Why we have large-scale retailing

The type of large-scale storekeeping that has developed is properly described as horizontal integration of merchandising. Its chief advantages are that large-scale economies can be made in buying, in specialization of manpower and skills, in joint advertising and merchandising promotions, and in wider assortments for consumers.
Horizontal integrations, generally referred to as chains, would not have been possible if they had not, through a greater assortment of merchandise, lower prices and convenient locations, given the consuming public better service than that provided by small stores. It is true that the growth of chains has, to a degree, destroyed the personal relationship often existing between the storekeeper and the consumer. But the verdict of the consuming public, which in the end must determine what services the public is willing to buy, has still been overwhelmingly for bigger stores, bigger assortments, greater convenience and lower prices.
    Department stores are also horizontal integrations. In essence, a department store is a variety of small stores grouped together under one roof. Department stores cater to people buying shopping goods. As a rule, they are not neighborhood but downtown shopping stores, and they depend, to a large extent, on transportation facilities for store traffic. With the development of shopping centers, department stores have tended to move out into these centers with branch stores, so that, in effect, many department stores have also become chain stores.
In a recent year, sales of each department store on the average amounted to about $4.2 million. Some stores, like Macy's in New York, had much higher sales. There are approximately 3,200 department stores in the United States. Although this is a very small number relative to the total of 1,800,000 retail stores in the country, department store sales account for 7 per cent of the total retail sales.
One development in department stores, not usually found in chain or independent supermarkets, is that many of the departments inside the store are actually independent, leased concessions. The practice of leas¬ing departments inside of large units is growing. It will probably spread, in the years ahead, into all types of large-scale retail operations. Leasing makes possible a wider variety of offerings to the consuming public without tying up greater amounts of capital on the part of the store owner.
One point about the size of retail establishments deserves mention. Size can become a handicap as well as an asset. The larger a unit of operation, the more rigid the operating policies tend to be. Fixed expenses have a way of becoming fixed at a high level. Some consumer buying concessions, such as the practices of accepting returned merchandise, of delivering free, and of giving extended credit, have cost department stores considerable in the past, and have proven hard to discontinue.
The movement of populations to the suburbs has also cut heavily into department store profits, particularly those which remained downtown establishments. In many cities, the downtown area has suffered, and while there are some indications of partial comebacks, the scattering of the population into the suburbs has meant that department stores have had either to build branches or to accept a smaller share of the market.
Again, the student will do well to remember that the only reason for the existence of retail establishments is to serve the consumer. Convenience to the consumer is therefore the first requisite of success for any retail store. Department stores are no exception.