Question

U.S. and European bricks-and-mortar retailing is increasingly becoming dominated by "hypermarts," enormous stores that sell groceries, household goods, hardware and other products under one roof. What are the possible economies of scale that might be enjoyed by "hypermarts?" What are the potential diseconomies of scale? How can "hypermarts" fend off competition from Web-based retailing?

Answer 1

Hypermarts are those shops that is into selling a variety of products in one roof like for instance, they sell groceries, Household essentials, electronic items, hardwares etc. These hypermarts are always preferred to retail outlets since they have all in one roof thereby allowing the consumers to buy everything they want in a single place rather them roaming about for products. Since the hypermarts are usually huge, they tend to sell a variety of products in a comparatively cheaper costs than the other stores.

Hypermarts enjoy economies of scale by having cost savings. Most of the hypermarts buy everything in bulk thereby reducing the procurement rates which inturn makes them sell it cheap for a lower margin thereby making it feel like they are selling at a reduced rate.

Since the hypermarts are huge, the major dis-economies of scale will be in the inventory handling and maintenance. They will have to have a huge place for storage, movement and management of inventory.

Web-based retailing is increasing trememdously these days since people want to save time visiting stores. In order to fend off competition from web-based retailing, Hypermarts should also have an online presence wherein the customers get to have the ship the store feature. The ship to store feature allows the individuals to buy stuffs online, thereby making them available online, for the individuals to pick them up the next day. This is one way to bring the customer back to the store. which is expected to make the customer buy more new products.