Departmental Stores : Features, Types, Advantages & Disadvantages

What are Departmental Stores?

A departmental store is a large establishment that sells a wide range of products organised into distinct departments in order to satisfy nearly every customers’ requirements under one roof. It is divided into several departments, each of which focuses on a specific type of product, including clothing, electronics, furniture, and more, making it a one-stop shop for many consumers. For Example: Within a departmental store, there are separate departments for toiletries, medicines, furniture, groceries, electronics, clothing, and dress material.

They cater to a wide range of market segments with a diverse range of goods and services. In the United States of America, it is not uncommon for a department store to sell ‘needle to an aeroplane’ or ‘all shopping under one roof.’ A typical department store’s spirit encompasses everything from “a pin to an elephant.” US departmental stores include giants like Walmart, Target and Macy’s. Real department stores have yet to make a significant impact in the retailing industry in India. However, in countries like India, some stores carrying this line include ‘Akbarally’ in Mumbai and ‘Spencers’ in Chennai. 

History of Departmental Stores

Department stores emerged in Europe during the 18th century as an evolution of smaller novelty shops. These grand retail spaces pioneered the concept of offering a diverse selection of consumer goods organized across distinct departments, promoting convenience for shoppers. Pioneering stores like Harding, Howell & Co. in London and Le Bon Marché in Paris redefined shopping with spacious buildings, fixed pricing, and innovative marketing strategies. Department stores expanded rapidly into the United States, with influential names such as Macy’s, Marshall Field’s, and John Wanamaker’s further transforming the retail landscape. Their priority on customer service, wide product variety, and centralized purchasing created a new standard in the shopping experience. While recently challenged by e-commerce, departmental stores continue to evolve in the 21st century, adapting to consumer preferences and modern retail trends.

Features of Departmental Stores

The features of Departmental Stores are as follows:

1. Excellent Services: A modern department store may include all amenities such as a restaurant, a travel and information bureau, a phone booth, restrooms, and so on. As a result, they strive to provide the excellent service possible to a higher class of customers for whom price is secondary.

2. Centralised Locations: These departmental stores are generally located in a central location in the heart of a city, where they can serve a large number of customers.

3. Corporate Status: As these stores are so large, they are usually organised as a joint stock company operated by a board of directors. A managing director is in charge, who is assisted by a general manager and several department heads.

4. Elimination of Middlemen: A department store performs both retailing and warehousing functions. They buy directly from manufacturers and have their own warehouses. As a result, they contribute to the elimination of undesirable middlemen between producers and customers.

5. Centralised Purchasing: They have centralised purchasing procedures. All purchases in a department store are made centrally by the store’s purchase department, whereas sales are decentralised in various departments.

6. Variety of Goods: These stores maintain a large variety of goods and services and are able to meet all the requirements of the customers. 

Types of Departmental Stores

Departmental stores offer a one-stop-shop experience, but they come in various forms. Here’s a breakdown of the primary types you might find:

1. Discount Stores: These retail chains (such as Walmart and Target) are known for offering a wide variety of products at prices below traditional market rates. Customers are often encouraged to buy in bulk quantities to maximize savings.

2. Off-Price Stores: Owned by individual brands or conglomerates, these stores (like TJ Maxx, Marshalls, Burlington and Ross Dress for Less) sell discounted brand-name or designer merchandise. This can include end-of-season items, overstocked goods, or products with minor irregularities.

3. Outlet Stores: If you’re loyal to a particular brand, outlet stores provide a wider selection of that brand’s products than standard department stores, usually at discounted prices. Examples include the Nike Outlet or Adidas Outlet.

4. Junior Departmental Stores: These stores (such as Bloomingdale’s and Nordstrom) cater to a clientele seeking high-end, exclusive products. They may feature a more curated selection with semi-autonomous departments for different brands or product categories.

5. Category-Specific Stores: These stores specialize in a broad product category like clothing, beauty, electronics, books and so on, offering an unmatched selection within that niche. Examples include Zara and H&M, or stores dedicated to clothing or fast-fashion apparel.

6. Warehouse Stores: Warehouse stores (like Costco and Sam’s Club) function as both retail outlets and massive storage facilities. They typically sell products in large quantities and may operate on a membership-only basis

Advantages of Departmental Stores

The advantages of Departmental Stores are as follows:

1. Attract a Large Number of Customers: As these stores are typically located in central locations, they attract a large number of customers during the busiest times of the day.

2. Convenience in Purchasing: By offering a wide range of goods under one roof, department stores allow customers to purchase almost all of their needs in one location. As a result, customers no longer have to rush from one location to another to finish their shopping.

3. Attractive Sales Services: A department store strives to provide the best services to its customers. Its services include home delivery of goods, telephone order execution, credit facility grant, and provision for restrooms, telephone booths, restaurants, salons, and so on.

4. Economies of Scale: Since these Departmental stores are organised on a large scale, they can utilize the advantages of large-scale operations, particularly in terms of purchasing goods.

5. Sales Promotion: Department stores can afford to spend a lot of money on advertising and other promotional activities that help them increase their sales.

Disadvantages of Departmental Stores

The disadvantages of Departmental Stores are as follows:

1. Lack of Personal Attention: Due to the large-scale operations, it is extremely difficult to provide adequate personal attention to customers in these stores.

2. High Operating Costs: As these stores place a higher emphasis on providing services, their operating costs tend to be higher. These costs, in turn, raise the prices of goods. They are not appealing to people with lower incomes.

3. High risk of Loss:  Due to various high operating costs and large-scale operations, the risk of loss in a department store is high. For example, if customer tastes or current fashions change, it may be necessary to sell such out-of-date articles in a clearance sale to reduce the large inventory of goods built up.

4. Inconvenient Location: Because department stores are generally located in central locations, they are inconvenient for purchasing goods that are required quickly or for people who prefer to buy goods from nearer shops.

Despite some of these limitations, department stores have become popular in some Western countries due to the benefits provided to a specific class of customers.