Fixed Shop Retailers

Fixed shop retailers are the most common type of retailing seen in the marketplace. As the name suggests, these retailers maintain a permanent establishment to sell their merchandise, and so, unlike itinerant traders, they do not move from place to place to serve their customers.

Characteristics

• (a) Greater resources, larger scale: Compared with itinerant traders, fixed shop retailers normally command greater resources and operate on a relatively large scale. Even so, they range widely in size, from very small shops to very large stores.
• (b) Variety of goods: They may deal in many different kinds of products, including both consumer durables and non-durables.
• (c) Greater credibility and service: This category of retailer enjoys greater credibility in the minds of customers and is able to offer more services, such as home delivery, guarantees, repairs, credit facilities and availability of spares.

Types

On the basis of the size of their operations, fixed-shop retailers fall into two broad groups: (a) small shopkeepers and (b) large retailers.

Fixed Shop Small Retailers

• (i) General stores: Commonly found in local markets and residential areas, these shops keep a variety of products that meet the day-to-day needs of nearby residents, such as grocery items, soft drinks, toiletries, stationery and confectionery. They remain open for long hours at convenient timings and often extend credit to some of their regular customers. Their biggest advantage is the convenience they offer for everyday purchases, and an important factor in their success is the image of the owner and the rapport he has established with local customers.
• (ii) Speciality shops: Increasingly popular, particularly in urban areas, these stores concentrate on a single line of products instead of a general mix, for example, children's garments, men's wear, ladies' shoes, toys and gifts, school uniforms, college books or consumer electronic goods. They are usually located at a central place where a large number of customers can be attracted, and they offer a wide choice within their chosen line.
• (iii) Street stall holders: These small vendors are commonly found at street crossings and other places where the flow of traffic is heavy, serving floating customers. They deal mainly in goods of a cheap variety such as hosiery products, toys, cigarettes and soft drinks, drawing supplies from local suppliers as well as wholesalers. As the area covered by a stall is very limited, they handle goods on a very small scale, their main value lying in the convenient service they provide.
• (iv) Second-hand goods shops: These shops deal in second-hand or used goods such as books, clothes, automobiles, furniture and other household goods, generally bought by people of modest means at lower prices. They may also stock rare objects of historical value and antique items, which are sold at rather heavy prices to people with a special interest in such goods. These shops range from a bare stall with a table or temporary platform to fairly good premises, as in the case of those selling used furniture, cars or two-wheelers.

Fixed Shop Large Retailers

1. Departmental Stores

A departmental store is a large establishment that offers a wide variety of products, classified into well-defined departments, aiming to satisfy practically every customer's need under one roof. Each department confines its activities to one kind of product, for example, separate departments for toiletries, medicines, furniture, groceries, electronics and clothing, so that diverse market segments are served with a wide variety of goods and services in a single store. Real departmental stores have not yet come up in a big way in India, though examples on these lines include 'Akberally' in Mumbai and 'Spencers' in Chennai.

Features

• (a) A modern departmental store may provide facilities such as a restaurant, travel and information bureau, telephone booth and rest-rooms, offering maximum service to a higher class of customers for whom price is of secondary importance.
• (b) These stores are generally located at a central place in the heart of a city, which caters to a large number of customers.
• (c) As their size is very large, they are usually formed as joint stock companies managed by a board of directors, with a managing director assisted by a general manager and several department managers.
• (d) A departmental store combines both retailing and warehousing, purchasing directly from manufacturers and operating its own separate warehouses, thereby helping to eliminate undesirable middlemen.
• (e) Purchasing is centralised, done by the store's purchase department, while sales are decentralised across the different departments.

Advantages

• (i) Attract large number of customers: Being located at central places, they draw a large number of customers during the best part of the day.
• (ii) Convenience in buying: By offering a large variety of goods under one roof, they let customers buy almost everything they need in one place, without running from shop to shop.
• (iii) Attractive services: They aim at maximum service, including home delivery of goods, execution of telephone orders, credit facilities, and rest-rooms, telephone booths, restaurants and saloons.
• (iv) Economy of large-scale operations: Organised on a very large scale, they enjoy the benefits of large-scale operations, particularly in the purchase of goods.
• (v) Promotion of sales: They can spend considerable sums on advertising and other promotional activities, which helps boost their sales.

Limitations

• (i) Lack of personal attention: Because of large-scale operations, it is difficult to give adequate personal attention to each customer.
• (ii) High operating cost: Their emphasis on services pushes operating costs, and therefore prices, up, making them unattractive to lower-income groups.
• (iii) High possibility of loss: High operating costs and large-scale operations raise the chances of losses, for instance when changing tastes or fashions force clearance sales to reduce a huge inventory.
• (iv) Inconvenient location: A central location is not convenient for buying goods that are needed at short notice.

2. Chain Stores or Multiple Shops

Chain stores or multiple shops are networks of retail shops owned and operated by manufacturers or intermediaries. Under this arrangement, a number of similar-looking shops are established in localities spread over different parts of the country, dealing in standardised and branded consumer products with rapid sales turnover, all run by the same organisation with identical merchandising strategies, products and displays.

Features

• (a) Shops are located in fairly populous localities so as to serve customers at a point nearest to their residence or workplace, rather than attracting them to a central place.
• (b) Manufacture or procurement of merchandise for all units is centralised at the head office, from where goods are despatched to each shop according to its requirements, saving on operating costs.
• (c) Each shop is under the direct supervision of a Branch Manager responsible for its day-to-day management, who sends daily reports on sales, cash deposits and stock requirements to the head office.
• (d) All branches are controlled by the head office, which formulates the policies and gets them implemented.
• (e) Prices of goods are fixed and all sales are made on a cash basis; the cash realised is deposited daily into a local bank account on behalf of the head office, and a report is sent.
• (f) The head office normally appoints inspectors to supervise the shops day to day in matters such as the quality of customer service and adherence to head-office policy.

Chain operations are most effective for high-volume merchandise whose sales stay relatively constant throughout the year. In India, Bata shoe stores, DCM, Nirula's and Raymonds are typical examples of such shops.

Advantages

• (i) Economies of scale: Central procurement lets the multiple-shop organisation enjoy the economies of scale.
• (ii) Elimination of middlemen: Selling directly to consumers removes unnecessary middlemen.
• (iii) No bad debts: As all sales are on a cash basis, there are no losses from bad debts.
• (iv) Transfer of goods: Goods not in demand in one locality can be transferred to another where they are in demand, reducing dead stock.
• (v) Diffusion of risk: Losses at one shop may be covered by profits at others, reducing the total risk of the organisation.
• (vi) Low cost: Centralised purchasing, elimination of middlemen, centralised sales promotion and increased sales keep the cost of business low.
• (vii) Flexibility: An unprofitable shop can be closed or shifted elsewhere without really affecting the profitability of the organisation as a whole.

Limitations

• (i) Limited selection of goods: Chain stores owned and operated by manufacturers mostly sell only their own products, giving consumers a limited choice, though this is not the case with retailer-owned chains such as Big Apple or Reliance Retail, which sell the products of many manufacturers.
• (ii) Lack of initiative: The staff must obey instructions from the head office, so they habitually look up to it for guidance and lose the initiative to use their creative skills to satisfy customers.
• (iii) Lack of personal touch: This lack of initiative can lead to indifference and an absence of personal touch among the employees.
• (iv) Difficult to change demand: If demand for the merchandise changes rapidly, large unsold stocks lying at the central depot can cause heavy losses.

Difference between Departmental Stores and Multiple Shops

Both are large retail establishments, yet they differ in several respects:

• (i) Location: A departmental store is located at one central place; multiple shops are spread across many locations, so a central location is not necessary for them.
• (ii) Range of products: Departmental stores carry a wide variety of products to satisfy all customer needs under one roof; multiple shops generally handle only a specified range of products.
• (iii) Services offered: Departmental stores stress maximum service, such as alteration of garments and a restaurant; multiple shops offer very limited service, confined mostly to guarantees and repairs on defective goods.
• (iv) Pricing: Multiple shops sell at fixed, uniform prices across all outlets; departmental stores have no uniform pricing policy and may occasionally offer discounts to clear stock.
• (v) Class of customers: Departmental stores cater to relatively high-income customers who value service over price; multiple shops serve varied customers, including lower-income buyers interested in quality goods at reasonable prices.
• (vi) Credit facilities: Multiple shops sell strictly for cash; departmental stores may extend credit to some regular customers.
• (vii) Flexibility: Dealing in a wide variety of products gives departmental stores flexibility in their line of goods; chain stores, limited to a narrow line, have little such scope.

3. Mail Order Houses

Mail order houses are retail outlets that sell their merchandise through the post, with generally no direct personal contact between buyer and seller. Potential customers are approached through advertisements in newspapers or magazines, circulars, catalogues, samples, bills and price lists sent by post, all describing the price, features, delivery terms and terms of payment. Orders received are carefully scrutinised against the buyer's specifications and complied with through the post office.

Receiving payment can take different forms. First, the customer may be asked to pay in full in advance. Second, the goods may be sent by Value Payable Post (VPP), where they are delivered only on full payment. Third, the goods may be sent through a bank, which delivers them to the customer only after full payment, so there is no risk of bad debt. In each case there is a need to ensure the buyer that the goods despatched match the specifications.

This method is not suitable for all products. Goods that are perishable, or bulky and hard to handle, are not recommended. Only goods that can be (i) graded and standardised, (ii) transported easily at low cost, (iii) have ready demand, (iv) are available in large quantity throughout the year, (v) face least possible competition, and (vi) can be described through pictures are suitable for this type of trading. Mail order business also depends on widespread literacy, since only literate people can be reached through advertisements and other written communication.

Advantages

• (i) Limited capital requirement: It needs little expenditure on buildings and infrastructure, so it can start with relatively low capital.
• (ii) Elimination of middlemen: Removing unnecessary middlemen between buyers and sellers can save money for both sides.
• (iii) Absence of bad debt: As no credit is extended to customers, there are no chances of bad debt.
• (iv) Wide reach: Goods can be sent to every place that has postal services, opening a wide scope of business across the country.
• (v) Convenience: Goods are delivered at the doorstep of customers, offering them great convenience.

Limitations

• (i) Lack of personal contact: With no personal contact, there are greater chances of misunderstanding and mistrust; buyers cannot examine goods before buying and sellers cannot attend to individual likes and dislikes.
• (ii) High promotion cost: Heavy reliance on advertisements and other promotion to inform and persuade buyers means high promotion expenditure.
• (iii) No after-sales service: As buyers and sellers may be far apart with no personal contact, there is an absence of after-sales service.
• (iv) No credit facilities: No credit is offered, so customers with limited means may not be interested.
• (v) Delayed delivery: Receiving and executing orders through mail takes time, so there is no immediate delivery.
• (vi) Possibility of abuse: Dishonest traders may cheat customers by making false claims or not honouring commitments made through hand bills or advertisements.
• (vii) High dependence on postal services: Success depends on efficient postal services, which limits prospects in areas that still lack postal facilities.

4. Consumer Cooperative Store

A consumer cooperative store is an organisation owned, managed and controlled by consumers themselves. Its objective is to reduce the number of middlemen who increase the cost of produce, thereby providing service to its members. Such stores generally buy in large quantity directly from manufacturers or wholesalers and sell to consumers at reasonable prices, so members get good-quality products at cheaper rates. Profits earned during the year are used to declare bonus to members and to strengthen general reserves and welfare funds for the members' social and educational benefit.

Formation: At least ten people must come together to form a voluntary association and get it registered under the Cooperative Societies Act. The capital is raised by issuing shares to members. Management is democratic and entrusted to an elected managing committee on the principle of one man, one vote. Members' liability is generally limited to the capital they contribute, and the accounts are audited by the Registrar of Cooperative Societies or a person authorised by him or her.

Advantages

• (i) Ease of formation: Any ten people can come together, form a voluntary association and register it after completing a few formalities.
• (ii) Limited liability: Members' liability is limited to the capital they have contributed; they are not personally liable beyond that for the society's debts.
• (iii) Democratic management: The society is managed democratically through an elected committee, with each member having one vote irrespective of the number of shares held.
• (iv) Lower prices: Buying directly from manufacturers or wholesalers eliminates middlemen and results in lower prices for members.
• (v) Cash sales: Goods are normally sold on a cash basis, which reduces the requirement for working capital.
• (vi) Convenient location: Stores are generally opened at convenient public places where members and others can easily buy what they need.

Limitations

• (i) Lack of initiative: As these stores are managed by people working on an honorary basis, there is a lack of sufficient initiative and motivation to work effectively.
• (ii) Shortage of funds: The main source of funds is money raised from members through shares; as membership is limited, stores often face a shortage of funds that hampers growth and expansion.
• (iii) Lack of patronage: Members do not always patronise the store regularly, so it is not able to operate successfully.
• (iv) Lack of business training: Those entrusted with management often lack the expertise and training needed to run the store efficiently.

5. Super Markets

A super market is a large retailing business unit that sells a wide variety of consumer goods on the basis of low price appeal, wide variety and assortment, self-service and a heavy emphasis on merchandising appeal. The goods traded are generally food products and other low-priced, branded and widely used consumer items such as grocery, utensils, clothes, electronic appliances, household goods and medicines. Super markets are usually situated at the main shopping centres, with goods kept on racks bearing clearly labelled price and quality tags; customers move through the store to pick up what they need, bring it to the cash counter, make payment and take home the delivery. Organised on a departmental basis, they do not, unlike departmental stores, offer services such as free home delivery or credit facilities, nor do they appoint salespersons to convince customers about product quality.

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