Question

Discuss the features of a departmental store. How are they different from multiple shops or chain stores.

Answer 1

Department stores are basically large, fixed establishments that deal with a wide variety of products. The following points highlight the features of a department store:

(a) Central locations: Department stores are generally located in central areas so as to attract a large number of customers.

(b) Defined hierarchy: The management in department stores follows the same hierarchy that is generally followed in any joint-stock company. That is, the top management consists of a board of directors, with the managing director, the general manager, and the department managers under it in that order.

(c) Absence of middlemen: Department stores purchase goods directly from manufacturers and sell them to customers. Thus, they eliminate the role of middlemen.

(d) Centralized purchase with decentralized sales: In a department store, the purchases from manufacturers are handled by a single division that follows a centralised purchase policy. On the other hand, the sales are handled by the respective sections of the department store, which follow a decentralised policy for sales.

Differences between department stores and multiple shops

Basis of difference	Department stores	Multiple shops
Variety of products	They offer a wide variety of products to customers.	They deal with a single line of products and specialise in it.
Customer services	They offer a wide variety of customer services.	They offer limited customer services.
Location	They are located in central parts of cities so as to attract a large number of customers.	They have multiple locations—that is, they are spread across cities or towns.
Pricing policy	They do not follow a fixed pricing policy as the prices of products vary across departments.	They follow a fixed pricing policy across all the shops that are part of a particular chain.
Cost of failure	They have a very high cost of failure because of the huge initial and operating expenses.	They have a limited cost of failure because the initial investment is not very large and the losses of one shop can be covered by the profits of others.