Department stores are basically large, fixed establishments that deal in 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) Centralised purchase with decentralised 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

Question - 12 : -
Why are consumers cooperatives stores considered to be less expensive? What are its relative advantages over other large scale retailers?

Answer - 12 : -

Consumer cooperative stores are formed by groups of consumers to provide goods at reasonable prices to members of consumer societies. In such societies, the role of middlemen is eliminated as these societies purchase goods from manufacturers or wholesalers directly and sell them to society members at reasonable rates. As consumer cooperative stores do not aim at profit making, the prices of goods offered by them are much lower than the prices of goods at retail shops. Compared with large-scale retailers, the capital requirement for starting a consumer cooperative society is very low. Thus, consumer cooperative stores do not require much investment, and the goods sold by them are priced lower.

The following are some advantages that consumer cooperative stores have over large-scale retailers:

(a) Democratic management: Consumer cooperative stores are democratic organisations as they are managed and controlled by elected managing committees of consumer societies. The members of managing committees are elected by the members of consumer societies on the principle of ‘one member, one vote’.

(b) Limited liability: The liability of the members of consumer cooperative societies is limited to the amount of shares held by them. Thus, in case a society’s liabilities increase beyond the assets, the members will not be liable to repay the debts using their personal assets.

(c) Low price of goods: As the goods offered by consumer cooperatives are directly purchased from manufacturers and wholesalers, the role of middlemen is eliminated. Therefore, consumer societies are able to sell goods at lower prices.

Question - 13 : -
Imagine a life without your local markets. What difficulties would a consumer face if there is no retail shop?

Answer - 13 : -

Retail shops are the final stage of distribution through which retailers directly sell goods to the final consumers. Retail shops act as a link between manufacturers/wholesalers and consumers as they buy goods from manufacturers/wholesalers and sell them directly to consumers. They play an essential role because of the following features.

(a) Product information: Retailers provide customers information about new products, their features, prices, etc. This information helps the customers in deciding which product to buy, thus facilitating their product choice.

(b) Wide range of goods : Retail shops generally offer customers a wide variety of goods such as stationery goods, dairy products and food items.

(c) Convenient locations: Retail shops are generally established close to residential localities. They remain open for long hours, providing convenience to customers.

(d) Credit facilities: Retailers at times offer goods on credit to their regular customers. This helps customers to maintain their level of consumption even when they are facing financial difficulties.

(e) Regular availability of products: Retail shops ensure regular and timely availability of goods produced by different manufactures. Thus, they make it possible for customers to purchase the goods they require as and when the need arises.

(f) After-sales services: Many customers look for after-sales services, such as repair of equipment, and many retail shops provide these services to its customers or arrange for them.

Question - 14 : -
Explain the usefulness of mail order houses. What types of products are generally handled by them? Specify?

Answer - 14 : -

(b) Wide range of goods : Retail shops generally offer customers a wide variety of goods such as stationery goods, dairy products and food items.

(c) Convenient locations: Retail shops are generally established close to residential localities. They remain open for long hours, providing convenience to customers.

(f) After-sales services: Many customers look for after-sales services, such as repair of equipment, and many retail shops provide these services to its customers or arrange for them.

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Chapter 10 Internal Trade Solutions

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