DEPARTMENTAL STORES —MEANING, CHARACTERISTICS, ADVANTAGES AND DISADVANTAGES

A departmental store is a large-scale retail establishment where a wide range of products is offered for sale in a single structure.

It is a form of large-scale retail trade where an entire building is divided into smaller departments, each of which sells a particular kind of merchandise, such as stationery, books, shoes, food items, etc, 

In essence, a department store is a collection of many departments housed in the same structure, with centralized management of the whole department store.

Department store

In departmental stores, a wide variety of goods is sold under one building. The building is then divided into different departments, with each department selling a particular line of products.

The main purpose of departmental stores of to satisfy practically every consumer's needs under one roof.

Characteristics of Departmental Stores

1. Range of goods: A department store deals in a wide variety of goods and services ranging from food items, shoes, and clothes just to name a few. 

All of these are sold in one building but in different departments.

2. Size: Due to the nature of their operation, departmental stores are usually very large, offering customers a wide range of products.

3. Centralized management: A department store is made up of various departments, each of which sells a specific kind of goods

However, central management oversees the affairs of all departments in a department store

4. Facilities and amenities: For the convenience of the customer, a department store offers a restaurant, telephone, ATM, restroom, and other amenities that can improve the consumer's shopping experience.

5. Location: Due to the nature of their business, department stores are typically located in populated areas and prominent locations within a city.

It may be situated close to a major airport or market, or in areas where a large number of people congregate.

6. Capital requirements: Because department stores typically operate on a large scale, they require a significant amount of capital.

Most department stores sell a large number of goods and have restaurants, toilets and other facilities in a building.

You will agree with me that all of the aforementioned required large capital to set up.

7. Operating cost: In the same way the capital required to set up a department store is very high, the operating cost associated with department stores is also high.

First off, a department store frequently requires generators to power up its operations, and these generators need fuel to run. This in and of itself is very expensive

Second, because departmental shops often have a big number of departments, a significant number of workers must be employed to manage sales in each department. Again, this costs a lot of money

Because of the huge capital outlay and cost of operation, most department stores are usually run as joint stock companies. 

Advantages of Department Stores

1. Convenience for Consumers: Departmental store allows customers to buy everything they need under one roof.

As a result, time and effort that would have been wasted going from store to store in search of a specific item are saved.

2. Provide variety: Customers can find a wide range of products and services at department stores.

Customers are given the freedom to select the products they want depending on their preferences.

3. Excellent customer service: Department stores are usually organized on a large-scale basis.

As a result, they can employ competent staff to provide the best services to customers.

Moreover, department stores usually have restaurants, toilets and Point of Sale (POS), which can enhance the service delivered to the customer.

Additionally, they may offer home delivery to selected customers.

4. Economies of large scale: Department stores benefit from economies of scale by buying items in bulk, which lowers or eliminates the transportation costs involved with break-bulk purchases.

The economies of large scale gained by departmental stores can lower costs and increase the profit of the business.

5. Easy to set up: A departmental store is usually organized as a joint stock company or limited liability company.

This makes it easy to obtain credit and other sources of funding from a financial institution.

6. Efficient management: As it is usually organized on a large-scale basis, a department store can employ competent and efficient managers to oversee the affair of each department and the organization as a whole.

The employment of competent and efficient managers can help improve the efficiency of the whole organization.

7. Attracts a large number of customers: On normal days, a large number of people usually visit department stores for their shopping.

This is because departmental stores are usually located in central places and places where 'things happen in the city.

Disadvantages or Limitations of Departmental Stores

1. Large capital requirements: Because of its scope and scale of operation, a departmental store required large capital to set up, which makes it very difficult to set up.

2. Lack of personal touch with customers: On an average day, hundreds of people troop into departmental stores for their shopping.

This makes it very difficult to provide adequate personal attention to the customers in the stores.

3. Distance: Department stores are typically located in a central position and far away from residential areas.

As a result, they are not convenient for buying goods of daily use. 

Indeed, most consumers find it more convenient to buy everyday necessities from hawkers and other itinerant retailers than buy from departmental stores.

4. Coordination problems: In a department store, different departments sell inside of the same structure, which calls for effective coordination between the various organizational departments

However, effective coordination between various departments may prove challenging.

They might be a shortage of staff in one department, which may necessitate the transfer of one staff to another department.

They may be arguments between staff of different departments or the same department, and these may not augur well with coordination in the organization.

All of these things have the potential to make the organization less effective.

5. High business risk: Department stores usually carry high business risk.

The owners of the departmental stores face a high risk of loss especially if there is a change in consumer tastes and preferences, which may necessity selling at a low price so as not to have large unsold stocks.

6. High operating costs: To effectively run a departmental store, one has to rent a shop or buy a building, fill the building with goods of different varieties, employed a large number of people, and provide other convenient services to customers.

All of these costs are reflected in the price of goods sold to customers.

7. Stealing problems: Departmental stores has to deal with the pilferage of goods by customers. 

Consumer shoplifting from department stores occurs frequently.

READ ALSO: DIFFERENCES BETWEEN ITINERANT RETAILERS AND NON-ITINERANT TRADERS

Employees of departmental stores are also known to misuse or steal goods from the stores. All of these activities can contribute to business loss in department stores.

Final words

To repeat, departmental stores are large-scale retail establishments that sell a variety of goods under one roof.

A departmental store has the following characteristics: it offers a wide variety of goods, it is located in a prominent place in the city, its capital requirement is very high, and it usually has centralized management.

The following are advantages of a departmental store: it is very easy to set up, it offers convenience for the customer, it enjoys economies of scale, and it attracts a lot of consumers.

The disadvantages of a department store are high business risk, high operational costs, high capital requirements, and coordination challenges.

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