Chain Stores

In the huge competition in the business field, national and multinational companies had started to adopt the strategy of chain stores for market and product expansions. Since then, Chain Stores have become a popular and reliable technique to grow your business and profit. Any company can have a string of shops in a city or adjacent cities now and create a chain of their own. This article aims to help you better understand the concept of chain stores in business studies. 

What are chain stores?

When you’re taking a road trip across cities, have you seen Starbucks in every populated city? Then you know what chain stores are. Chain stores are retail organisations operated through a single management company. It is a string of shops, identical and regulated by one management head. Chain stores have brought forth a revolution in marketing strategy and growth. 

They are outlets, a lot more recurrent than previous ones which use identical systems to operate. One very effective strategy of building a chain is to put a store in every large shopping mall in the city while having a large and separate showroom or shop on its own. 

What are the Characteristics of Chain Stores?

Chain stores have benefitted the marketing and growth of the company. It has also become easier for customers worldwide to access the goods they need and lead a lifestyle that is not too different from each other. The characteristics of a Chain Store includes 

• Large Scale Retailing

Chain stores concentrate on large-scale retailing more than anything else. Chain stores are diverse and carry items of everyday use to luxury items. So automatically, the chain stores become a part of large-scale retailing. These stores carry branded goods, and the turnover is pretty good. The fixed shops are divided into the small scale and large scale. Chain stores are a part of the large scale. 

• Customer Care

A big part of the success of chain stores is how they treat their customers. The employees and branch managers who work for a chain of stores are given extensive training on approaching, attracting, and caring for the customers. The approach of departmental stores and the approach of chain stores should be very different. 

While departmental stores should always try and compete with the competition, chain stores are supposed to tend to a larger number of customers simply because the chain store strategy is efficient in drawing large crowds across countries and cities. 

• Specialised in One Line

Here it has an apparent disadvantage on departmental stores. Departmental stores carry many items under one roof, while chain stores are only specialised in one line. If you go to one restaurant or Starbucks of a chain, you will get a similar menu in all of them. 

This at first looks like a bad idea because why would customers go to chain stores when they can get whatever they want at one place. It is not true; research has proven that people consider the products of specialised stores better in quality and will purchase from them over departmental stores, ensuring a continuous turnover and generation of revenue. 

• Single Ownership

A single company owns a chain of stores. This strategy is what makes the growth of companies possible. If you have more stores in a chain than your competition, you will make a better profit and attract more customers.

• Centralised Purchasing

Single ownership means that all the stores’ products are bought and manufactured in the same places. This strategy generates similar customer satisfaction in all the stores. 

• Central Management

Even though there can be different branch managers in the stores of a chain, they have centralised management for policy-making and ensure that the stores have similar and identical running systems. It is also a strategy to ensure similar customer satisfaction everywhere. 

• Uniformity in Every Section

The single ownerships and the centralised management system ensure uniformity in every sector, whether pricing or employee behaviour. This uniformity and similarities in the action of all the stores maintain the reputation of the central company. 

• Minimum Size

Usually, a chain starts with two stores, but we cannot call them a chain until they reach a higher number. Most of the time, small scale companies that open up three or fewer stores in the populated shopping malls or areas of a city don’t identify them as chain stores. We need a larger number of stores to call a string of shops, chain stores.

• Handling a lot of Cash

Chain stores usually operate on the cash and carry model and don’t allow credit cards. Because the turnover is better than any departmental store, there is a lot of cash to manage in chain stores. It can be a challenge, but it is also a good sign. 

Limitations of Chain Stores as a Business Strategy 

Although chain stores have revolutionised the marketing strategies for large scale, they do have some disadvantages. Let’s look at what they are,

• A Limited Selection of Products

Like we said before, the lack of variety or range in products is a disadvantage of chain stores. So while this makes chain stores perfect for electronics or luxury goods, it puts them at a disadvantage for everyday products.

• Less Initiative

Because of the centralised management system, it becomes harder for local managers or employees to take things into their own hands and make decisions that will change things. The uniformity of chain stores that are so appreciated can be a very unhelpful environment for the growth of employees. 

• Missing Personal Touch 

Because the employees lack initiative or decision-making capabilities, the operation of these stores becomes very mechanical. And some customers find this lack of personal touch disconcerting. 

• Difficult to handle Change in Market 

Since the management has to produce everything in bulk, it is difficult to handle changes in demand. Suppose one chain of stores just got reimbursed with a product that was doing well, and the demand for that product dropped. If you have one store, it is easier to handle the extra product but handling a large number of products in every store of a chain is next to impossible. 

In Conclusion

Understanding the concept of chain stores and why a failed chain of stores can be detrimental to the company and cause it to shut down is very important. Chain stores are a big part of marketing strategies nowadays with their efficient centralised management and single ownership. But we have to remember the limitations of the chain stores as well.