and information bureau, telephone booth, restrooms, etc. Likewise they try to give maximum service to higher class of customers for whom the rates of goods are of secondary importance.
- They are normally situated at a central place in the heart of a city, which caters to a huge number of people.
- As these stores are very large, they are normally established as a joint stock company managed by a board of directors. They have a managing director assisted by a general manager and several other managers;
- These stores combine both the functions of retailing as well as warehousing by purchasing directly from producers and operate individual warehouses and thus by that way they help in eliminating undesirable middlemen between the producers and the customers; and
- These have centralized buying arrangements since all the purchases here are made centrally by the purchase department of the store, whereas sales are decentralized into various departments.
- Attract Large Number of Customers: As they are normally situated at central places they attract a huge number of people during the best part of the day.
- Convenience in Buying: They offer a large variety of items under one roof and hence provide great convenience to customers in purchasing nearly everything of their requirements at a single place which avoids them to run from one place to the to complete their shopping.
- Attractive Services: This store aims at giving maximum services to the consumers. A few of the services they provide include home delivery of goods, execution of telephone orders, grant of credit facilities and provision for restrooms, telephone booths, restaurants, saloons etc.
- Economy of Large-scale Operations: Since these stores are organized at a big scale, the benefits of large-scale operations, particularly, in respect of purchase of products are available to them.
- Promotion of Sales: These stores are in a position to spend considerable amount of money on advertising and similar promotional activities, which boost their sales.
- Lack of Personal Attention: Since they carry out large-scale operations, it's very difficult to show adequate personal attention to the customers in these stores.
- High Operating Cost: Since they give more emphasis on providing services, their operating costs are on the greater side and hence, in turn, make the prices of the goods high. Therefore they do not attract the lower income group of people.
- High possibility of Loss: Because of higher operation costs and big scale operations, the probability of incurring losses in a departmental store is high.
- Inconvenient Location: As these stores are normally located at a central location, it is not convenient for the purchase of goods that are needed at short notice. Apart from some of these limitations the departmental stores are popular in some of the western countries of the world because of their benefits to few classes of customers.
Chain Stores or Multiple Shops
They are networks of retail shops that are owned and operated by producers or other middlemen. Under this form of arrangement, a number of stores with similar appearance are established in places, spread over different parts of the country. These different types of stores generally deal in standardized and branded consumer items, which have rapid sales turnover. They are run by the same organization and have similar merchandising strategies, with identical goods and displays. Some of the features of these are given below:
- They are situated in fairly populous places, where sufficient number of customers can be approached;
- The production of merchandise for all these retail units is centralized at the head office, from where the products are dispatched to each of these shops according to their requirements and thus results in savings in the cost of operation of these stores;
- Each one is under the direct supervision of a Branch Manager, who is considered responsible for its daily management. He sends daily reports to the head office in respect of the sales, cash deposits, and the needs of the stock;
- All these branches are handled by the head office, which is connected to formulating the policies and having them implemented;
- The rates of the products in these shops are fixed and all sales are made on cash basis. The cash realized from the sales of goods is deposited daily into a local bank account on behalf of the head office, and a report is delivered to the head office in this regard.
- The head office generally appoints inspectors, who deal with day-to-day supervision of these shops, in respect of quality of customer service given, adherence to the policies of the head office, and so on. In our country, Bata Shoe stores are typical examples of these kind of shops. Similar form of retail outlets are gathering up in different type of goods also. For example, D.C.M., Raymonds and the fast food chains of Nirula's and McDonald and many more.
- Economies of Scale: Because there is central production, these multiple-shops organization enjoy the economies of scale.
- Elimination of Middlemen: By selling directly to the customers, these multiple-shop organizations are able to eliminate unnecessary middlemen in the sale of products and services.
- No Bad Debts: Because all the sales in such shops are made on cash basis, there do not incur losses on account of bad debts.
- Transfer of Goods: The products not in demand in a specific place may be transferred to another locality where it is in demand and reduce the chances of dead stock in these shops.
- Diffusion of Risk: The losses incurred by one shop are compensated by profits in another one, reducing the total risk of an organization.
- Low Cost: Since they have a centralized purchase, elimination of middlemen, centralized promotion of sales and increased sales, the multiple shops have less expensive rate of business.
- Flexibility: Under such systems, if the shop is not operating at a profit, the management can decide to close it or shift it to some other place without really affecting the profitability of the organization as a whole.
- Limited Selection of Goods: They deal only with limited range of goods, mostly those produced by the marketers. They never sell goods of other producers and so In that way the consumers get only a limited choice of products.
- Lack of Initiative: The employees handling these shops have to obey the orders received from the head office and this makes them habitual of looking up to the head office for guidance on all matters, and takes away the initiative from them to use their creative skills to satisfy the consumers.
- Lack of Personal Touch: Lack of participation in the employees may lead to indifference and less personal touch in them.
- Difficult to Change Demand: If the demand for the goods managed by multiple shops change rapidly, the management will have to incur huge losses because of large stocks lying unsold at the central depot.