After reading this article you will learn about:- 1. Meaning of Department Store 2. Features of Department Store 3. Advantages 4. Disadvantages.
Meaning of Department Store:
A department store is a huge retail shop situated at a central place in the city, divided into a number of small shops or departments each dealing with one or two lines of goods and specialising in those lines. All such departments or speciality shops are under one roof and under one management and control.
Such a kind of huge retail organisation, many a time, looking like a miniature township, is usually owned by big company as it requires huge capital. Thus, a unit of sales organisation assumes a very big size under a department store.
The department store is, therefore, a mere collection of shops all under the same palatial building, each shop dealing in a particular line of retail trade. This kind of shopping is often referred to as ‘one-stop’ shopping. Instead of increasing sales by opening branches to sell the same goods (Multiple shops), a business can as well sell different kinds of goods in the same building (Dept. Store).
Features of Department Store:
i. The basic principle of department store is that it is easier to sell more goods to the same customer by keeping a wide variety of goods than to find many customers for the same kind of goods.
Hence, a department store acts as a universal supplier of a wide variety of goods. It tries to satisfy all expected human wants under one roof. Thus, it provides maximum shopping convenience, so that a customer may make all his purchases at one place.
ii. Management, control and sales are centralised.
iii. Location of the store is at a central place. It is the most important factor in determining the success of the entire organisation. The store is usually situated in the heart of the city where maximum number of people do come for some purpose.
iv. It caters to the needs of richer and better class of population. It gives more emphasis on quality and bigger choice of goods, and on other services and comforts. Price is given a secondary consideration and hence, it cannot suit the requirements of poorer people.
v. It has to pull the customers by continuous advertisement, window display, etc. In order to attract people to the department store, one of the departments may be used as a loss seller, i.e., it may be run at a loss to boost the sales of other departments. Some departments are included for ‘prestige’ reasons. This practice is common in the U. S. A.
vi. It maintains very large number of consumer goods and a wide variety of their designs, colours and styles.
vii. Purchases of all departments may be centralised, i.e., carried on by the Purchase Department, or may be decentralised, i.e., carried on by individual department concerned. Under the system of decentralised purchases, each department manager is allotted a definite monthly sum and he may be given full liberty to make his own purchases within that fixed sum.
Advantages of Department Store:
i. Shopping Convenience:
A department store enables a customer to purchase all his requirements at one place. Thus, it saves the time and labour of the customers required in going to different shops; department stores deal in everything required for daily life. For instance, a newly married couple can establish their home by purchasing all their requirements at one place.
ii. Automatic Mutual Advertising:
One department advertises for the other. A customer, who enters the store to purchase a couple of articles, can easily be persuaded to purchase so many other articles from other departments situated in the same building.
iii. Offer of Complete Service:
Facilities and services offers by the store attract considerable number of customers. One does not like to go to other retail shops. The courtesy, fair treatment and services such as free home delivery, increase the sense of laziness, love of luxury and temptation for all kinds of comforts while making purchases.
For durable consumer goods, like Radio or T.V. sets, Tape Recorders, Refrigerators, Washing Machines, Electric Appliances, etc., hire purchase system is always offered to the customers.
iv. Central Location:
The store is located in the heart of the city. It is, therefore, easily accessible to all persons staying in the surrounding localities. The central situation, attractive window display, comforts and amenities, and intensive advertising attract a very big number of customers than an ordinary shop situated in a corner of a street.
v. Wide Selection:
Since a department store keeps very wide variety of goods of different designs, colours, styles, etc., a customer can make much better selection of goods at the time of purchase.
vi. Economies of Large-scale:
As it is a large-scale organisation it enjoys all advantages and economies of a large-scale organisation.
vii. Adequate Capital:
It possess huge capital and hence, it can spend considerable amount of money in continuous advertising to keep its name before the public. Through periodical grand sales and reduction sales it attracts attention of the public and becomes very popular.
viii. Attractive Layout:
The layout of the store is convenient and attractive to customers.
Disadvantages of Department Store:
i. Absence of Local Convenience:
Since the store is situated far away from the residential areas, suburban people cannot take advantage of the department store. The absence of local convenience is partly compensated by opening a mail-order section in the department stores.
ii. High Prices:
Such stores have to pull customers and hence, they have to offer extra services and facilities. They have also to incur heavy expenditure in window display, advertising, etc. The establishment and overhead charges of a department store are considerable.
So the prices charged by the store are slightly higher than those charged by other small retail shops. Only richer persons, who care for quality and service and not for price will take the advantage of the department store.
iii. Higher Risk of Loss:
As the purchase are made on a large-scale, an error of judgement by the ‘buyer’ will involve the firm in great financial loss. Changes in taste and fashion, and market fluctuations in prices will also affect adversely in big department store.
There may be; a constant danger of dead stock in the store. Heavy expenditure on advertising as well as salaries of assistants and department managers reduce the scope of profits. Such stores have a better future in a highly industrialised country like the U. S. A. and the U. K. than in a developing country like India, where general standard of living is low and where bulk of the population resides in rural areas and small towns.
iv. Limited Scope in Developing Countries:
The department store requires huge amount of capital. Hence, they have little scope in less advanced countries like India, where there is a universal shortage of capital. Furthermore, in a developing country like India top priority is given to economic development and investment in consumer goods is relatively-discouraged.
Hence, the department stores in such a country deal, in general, variety of articles instead of ultra modern and luxurious goods.