Chain Store: Definition & Overview

Instructor: Shawn Grimsley
Have you ever wondered why you see the same stores no matter where you go? In this lesson, you'll learn about chain stores, including some of their characteristics and advantages. A short quiz follows the lesson.

Definition

A chain store is a retail company with more than one branch. It doesn't matter if the chain consists of just two retail shops or hundreds. A chain store can exist in only one town or across the globe. There are a variety of chain stores from big-box retailers to specialty shops to supermarkets to restaurant chains. Examples of well-known chain stores include Wal-Mart, Target, Macy's, Home Depot, Bed Bath and Beyond, and the Body Shop.

Chain Store Advantages

Chain stores have some distinct advantages over single store operations. The underlying reason for these advantages is the ability of chain stores to leverage their large-scale operations. Let's take a look at some of these advantages.

  • Strategic locations. You can set up multiple stores in strategic locations to maximize your ability to capture market share.
  • Economies of scale. You can get better wholesale prices for your products because of volume discounts. This will give you a competitive advantage over smaller stores who may not be able to match your pricing because their profit margins are smaller.
  • Private labels. You may be able to leverage your buying power to work deals with manufacturers to develop private label products that you can offer to your customers. A private label is a product that is manufactured exclusively for you. For example, the Trader Joes grocery store chain has several private label food products that can only be purchased at Trader Joes. If you can get customers loyal to a private label, you may snag some other sales from them when they come in for the private label product.
  • Name recognition. You have a much better chance of staying in the mind of consumers than a single operation shop because you have multiple locations.
  • Customer loyalty. You can often develop better customer loyalty. Multiple locations provide convenience. Prices are often lower than single store operators. Also, customers often become creatures of habit and often are opposed to risk. Chain stores provide a sense of predictability for customers because they can walk into any chain store and get pretty much the same type of service and products regardless of the store's location.

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