CHAIN STORE OR MULTIPLE STORE —MEANING, CHARACTERISTICS, ADVANTAGES AND DISADVANTAGES

A chain store is a network of retail shops, owned and operated by large manufacturers or intermediaries.

It is a group of retail outlets located in different locations but under the control of a head office.

A chain store usually has different branches distributed around a city, region or country.

The McDonald's restaurant, which typically sells hamburgers and beverages through its outlets in various parts of a country, is arguably the best-known example of a chain store.

McDonald Restaurant is an example of chain store s

One important feature of chain stores is that they specialize in the sales of one kind of product.

That is, the same kind of goods is often sold in each branch of the store.

Multiple stores is another name for chain stores.

Characteristics of Chain stores or multiple stores 

1. Same line of product: Every retail outlet under the chain store specializes in the same line of products.

More so, the shop and product designs of chain store branches are always the same.

2. Location: Chain stores are usually located in different places of the country near consumers.

Ideally, they are situated in densely populated locations where a large enough audience can be reached and significant sales may be made.

3. Central management: In a chain store, the branch managers make decisions regarding the day-to-day activities.

The head office receives daily reports from the branch managers detailing sales, cash deposits, and supply requirements.

Also, important matters and decisions are usually taken by the head office.

4. Centralized purchase of goods: In chain stores, the head office manufactures or procure goods on behalf of the branches

After purchasing the goods, the head office then distributes the goods to each branch according to their needs.

Therefore, in chain stores, the branches do not purchase the goods they sell. They are only given the goods by the head office.

5. Identical designs: All shops under chain stores have the same appearance and designs.

This helps consumers easily identify the chain stores.

6. Uniform prices: Prices of goods are the same across all chain stores' branches

The head office purchases the good and fixes the price at which each good should be sold across the chain stores branches in a particular locality

READ ALSO: 11 CHARACTERISTICS OF CHAIN STORES

Advantages of Chain stores or multiple shops

1.  Economies of scale: Rather than purchase goods locally through branch offices, chain stores purchase goods centrally through the head office.

This means that goods can be purchased in bulk and economies of scale can be gained from purchasing goods in bulk.

2. No bad debts: Because chain stores mostly operate on a cash basis, the risk of bad debts is entirely eliminated.

3. Product variety: As chain stores focus on the sales of a particular type of goods, they can sell a different variety of that particular product.

Therefore, chain stores provide consumers with wide options of a specific good to choose from.

4. Risk spreading: A chain store acts as a form of risk management because losses in one store are offset by gains in other stores.

More so, as a result of different branches, the owners of chain stores can easily identify store that are not profitable and take action to make them more profitable.

5. Convenience to customers: The whole idea of chain stores is to serve customers at the location that is close to their residences.

Chain retailers accomplish this by positioning their branches close to residential areas.

Chain stores are more convenient because they are situated close to the clients.

6. Easy transfer of goods: If a particular branch run out of stock, the neighborhood branch may transfer goods to it pending the delivery of goods by the head office.

Also, the central office can quickly move employees from one branch to another branch if a branch lacks sufficient workers

Disadvantages of Chain stores

1. Require large capital: To establish a chain shop, one must open numerous retail locations and stock those locations with merchandise.

Setting up all of this requires a significant amount of money, which may deter some people from doing so.

2. Coordination problems: As chain stores are made up of networks of retail outlets, there is a need for proper coordination and supervision.

If the head office lacks effective management skills, it will affect the business operations negatively.

3. Limited range of products: Chain stores generally sell only one or few types of products. 

Hence, such stores may not be to satisfy all consumer's needs like supermarkets.

4. Lack of credit facilities: In chain stores, sales are made on a cash basis. No credit facilities are given to customers.

Low-income earners may find chain stores less appealing because they do not provide credit facilities.

5. Lack of initiative: Each branch of chain stores is generally managed by branch managers, who must always obey the directive and instructions of the head office.

The result is that branch managers begin to rely on the central office for assistance on a regular basis, thereby losing the initiative to handle business issues on their own.

6. Risk of change in demand: Since chain stores specialized in the sales of only one good, they faced a risk of change in consumer demand, which could lead to a significant loss for the business

If the demand for the particular goods sold by the chain stores changes unfavourably, the business could be faced losses as a result of unsold inventory lying in the central depot.

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