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Monday, November 13, 2017

Departmental Store and Super Market

Unit – 2: Types of Retailing



Department Stores
These are large scale retail stores selling under one roof and one control a variety of goods divided into different departments, each of which specializes in an individual merchandise. Converse is of the opinion that a department store is a retail shop handling several classes of goods including fast moving consumer goods, each class being separated from others in management, accounting and location. It is viewed by Clarke as that type of retail institution which handle a wide verity of merchandise under one roof which the merchandise grouped into well-defined  departments which is centrally controlled and which caters primarily to women shoppers.
Thus a department store is a retailing business unit that handles a wide variety of shopping and specialty goods and is organized into separate departments for purposes of sales promotion, accounting control and store operation.
Recent trends are to add departments for automotive, recreational and sports equipment, as well a services such as insurance, travel advice and income-tax preparation. Department stores are distinctive in that they usually are oriented towards service. They are usually shopping centers.

Classification of Department Stores
These stores may be classified either according to ownership or income groups to which they appeal.
a) On the basis of ownership these are:
(i) The independent; (ii) The ownership group; and (iii) Chain department Stores.
Independent stores are owned by a financial interest which does not own other similar stores.
Ownership group stores are those stores which were formerly dependent but now have been combined.
Chain department stores are those stores which are centrally owned and operated.
b) On the basis of income groups, These stores cater to the middle and high income  groups. They usually handle good quality merchandise and offer maximum  service to the customers. Other stores cater to the needs of the lower income group people.
c) Sometimes there is also to be found what are called leased department stores. Although it appears to most customers that all departments in a department store are owned and operated by the store, that is not always the case. The operations of certain departments are sometimes turned over to leases and such departments are called leased departments.

Some of the important features of a departmental store are as follows:
1. Large retail establishment: Departmental store is a large size retail institution under a roof where different goods are sold out. Adequate capital needs to be invested to establish, operate and expand it. Generally, departmental stores are operated as joint stock company.
2. Centralised Location: These stores are generally located at a central place in the heart of a city, which caters to a large number of customers.
3. Wide varieties of goods: To provide all kinds and varieties of goods to satisfy customers' needs in the same place is an important feature of departmental store. It is said 'from needle to plane, i.e A to Z goods can be found in a departmental store'. All the consumers goods from ready-made garments, household goods, furniture, electrical goods, medicines, motor cars to many others are sold by departmental store.
4. Centralised Management: As the size of these stores is very large, they are generally formed as a joint stock company managed by a board of directors. There is a managing director assisted by a general manager and several department managers. All the departments of departmental store are operated under the management and control of central level management. But each department is let free to purchase, sell and advertise their goods.
5. Elimination of Middlemen: A departmental store combines both the functions of retailing as well as warehousing. They purchase directly from manufacturers and operate separate warehouses. That way they help in eliminating undesirable middlemen between the producers and the customers; and
6. Centralised Purchased: They have centralised purchasing arrangements. All the purchases in a department store are made centrally by the purchase department of the store, whereas sales are decentralised in different departments.
7. Special facilities: Departmental stores make all the necessary goods available to customers. They also provide different facilities to the customers to attract them. Departmental stores provide goods on credit, help customers to carry goods to their home, they also provide cafeteria, telephone, mail, and other services to customers. 
Advantages of Departmental Stores


The major advantages of retailing through departmental stores may be listed as follows:
1.       Attract large number of customers: As these stores are usually located at central places they attract a large number of customers during the best part of the day.
2.       Bulk Buying: Departmental stores buy goods in large quantity from producers. As a result, they get quality goods at low price. They can also take help of specialist in buying goods. Those having strong financial position can buy goods in large quantity due to which per unit price and transport cost also falls low.
3.       Convenience in buying: By offering large variety of goods under one roof the departmental stores provide great convenience to customers in buying almost all goods of their requirements at one place. As a result, they do not have to run from one place to the another to complete their shopping.
4.       Attractive services: A departmental store aims at providing maximum services to the customers. Some of the services offered by it include home delivery of goods, execution of telephone orders, grant of credit facilities and provision for restrooms, telephone booths, restaurants, saloons etc.
5.       Economy of large-scale operations: As these stores are organised at a very large-scale, the benefits of large-scale operations, particularly, in respect of purchase of goods are available to them.
6.       Promotion of sales: The departmental stores are in a position to spend considerable amount of money on advertising and other promotional activities, which help in boosting their sales.
7.       Research: Departmental stores can carry out study and researches of different sectors. As a result, effectiveness comes in its operation with minimum cost and the profit increases. 
8.       Ability to bear loss: In comparison to other retailing institutions, departmental stores can have more ability to bear loss. In case any one or two departments got loss in business, the profits earned by other departments can easily compensate the loss. The financial position of departmental store becomes stronger than of other retailing institutions.
9.       Economy in advertisement: Departmental stores make effective a well as attractive advertisements taking help of specialists. Each department also advertises goods by attractively displaying and decorating shop. The departments do not need to spend on advertising goods, as a result cost for advertisement becomes automatically low.
Limitations of Departmental Stores
However, there are certain limitations of this type of retailing. These are described as follows:
1.       Large investment of capital: Large amount of capital is required to operate departmental store. The business entrepreneurs having limited capital cannot operate departmental stores.
2.       Limited number of customers: Departmental store attracts mainly rich class customers. poor customers hesitate to enter departmental stores. It becomes difficult for some customers to buy goods from departmental stores, they feel uneasy to buy goods, takes longer time and prices of goods is higher in departmental stores.
3.       Lack of personal attention: Because of the large-scale operations, it is very difficult to provide adequate personal attention to the customers in these stores.
4.       High operating cost: As these stores give more emphasis on providing services, their operating costs tend to be on the higher side. These costs, in turn, make the prices of the goods high. They are, therefore, not attractive to the lower income group of people.
5.       High possibility of loss: As a result of high operating costs and largescale operations, the chances of incurring losses in a departmental store are high. For example, if there is any change in the tastes of customers or latest fashions, it necessitates selling of such out-of-fashion articles in clearance sale, to reduce the huge inventory of goods built up.
6.       Inconvenient location: As a departmental store is generally situated at a central location, it is not convenient for the purchase of goods that are needed at short notice.
7.       Difficulty in management: Departmental stores are difficult to efficiently manage and run smoothly. Very efficient, skilled and able manager is needed. Otherwise, it becomes impossible to operate departmental stores.
Super Markets
A super market is a large retailing business unit selling wide variety of consumer goods on the basis of low margin appeal, wide variety and assortment, self-service and heavy emphasis on merchandising appeal. The goods traded are generally food products and other low priced, branded and widely used consumer products such as grocery, utensils, clothes, electronic appliances, household goods, and medicines. Super markets are generally situated at the main shopping centres.


Goods are kept on racks with clearly labelled price and quality tags in such stores. The customers move into the store to pick up goods of their requirements, bring them to the cash counter, make payment and take home the delivery. Super markets are organised on departmental basis where customers can buy various types of goods under one roof. However, as compared to departmental stores, these markets don’t offer certain services such as free home delivery, credit facilities, etc., and also don’t appoint sales persons to convince customers about the quality of products.
Some of the important characteristics of a super market are as follows:
1.       A super market generally carries a complete line of food items and groceries, in addition to non-food convenience goods;
2.       The buyers can purchase different products as per their requirements under one roof in such markets;
3.       There are no selling counters or selling assistants to help the customers. A super market operates on the principle of self-service. The distribution cost is, therefore, lower;
4.       The prices of the products are generally lower than other types of retail stores because of bulk purchasing, lower operational cost, and low profit margins;
5.       The goods are sold on cash basis only.
6.       The super markets are generally located at central locations to secure high turnover.
7.       They function on cash-and-carry lines and offer no credit.
8.       The products stored in a super market are properly packed and placed on separate racks in order to facilitate purchasing by the buyer.
9.       The buyer is completely at ease while buying as there is no undue sales pressure by counter salesmen.
10.   They are large retail organisations and are a useful channel of distribution.
Advantages of Super Market
Super markets are becoming more and more in our country because of its following advantages:
1.       All Products under one roof: Super markets offer a wide variety of products at low cost, under one roof. These outlets are, therefore, not only convenient but also economical to the buyers for making their purchases.
2.       Low Price: Goods are found at relatively at low price in supermarkets because they purchase larger quantity of goods, sales volume rises high. It takes less operating cost. They take less profit from customers.
3.       Central location: The super markets are generally located in the heart of the city. As a result, these are easily accessible to large number of people staying in the surrounding localities.
4.       Freedom of selection and self-service: The customers should select goods themselves in supermarket. More freedom is given to select goods, due to which the customers can get more satisfaction. Such freedom is more appropriate for those customers who do not like interference of sellers.
5.       Wide selection: Super markets keep a wide variety of goods of different designs, colour, etc., which enables the buyers to make better selection.
6.       No bad debts: As generally the sales are made on cash basis, there are no bad debts in super markets.
7.       Benefits of being large scale: A super market is a large scale retailing store. It enjoys all the benefits of large scale buying and selling because of which its operating costs are lower.
8.       Prospect for large profit: Supermarkets can have prospect of earning more profit, because they purchase in large quantity and sell out small quantity. Moreover, they bear only little operation expenses and do not provide free services to customers. This automatically results in more profit.
Limitations of Super Market
The major limitations of super markets are as follows:
1.       No credit: Super markets sell their products on cash basis only. No credit facilities are made available to the buyers. This restricts the purchasing power of buyers from such markets.
2.       No personal attention: Super markets work on the principle of selfservice. The customers, therefore, don’t get any personal attention. As a result, such commodities that require personal attention by sales people cannot be handled effectively in super markets.
3.       Mishandling of goods: Some customers handle the goods kept in the shelf carelessly. This may raise costs in super markets.
4.       High overhead expenses: Super market incur high overhead expenses. As a result these have not been able to create low price appeal among the customers.
5.       Huge capital requirement: Establishing and running a super market requires huge investment. The turnover of a store should be high so that the overheads are kept under reasonable level. This can be possible in bigger towns but not in small towns.


6.       Need of central place: Central as well as proper places are needed to establish supermarkets. Supermarkets cannot be operated everywhere. It becomes difficult to find proper location to establish supermarkets, even if found they become costly.
7.       Unsuitable for all products: Only some products, which are known by customers, can be sold in supermarkets. Some goods need to be explained by sellers to the customers for their knowledge. So, the products unknown to customers cannot be sold out from supermarkets.
8.       Need of efficient manager: Compared to other retailing institutions, efficient manager is necessary for the operation of supermarkets. Otherwise, it cannot be operated successfully.
Difference Between Departmental Store and Super Market
Basis
Departmental Store
Super Market
Meaning
A department store is a large retail store offering a variety of merchandise and services and organized in separate departments.
Supermarket is a large self-service retail market that sells food and household goods.
Size
Departmental stores are larger than supermarkets.
Although supermarkets are large stores, they are typically smaller than departmental stores.
Floors
Departmental stores have many floors.
Supermarkets usually have only one floor.
Products
Departmental stores stock a variety of products.
Supermarkets do not usually stock clothing, jewelry, and hardware.
Fresh Products
Departmental stores do not usually stock fresh produce or meat.
Supermarket: Supermarkets stock fresh produce, dairy, and meat.
Ownership
Departmental stores are not typically owned by corporate chains.
Supermarkets are owned by corporate chains.

Super Market is superior than other markets
Supermarkets enjoy some of the most stable revenue streams of all business types because, while various consumer tastes and trends fluctuate, the demand for groceries and basic household items is fairly constant. For this reason, starting a supermarket chain can prove to become a strong and lucrative investment for some time to come. Whether you plan to start with one store or multiple stores, location is key to success in such a venture.
1. Identify your supermarket facility locations. To do this, conduct an analysis of the market in your prospective areas. You want your business to be located in a populous and accessible area with high levels of traffic. Conduct a feasibility study or hire a business analyst to do so.
2. Research your state's general business licensing and permit requirements. If you are opening multiple locations at once, you may need to meet a number of requirements, especially if you are opening locations in multiple states. Go to SBA.gov, click the "Starting and Managing a Business" pull-down menu, click the "Search for Business Licenses and Permits" link and click the appropriate state or states.
3. Obtain the required licenses to operate in each state where you will have a store. For example, if your supermarket chain is in Connecticut, the state may require Milk, Retail Store, Frozen Dessert Retailer, Bakery, Non-Legendary Drug and Liquor licenses. If you plan on selling gasoline in the parking lot as many grocery stores do, you need a Retail Gasoline Dealer Permit and a Weight & Measures Device Registration from the Department of Consumer Protection. If your supermarket chain is in various states, follow the licensing and permit requirements of your various supermarket locations.
4. Write a supermarket business plan. All businesses require business plans, especially ones that need financing. Your business plan should contain a market analysis that deals with the demographics in and surrounding your supermarket locations, the regular traffic around the stores, the prospects for profitability in your chosen locations and your financing requirements.
5. Hire the personnel necessary for running a supermarket. These may include cashiers, baggers, stock clerks, order fillers, meat, poultry and fish-processing workers, bakers, cooks and food preparation workers, food servers, hand laborers, freight, stock and material movers, hand packers and packagers, demonstrators and product promoters, first-line managers, general office clerks, bookkeeping, accounting and auditing clerks, category managers, such as snack food managers, marketing and sales managers, human resources, training and labor relations specialists and cleaning workers.

6. Choose suppliers. You may contact local food growers and producers in your area. You may also contact the manufacturers of the items you sell. For example, if you want to sell Procter and Gamble Products, you may go to order.pg.com, where you can register and order the company's products through the Internet. Wholesalers are another option. For supermarket wholesalers, check WholesaleCentral.com and B2BSupermarkets.com. To ensure that you are responding to the varying tastes and preferences of your prospective customers, offer variety and don't limit yourself to a single brand of items.

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