What are Departmental Stores?
Departmental stores are large scale retail stores selling under one roof under a single control. They deal in a variety of goods. They are divided into different departments, each selling a particular merchandise. Departmental stores are of French origin. Departmental stores came into existence in 19th century.
Definition of Departmental Stores
A departmental store is type of retail institution which handles a variety of merchandise under one roof, with the merchandise grouped into well-defined departments which are centrally controlled, and which caters primarily to women shoppers.
— Clark and Clark
A departmental store is a collection of shops under one roof and ownership, each shop or department specializing in selling a special range of goods.
— G.B. Giles
A retailing institution that deals in many lines of merchandise including women’s wear and house furnishing, each line being separated or departmentalized from the other.
From the above definition, we can understand that a departmental store is a retail shop handling several classes of goods, each class being separated from other in management, accounting and location.
Characteristics of Departmental Stores
A departmental organization has the following features.
1. A departmental store is a large retailing unit.
2. A department store deals in a wide merchandise line. All goods are available under one roof.
3. It is divided into various departments, each dealing in a special range of goods.
4. A department store is centrally located.
5. The store is a horizontally integrated institution.
6. All the departments have centralized control on advertising, sales promotion, accounting, credit, employment, etc.
Advantages of Departmental Stores
Departmental stores offer the following advantages.
1. Economies of large scale buying
Departmental stores buy directly from manufacturers. They are given special concessions on account of their bulk purchase. They avoid expenses incurred on middlemen. So, prices charged by departmental stores are comparatively lower.
2. Convenience in shopping
Departmental stores are large scale retail stores that deal in a wide variety of shopping and specialty goods. All sorts of goods from pin to plane are available under one roof. So, without moving from shop to shop, customers can buy their requirements in one place. Thus, their time and efforts are saved.
3. Customer services
Departmental stores offer many services and facilities to customers. Customers get quality goods at cheaper rates. Departmental stores have made shopping a pleasant experience. Expert supervision of various departments, adoption of a liberal credit, free delivery service, recreational facilities, courteous treatment etc., are some important services that customers can enjoy while shopping at departmental stores.
4. Lower operation cost
Departmental stores are large in size. For each important class of merchandise, there is a separate department. Each department works under a manager. He is responsible for the success of his department. In addition to these, there are a large number of accountants and cashiers. The overall expenses spent may appear high.
But when they are divided among a large number of sections, the cost of operation is cheaper. Moreover, advertisement expenses are incurred for the departmental store as a whole. So, it can be entrusted to an outside agency specializing in advertising.
5. Efficiency in operations
Departmental stores employ trained salesmen, who are taught to regard that, “the customer is always right“. Departmental stores offer a superb ambiance for customers — waiting lounge, reading room, restaurant, information bureau, channel music, etc.
6. Convenient location
The success of a departmental store depends upon its location. The availability of space, the area and community to be served and ability to attract customers are the important factors. Since every departmental store is located in a convenient location, customers look forward to shopping there.
Disadvantages of Departmental Stores
Departmental stores are not free from defects. There are certain specific limitations that hinder their progress.
1. High operational costs
Departmental stores are located at important localities. They are modern, decorated and equipped with latest facilities.
They are large, necessitating, numerous supervisors and huge investments. They also employ professionals such as window decorators, copywriters, etc. Salary paid to these personnel burdens the departmental store with high overhead costs. Ultimately, the operating costs are high.
2. High cost of capital
Departmental stores require huge capital for their establishment. Spacious building in a convenient location is also essential for its success. So, an enormous amount of fixed capital is sunk in the form of its premises. Apart from loan from banks, funds may have to be mobilized from private sources. Cost of capital derived from such sources is comparatively high. Often departmental stores go in for rental buildings, where rent is exorbitantly high.
3. Absence of personal touch
A departmental store is a large organization. Employment of a large number of persons is inevitable. In order to economize the cost of operations, salary paid to employees may be poor. Then the low paid employees lack motivation, and their attitude to customers may be lukewarm. Most of the employees in department stores quit their jobs in search of better opportunities. This results in high employee turnover. So, maintaining personal contact with customer is difficult.
4. Risk factors
Departmental stores suffer loss due to risks. Departmental stores are characterized by a wide assortment of merchandise. They buy in bulk. They keep a large stock of goods to cater to the needs of customers. This may lead to dead stock where capital is locked up. Moreover, the prices of fashion goods fluctuate. There may be pilferage and mishandling of goods by employees.
5. Too much of specialization
Goods in the departmental stores are divided into different classes. Each class of merchandise is dealt in by a separate department. Departmental stores are specifically important in the sale of women’s apparel, accessories and home furnishing. In fact, they are primarily a women’s store. Sometimes, men’s department is physically separated from a women’s section, with a separate entrance. So, too much departmentalizing leads to over-specialization.
Departmental stores are located in busy areas. Crowded roads, lack of parking space and being far away from residential areas make departmental stores inaccessible to people if they want to finish off shopping quickly. When goods are needed at once, nearby retail shops are preferred.
Despite the above factors, departmental stores are becoming more popular. They are huge modern, decorated and offer better services. Departmental stores have eventually turned into self service counters. Consumer’s loyalty and trusted brands make these departmental stores popular.