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(b) The manufacturing/procurement of merchandise for all the retail units is centralized at the

head office, from where the goods are dispatched to each of these shops according to their

requirements. This results in savings in the cost of operation of these stores.

(c) Each retail shop is under the direct supervision of a Branch Manager, who is held responsible
for its day to-day management. The Branch Manager sends daily reports to the head office in

respect of the sales, cash deposits, and the requirements of the stock.

(d) All the branches are controlled by the head office, which is concerned with formulating the
policies and getting them implemented.

(e) The prices of goods in such shops are fixed and all sales are made on cash basis. The cash

realized from the sales of merchandise is deposited daily into a local bank account on behalf of

the head office, and a report is sent to the head office in this regard.

(f) The head office normally appoints inspectors, who are concerned with day-to-day
supervision of the shops, in respect of quality of customer service provided, adherence to the

policies of the head office, and so on.

The chain operation is most effective in handling high-volume merchandise, whose sales are
relatively constant throughout the year. In India, Bata Shoe stores are typical examples of such

shops. Similar type of retail outlets are coming up in other products also.

For example, the exclusive showrooms of D.C.M., Raymonds and the fast food chains of Nirula’s

and McDonalds.

Advantages

Multiple shops are offering various advantages to the consumers, which are described as

follows:
(i) Economies of scale: As there is central procurement, the multiple shop organization enjoys

the economies of scale.

(ii) Elimination of middlemen: By selling directly to the consumers, the multiple-shop
organization is able to eliminate unnecessary middlemen in the sale of goods and services.

(iii) No bad debts: Since all the sales in these shops are made on cash basis, there are no losses

on account of bad debts.