Question

Why do chain shops have lower cost of business

Answer 1

Answer:

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Answer 2

Answer:

Chain store, any of two or more retail stores having the same ownership and selling the same lines of goods. Chain stores account for an important segment of retailing operations in the Americas, western Europe, and Japan. Together with the department store and the mail-order company, chain stores represent the first successful application of large-scale integrated methods to a form of retailing.The principal advantages of chain stores include the ability of the central purchasing unit to buy on favourable terms, lower operating costs, the ability to place advertising for all selling units at one time, and the freedom to experiment in one selling unit without risk to the whole operation. Chains are able to buy on more favourable terms than single-unit stores owing to the volume of the central unit’s purchases and its ability to bring specialized buying skills to bear in those purchases. Chains can also achieve significant economies by combined wholesaling and retailing operations within the same business organization, since this structure improves coordination between the two branches and spares the wholesaler from both credit risks and the need for a sales staff. (See economy of scale.) Many chains achieve further economies by limiting their stock of merchandise to items in widespread demand. The low operating costs achieved by all these factors have enabled chain stores to reduce their selling prices in relation to single-unit stores, as well as to operate on slimmer profit margins. Besides selling in large volume at low prices, the large-scale chains’ most significant innovations have been in the area of improved retailing practices. Chain stores pioneered the clean, modern-appearing, well-planned store that has an efficient layout and modern interior lighting.

The main competitive disadvantage of chain store organizations is their centralized direction and their rigidly standardized operating procedures, which tend to limit individual selling units’ flexibility and hinder useful innovations. Chain stores also tend to offer fewer customer services than individual stores.

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