Chain stores

A chain store, or commonly referred to as a retail chain, is a type of business which has several locations and has management/activities shared between them. They are meant to control a large segment of the market for various goods or services. As of 2020, Subway is one of the biggest retaurant chain with over 42,600 locations.

The Main Purpose of a Chain Store

The basic purpose of a chain store is to have a business that overwhelms the competition with the ability to have lower costs of operating, having a centralized management system, significantly lower costs of advertising, and flexibility of trying out numerous goods/services in different locations to appeal to the market segment.

History of Chain Stores

A brief history of chain stores

• 1670 - The Hudson’s Bay Company, a fur trading company is created.
• 1680 - The Hudson’s Bay Company have a several number of locations in Canada.
• 1860 - J. Stiner & Company opened several tea shops located in New York, USA. Gave birth to the first chain stores in America.
• 1900 - The Great Atlantic & Pacific Tea Company was created, and became a large distributor of tea.
• 2000s - Walmart becomes the biggest retailer with a revenue of $514.405 billion, as of the 2016 Walmart Annual Report.

Advantages of Chain Stores

One of the main advantages of owning a chain of stores is that you are able to have your own private label. This means you develop or manufacture a product that only you can sell. With this you are building customer loyalty. With customer loyaly and high recognition globally, you develop devoted customers that flock to your products for usually cheaper prices.

Chain stores usually provide the same service anywhere. With strategic locations a customer can find the same variety of products, or services, that they can expect in the same store, just in a different location.

Different Types

A chain of stores could be located in several industries. These include; the music industry, gaming industry, electronics, restaurants, clothing brands, etc.

Due to the "COVID-19 Pandemic", chain stores have seen a decrease of revenue in stores, but an increase in online shopping. Online shopping also falls into the category of a chain store, as most websites have many physical locations, distributors globally, and warehouses in key locations.

Examples of Chain stores

• Walmart is one of the largest retail chains in the world, operating over 11,500 stores in 27 countries. It is a multinational retail corporation that operates a chain of hypermarkets, discount department stores, and grocery stores. Walmart is a one-stop shop for groceries, home goods, electronics, toys, and apparel.
• Starbucks is another global retail chain, with over 30,000 locations in 76 countries. It is the largest coffeehouse chain in the world, offering coffee, tea, and other food and beverage items. Starbucks is also well known for its commitment to environmental sustainability and its various corporate social responsibility initiatives.
• McDonald’s is the world’s largest fast food chain, with over 38,000 locations in over 100 countries. It offers a variety of menu items, including burgers, fries, chicken, and breakfast items. McDonald’s is also well known for its Happy Meals and other promotions.
• Subway is a global sandwich chain with over 42,600 locations in over 100 countries. It is well known for its “eat fresh” slogan and its signature footlong sandwiches. Subway also offers salads, wraps, and breakfast items.

Limitations of Chain stores

Chain stores have a number of limitations which can impede their success. These include:

• High overhead costs - Chain stores have to pay for rent, labor, and other costs associated with operating multiple locations. This can be quite expensive and can cut into profits.
• Lack of customer loyalty - Customers of chain stores may not be loyal to the brand, as they may find similar products at different locations or prices. This can cause customers to choose other stores for their needs.
• Lack of local customer base - Chain stores often struggle to develop a local customer base, as the customer base is often spread across multiple locations. This can make it difficult to establish a loyal customer base.
• Lack of personalization - Chain stores typically lack the ability to customize their offerings to meet customer needs as they lack the resources to be agile and respond quickly to customer demands.
• Difficulty responding to competition - Chain stores often have difficulty responding to competition due to their size and complexity. This can make it difficult for them to keep up with the changing market and stay competitive.

Other approaches related to Chain stores

Chain stores have become a popular approach to retailing and have increasingly been used to control a large segment of the market. Below are some of the other approaches related to chain stores:

• Franchising - Franchising involves a business owner (franchisee) paying a fee to use the name and other associated trademarks of a parent company (the franchisor) in exchange for benefits such as marketing support and access to a proven business model.
• Multi-brand retailing - Multi-brand retailing involves the operation of a chain of stores that offer multiple brands of products. This allows for increased customer choice and can lead to increased sales.
• Online retailing - Online retailing involves the sale of products through a website or mobile app. This has become increasingly popular in recent years as it allows for greater customer convenience and access to a much wider range of products.

In summary, chain stores have become a popular approach to retailing and are one of many different approaches that businesses can use to control a large segment of the market. Other approaches related to chain stores include franchising, multi-brand retailing and online retailing.

Footnotes

Chain stores — recommended articles

Mass Merchandising — Category Killer — Scrambled merchandising — Private label products — Indirect sales — Aggregator model — Differential pricing — Direct distribution — Horizontal diversification strategy

References

• Hackett, P. (2004), Averting Disaster: The Hudson's Bay Company and Smallpox in Western Canada during the Late Eighteenth and Early Nineteenth Centuries, Bulletin of the History of Medicine, vol. 78, pp. 575–609.
• Montague, G (1963), Chain Stores in America, 1859-1962
• OECD, (2020) E-commerce in the times of COVID-19
• Subway's publication (2020), Explore Our World, Subway Corporation
• US (1935), Annual Report of the Federal Trade Commission for the Fiscal Year, Ended Federal Trade Commission
• Walmart, (2016) Walmart 2016 Annual Report

Author: Krzysztof Nagaba-Poniatowski