In this article we will learn about:- 1. Meaning of Multiple Shop System 2. Characteristics of Multiple Shop System 3. Organisation 4. Advantages 5. Disadvantages 6. Effects on Middlemen.
Contents:
- Meaning of Multiple Shop System
- Characteristics of Multiple Shop System
- Organisation of Multiple Shop System
- Advantages of Multiple Shop System
- Disadvantages of Multiple Shop System
- Effects on Middlemen in Multiple Shop System
1. Meaning of Multiple Shop System:
The expression ‘multiple shops’ denote that similar shops are established in multiples by the sane organisation. In U.S.A., multiple shops are referred to as chain stores.
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The multiple shop system is an extension of the simple retail business. The concept of multiple shop system originated in Europe. In order to draw a large number of customers, certain companies open a large number of shops at different places in different towns and cities.
According to S.E. Thomas, multiple shop system is one in which there is a large number of retail shops owned by the same proprietor which are scattered over the various places of particular city of a country and are engaged in the same line of activity.
In India, Bata Shoe Company and few other concerns have opened multiple shops.
2. Characteristics of Multiple Shop System:
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The characteristics of multiple shop system are:
1. Each shop deals in the same line of products.
2. The products are meant for everyday use.
3. The declaration, setting and get-up of all shops are same.
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4. The head office of the organisation controls and manages all shops through a uniform policy.
5. The policy is to have centralised buying with decentralised selling.
3. Organisation of Multiple Shop System:
Multiple shops are, by nature and activities, large- scale retail units. These are owned and operated by companies in most cases, e.g. Bata Shoe Co., Delhi Cloth Mills, etc. So, the board of directors of a company is the highest authority which controls the affairs of the multiple shops.
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The organisational set-up is as follows:
The overall control and direction in the management of the multiple shops rest with the General Managers. The District Manager pay periodical visits to the shops in their areas for inspection, superintendence, and guidance. The local shop managers remain responsible only for the efficient working of the shops.
For a multiple shop organisation, unified advertisement campaigns are made by the company and thus, an Advertising or Publicity Manager is appointed in addition to the Sales or Marketing Manager.
The sales in the shops are invariably effected on cash basis and the receipts are deposited with bank every day. The expenses of the shops e.g. rent, wages and salaries, etc. are all directly paid by the company’s head office.
Since stock control is an important factor for the multiple shops, maximum and minimum quantities of stock are determined by the District or General Managers. The shops maintain stock sheets and submit periodical returns to the higher officials.
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In order to assess the efficiency in the workings of the multiple shops, periodical comparative statements showing the average expenses, gross profits, etc. are made out. This provides insights to the management to spot out the weaknesses in each of the multiple shops.
4. Advantages of Multiple Shop System:
The multiple shop system has the following advantages:
1. Rapidity in Turnover:
By being located in different places the system can know the customers closely, feel their habits, and stock such varieties which sell fast. The knowledge of the current market trends increases the rapidity in the sales turnover.
2. Stock Adjustments or Transfers:
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The inter-unit transfer of products in the same area or locality, in case .of any shortage of a particular variety in a shop, affords flexibility in the operations and minimises the chance of dead stocks.
3. Common Advertising:
Common types of advertisements for all shops reduce the publicity expenditure to a great extent, which afford competitive advantage.
4. Elimination of Bad Debts:
The multiple shops effect sales on cash basis and thereby bad debts do not occur.
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5. Operational Economy:
The factors like rapid turnover, bad debts elimination, common advertising, simplified accounting system with no credit sales, etc. attribute to the lower operational costs for the multiple shop system.
6. Low Prices:
Because of economical operations, the system is able to offer goods at cheaper prices which in turn increases the sales turnover.
5. Disadvantages of Multiple Shop System:
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The multiple shop system, in spite of the above-stated advantages, suffers from the following short-comings or disadvantages:
1. Absence of Varieties:
An ordinary retail store or a departmental store can offer product varieties far the choice of the customers. This is totally absent as the multiple shops deal in a limited or standardised line of products. Moreover, the customers cannot compare the goods with those of competitors on the spot.
2. Rise in Operational Costs:
With the increase in the number of multiple shops, administrative and supervision problems crop up and their cost increase.
3. Poor Public Image:
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The multiple shops do not provide personal services to the consumers like credit facilities, home delivery service, etc. The present day consumers prefer to have such services in addition to quality and low price. These have adverse effects on the public image.
4. Loss of Initiative on the Part of Shop Managers:
The orders, instructions, and policy decisions of the company with regard to multiple shops are rigid and the shop managers have no discretionary authorities. As a result, such managers loose interest and imitativeness in the sale of the goods in stock.
6. Effects on Middlemen in Multiple Shop System:
The multiple shops organised and operated by the companies are a type of manufacturers’ retail stores. They are virtually integrated with the companies as regards the marketing and selling functions. These companies do not engage either the wholesalers or the retailers as they themselves perform all these activities while dealing with the customers.
In other words, the functions of the middlemen are taken over by the manufacturers through the operation of multiple shop system. Thus, it can be stated that the system is an attempt to step the activities of middlemen who share profit margin at the costs of the manufacturers and the consuming public.
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The exponents in favour of the multiple shop organisational set up recommend that the system is tuned with the present day business conditions and environment where the middlemen’s role is highly unsatisfactory in the light of the growing expectations of the consumers regarding price, quality, availability, etc.
In addition to the benefit derived from the shortest possible channel of distribution of goods from the producers to the consumers via multiple shops, the system can provide either more profits to the companies or lower prices to the consumers instead of allowing a profit margin to the middlemen.