Home Trade 4

c) Chain stores (Multiple shops)

Are large scale businesses with separate branches which are managed and organized centrally. The branch managers are accountable to the head office. Examples; African Retail Traders
(ART), White Rose dry cleaners, Nakumatt, Tuskys, Uchumi e.t.c

Characteristics/features of chain stores

Are managed centrally from a head office

Prices are standard for all their products in all their branches

All branches deal in the same type of products

Sales are decentralized i.e. the various shops situated in different places act as selling points or branches

Purchases of stock are centralized i.e. buy stock buy stock in bulk centrally and distributed to the different branches

Goods can be transferred from one shop to another where the need for them is higher

The shops operate under one name and are similar in appearance and interior layout

Advantages of chain stores/multiple shops

They enjoy large trade discounts since they buy their goods in bulk centrally and is passed to consumers in form of low prices

Common costs such as those of advertising are shared

Goods that do not have a high demand in one branch can be transferred to another where their demand is high

They are easily identified by their colour and design

They have low operational costs because of the centralized buying, storage, advertising and accounting

They serve a large number of customers because they are spread in many towns and cities

The similarity of the shops in appearance and services serves as an advertising tool

Risks such as losses are spread among many shops

It is possible to pay for goods in one branch and pick them up in another.

Disadvantages of chain stores/multiple shops

Large amount of capital is required to start and maintain the business

They cater mainly for the urban areas as they are situated in those places

Organizational problems may occur due to their large size

No credit facilities are offered except those operating exclusively on hirebpurchase schemes

Response to market changes is slow due to the slow decision making

Decision making is slow as the head office must be consulted

Lack of personal touch with customers

Absence of personal touch between employer and employee may reduce incentives for hard work among staff

People tend to shy away from buying similar products such as clothes and this may reduce sales.

d) Departmental stores

This is a group of single shops operating under one roof with a centralized management
Each shop/department specializes in a particular line of products and is headed by its own department manager.

Characteristics of departmental stores

Each department has its own manager

Each department sells only one line of products

All departmental managers are answerable to a general manger

They offer a wide variety of goods at relatively low prices

They sell goods strictly on cash basis

They are usually in town centres

Goods are not transferable from one department to another as each has its own variety of goods.

Advantages of departmental stores

Customers can buy/access a wide variety of goods at fair prices under one roof.

They can afford to hire trained qualified experienced staff who providequality services

They buy goods in large trade discounts. This enables them to sell at low prices.

Each department is able to make independent and quick decisions that affect its operations.

The independence of departments ensures that the weakness of one department does not affect each other.

Savings can be made on some activities such as product promotion by centralizing them.

Disadvantages of Departmental stores

A large amount of capital is required to start and maintain the stores

They require a large number of customers to operate profitably

It is difficult to give personal attention to customers

They cater mainly for the urban communities in which they are located

They strictly sell their goods on cash basis

Operational costs are high due to the wide variety of services offered

Their large size could encourage theft and pilferage of goods

The independence of departments can make central control difficult.

e) Mail order stores

This is a type of retail business where business

is carried out through the post office, telephone or email
-Ordering of the goods is done through the post office telephone or email and delivering of goods is done by post or courier
-There is no personal contact between the seller and the buyer and buyers get
information from advertisements.
-Goods are dispatched on the basis of cash with order (CWD) or cash on delivery (COD).

Characteristics/features of Mail order stores

-They sell the goods through the post office

-They operate on cash with order (CWO) or cash on delivery (COD) terms

-Heavy advertisement are involved

-Customers do not visit the selling premises.

-There is no personal contact between the buyer or the seller.

-All transactions are done through the post office.

-They deal with goods that are less bulky, have high value, and are durable and not too fragile.

-May have large warehouses

Advantages of Mail order stores

They reach customers who are far for away from the shopping centres

Do not require the services of sales personnel or shop attendants for skilled
labour since selling is routine

Total control of distribution is possible

Payments is made with order or delivery so there is little chance of bad debts

Eliminates the loss associated with shop space, thus saving on rent

Supply of goods is based on order thus a trader requires little working capital

The method eliminates trips to congested stores and lengthy waits queues

Do not require large storage space for goods.

Disadvantages of Mail order stores

Advertising and postage costs may increases the price of goods

There is lack of personal contact between the seller and the buyer

There is limited variety of goods on offer

Customers do not have the opportunity of inspecting goods before buying

There are no credit facilities

The method is only suitable for those who can read and write

Should there be a problem with the post office.e.g industrial action like strikes, the business may be affected

Difficult to operate in places where post office services are poor or
unavailable

Chances of being defrauded are high.

Functions of Retailers

These can be discussed as services rendered to consumers, wholesalers and producers
Services Rendered to consumers

i) Offers credit facilities

Retailers are in close contact with the
consumers and some may give them credit facilities

ii) After-sales services

Retailers who sell technical goods e.g. cars,
electronics e.t.c may offer after sale services to consumers e.g. transport,installation repair e.t.c

iii) Provision of variety of goods

Retailers stock a wide variety of goods
from different wholesalers and manufactures enabling the consumers to have a wide choice.

iv) Advising consumers

Retailers may offer advice to consumers on
choice and use of products.

v) Availing needed goods

Retailers make goods available to consumers at
the right time and place.

vi) Breaking bulk

Retailers sell goods to consumers in convenient
quantities

vii) Accumulating bulk

viii) Stabilizing prices

By ensuring that goods are continuously available to consumers

Services Rendered to wholesalers.

i) Retailers store goods and relieve the wholesalers the burden of storing goods and the storage costs.

ii) They relieve the wholesalers the burden of transportation

iii) Retailers advice wholesalers on market trends(on consumers demand)and give valuable information

iv) They help in distribution of goods to the consumers

v) They help in breaking bulk on behalf of the wholesaler

vi) They finance wholesalers to continue with their operations through paying for the goods

vii) They relieve the wholesaler of some risks that arise from the storage of goods such as theft, fire and accidents.

Services Rendered to producers

i) Through wholesalers retailers provide very vital information to manufactures about market demand

ii) They advertise goods on behalf of producers

iii) They sell and market goods to consumers. This relieves the manufactures the task and risk of retailing

iv) They store goods on behalf of the producers

v) They break bulk on behalf of producers to consumers

vi) They finance producers by buying and paying cash

Home Trade Page 1 | Home Trade Page 2 | Home Trade Page 3 | Home Trade Page 4 | Home Trade Page 5