Advantages and disadvantages of Large-scale retailing

Advantages and disadvantages of Large-scale retailing
Advantages of Large – scale retailing
To the Retailer To the customers
1. Buying in bulk
Buying in bulk direct from the manufacturer would give the large retailer better discounts therefore a lower cost of goods
2. Employment of specialist buyers and other specialist staff
- It employs specialist buyers and other specialized staff hence goods of better quality will be purchased at reasonable price
- This is due the experience and knowledge of the market conditions
3. The use of an exclusive brand or of own factory
Some large retailers are able to have goods manufactured according to their own special requirements, design like “St. Michael” for Mark and Spencer
4. Saving on transport
Since they buy in bulk, they can also have their own fleet of transport vehicle where its more cheaper then hiring them from others
5. Smaller shop staff
- Most large retailers use self – services method therefore they need minimum sales staff to keep an eye on the goods and to assist customers whenever needed
- The staff required are those who packing the goods, filling the shelves and operating the “check out” points
Advantage of Large – scale retailing To the customers
1. Competitive price
- The customer is assured to get the same quality good at the same price at any other smaller retailers
- Sometimes, the price is lower when large retailer give “special offers” to attract customers
2. One stop shopping
Customers finds it very convenient as they can do all their shopping under one roof due to the wide range of goods offered by the various departments
3. Convenience
- Self service in large stores makes goods easy to collect and customers can go round on their own
- Prices are clearly marked and goods are packed in very convenient packages
- The facilities offered enable the customers to shop in comfort
- Example: air-conditioning, escalators and restaurants
4. Quick turnover
Since the volume of sales is so large, they can afford to make a small profit on each sale, thereby attracting customers with lower price
5. Savings on operation costs per unit of goods sold
- A large retailer would save on floor space since his turnover is very large
- He enjoys economies in administrations since the number of staff employed would not necessarily increase with the increase in turnover
- There are certain advantages to be gained in advertising since one advertisement can advertises for the all branches
Disadvantages of Large – scale retailing
To the Retailer
1. Large capital
- A larger amount of capital is needed since the business stocks a great variety of goods which it buy in bulk direct from the manufacturers
- Working capital is also very high 1. Loss of the personal touch
- Customers have to forgo the “personal touch” when they buy goods from a larger retailer where self – service is the offered
2. Only standard goods are stocked
- A large retailer will stock only these items which are in regular demand and which can be sold quickly
- A customer with an eye for individuality must look to the small retailer who may cater to their individual taste
3. Administrative difficulties
- As the number and size of branches increase, control from the headquarters become quite difficult and expensive
- The staff lose their personal contact with the employer
- It is not easy to find managers of the right calibre for large – scale stores
4. High overheads
- A large staff means high wage bills
- Even if the wage bills can be kept down through self-service, it involves losses through theft therefore they need to install devices and employ store detectives
- Other operating expenses are high rentals since most of large retailers are sited in town centres
4. Greater risk of loss
- Since the overheads (e.g. rents, advertising, wages, maintenance cost) are very high, and if turnover does not come up to expectations, profit will fall even faster
- Warehousing of large stocks of goods means that the retailer bears the risk of loss should the demand for goods fall e.g. changes in taste
To the customers
1. Loss of the personal touch
Customers have to forgo the “personal touch” when they buy goods from a larger retailer where self – service is the offered
2. Only standard goods are stocked
- A large retailer will stock only these items which are in regular demand and which can be sold quickly
- A customer with an eye for individuality must look to the small retailer who may cater to their individual taste
3. No credit
- Since a large retailer serves many customers who normally strangers, therefore they won’t offer any credit
- However, customers are able to buy on credit if they have credit or debit card
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