The number of retail stores operating under common ownership and management constitutes multiple stores or Chain store. A multiple or chain store consists of a number of similar shops owned by a single business firm.
Advantages of Chain or Multiple Stores
The main advantages of chain or multiple stores may be explained as under:
1. Advantages of Large Scale Production
Since a large number of multiple or chain stores are established at various places, goods are produced or purchased by the central office of these shops at very large scale.
Thus, the owners of these stores get all the advantages of large scale production.
2. Need for Minimum Stock
Goods to all the stores are supplied from head office and these shops can get the goods of their requirements at very short notice.
The head office maintains minimum stocks and meets the requirements of all these stores.
3. Economy in Advertising
Since all the shops deal in the same line of products, the central office can adopt a common advertising program for all the stores.
The advertisement made by the central office is the advertisement for all the stores.
Thus, the owners of these shops get economy in advertising.
4. Lower Selling Price
Since the goods are purchased and sold at a large scale, it reduces the cost of production and procurement.
It also enables the owners to sell their goods at reasonable prices.
5. Ability to Spread Risk
The principle of operating multiple or chain stores is not ‘to lay all the eggs in one basket’.
Since multiple or chain stores are located at different places, the risk of owners spreads all over the country and they can shift a unit sustaining a loss from one place to another.
6. Speedy Turnover
Since multiple or chain stores are located in different localities and are in direct touch with the customers, they are in direct touch with the changes in the needs, demands, and fashion.
Therefore, they maintain the stock which can be sold fast, and thus, these shops can achieve speedy sales.
7. No-Risk of Bad Debts
Since the multiple or chain shops sell only for cash, there is no risk of bad debts.
8. Efficient Management
Highly qualified and experienced managers and employees can be appointed for the management of these shops.
It helps these shops to be managed very efficiently and effectively.
9. Research and Development
Since multiple or chain stores is a large scale retail organization, It provides an opportunity for undertaking research and development.
The owners can develop new models.
10. Elimination of Middlemen
Multiple/chain shops is a retail organization, the main object of which is to eliminate the middleman.
This organization helps in establishing direct contact with the manufacturer with consumers.
11. Easy to Recognise
Since all the multiple or chain stores are exactly similar in design, color display, and decoration, etc.
It becomes very easy for consumers to recognize these shops.
12. Availability of Standard Goods
Customers feed that these shops deal in standard goods only and for this reason, they prefer to purchase the goods from these shops.
13. Uniform and Fixed Prices
Goods are sold at all the shops throughout the country at uniform prices and prices at these shops are always fixed.
For this reason, customers do not feel any need for bargaining at these shops.
14. Nearest to Consumers
As these shops are established in different parts of Different cities of the country, goods are made available to the consumers nearest to their home.
Disadvantages of Chain or Multiple Stores
Main disadvantages of chain or multiple stores/shops can be explained as under:
1. Need for Heavy Amount of Capital
As a large number of shops are established under this form of retail Trade Organisation, it requires heavy amount of capital.
2. Lack of Credit Facilities
As multiple or chain stores sell only on cash payment, a large number of customers who want to purchase goods on credit, cannot do so from these shops.
3. Lake of Personal Services
As all the employees of multiple or chain stores work on a paid basis, they do not take pains in selling the goods and customers feel the lake of personalized service.
4. Inflexible in Practice
Multiples or chain stores deal only in standard and selected goods.
These shops Do not maintain variety. As all the shops are controlled from the central office, these shops cannot adjust to local conditions.
5. High Operational Costs
Chain stores are a large scale retail organization. Large scale operations create the problem of supervision, control, and coordination.
It increases the costs of operation considerably.
6. Heavy Loss on Change in Demand
If the demand for the product being dealt with by the multiple or chain stores’ changes.
The organization has to suffer heavy loss because the total quantity of such product with all the shops throughout the country is always very high.
Thus, now you know the advantages and disadvantages of chain or multiple stores.