LARGE SCALE RETAILERS

Business studies study module

Large-scale retailers have the following features/characteristics;

  • Require large amounts of capital to start and maintain
  • They operate from larger fixed premises
  • They operate mainly in urban areas
  • They have a large labour force
  • Buy goods in large quantities from wholesalers or directly from producers and are therefore allowed large trade and quantity discounts and other favourable credit facilities
  • Require the services of specialists such as salespersons and accountants
  • May occupy one large premise or several premises in the same town or in different towns
  • They have large stocks and large sales volumes

TYPES OF LARGE SCALE RETAILERS

  1. Supermarkets:A supermarket is a large-scale self-selection/self-service store that deals mainly with household goods such as utensils, foodstuffs and clothes. It has the following features;

Features of supermarkets

  • Requires large capital to start
  • They stock a wide variety of goods
  • Offers self service facilities
  • Goods have price tags or bar codes
  • Prices of goods are fixed
  • No credit facilities are offered
  • Sell at comparatively low prices
  • Goods are systematically arranged for easy selection
  • Shoppers are provided with baskets or trolleys for convenience
  • There is minimal interaction between buyer and seller
  • There are employees who pack goods for customers at the pay points.

Advantages of supermarkets

  • Prices may be relatively low because they buy their goods in bulk and are given discounts
  • Saves time as customers are able to get most goods they require under one roof
  • Self-service saves the customers time
  • Few attendants are employed therereducing the monthly wage bill
  • Impulse buying leads to more sales, hence high profits
  • Bad debts are avoided because there are no credit sales.
  • The price tags on goods help customers to monitor their spending.

Disadvantages of supermarkets

  • Do not offer credit facilities to customers
  • Do not deliver goods to the customer’s premises
  • Are found mainly in urban areas
  • May incur losses due to pilferage of goods
  • Impulse buying may lead the customers to buying goods they may not need.
  • They are expensive to start and operate due to the large amount of capital required
  • Prices are fixed and bargaining is not accepted, which discourages some customers
  • Minimal personal interaction limits chances for making more sales
  1. Hypermarkets

A hypermarket is a large shopping complex/centre comprising a variety of businesses managed different people all housed in one building

Examples; village market, sarit centre, Tuskeys-Kisumu, Nakumatt mega city-Kisumu e.t.c

Features/Characteristics of Hypermarkets

  • Are served with good access roads
  • They have ample parking space
  • Many businesses in one building
  • Located in the outskirts of town
  • Offer a variety of goods and services
  • Occupy a large space.

Advantages of Hypermarkets

  • Offer ample and secure parking space to customers
  • Customers can do all their shopping in one building
  • They are usually open for long hours
  • They may provide credit facilities accepting credit cards
  • There is less traffic congestion as hypermarkets are located away from urban centres
  • Provide a wide variety of goods and services to customers under one roof.
  • They have fair prices that are customer friendly.

Disadvantages of Hypermarkets

  • Are only convenient to customers who have cars because they are situated away from city centres
  • They serve limited number of people due to their location
  • They require large amount of capital to establish
  • They can easily exploit their customers since their prices are not controlled
  • Require large amount of space which are not available in central business district (CBD)
  • They spend a lot of security to safeguard properties
  • 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 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 hire purchase 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.
  1. 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 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 provide quality 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 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.
  1. 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 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.



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