Page 5 - L5

(iv)Transfer of goods: The goods not in demand in a particular locality may be transferred to

another locality where it is in demand. This reduces the chances of dead stock in these shops.

(v) Diffusion of risk: The losses incurred by one shop may be covered by profits in other shops,

reducing the total risk of an organization.
(vi) Low cost: Because of centralized purchasing, elimination of middlemen, centralized

promotion of sales and increased sales, the multiple shops have lower cost of business.

(vii) Flexibility: Under this system, if a shop is not operating at a profit, the management may
decide to close it or shift it to some other place without really affecting the profitability of the

organization as a whole.

Limitations

(i) Limited selection of goods: Some of the multiple shops deal only in limited range of

products. This is especially the problem with the chain stores which are owned and operated by

manufacturers, and as such mostly sell the products produced by the themselves. They do not

sell products of other manufacturers. In that way the consumers get only a limited choice of
goods. This however is not the case with retailer owned chain stores such as Big Apple or

Reliance Retail which sell products of a large number of manufacturers.

(ii) Lack of initiative: The personnel managing the multiple shops have to obey the instructions
received from the head office. This makes them habitual of looking up to the head office for

guidance on all matters, and takes away the initiative from them to use their creative skills to

satisfy the customers.

(iii) Lack of personal touch: Lack of initiative in the employees sometimes leads to indifference

and lack of personal touch in them.
(iv) Difficult to change demand: If the demand for the merchandise handled by multiple shops

change rapidly, the management may have to sustain huge losses because of large stocks lying

unsold at the central depot.