Does the addition of numerous chain of stores around the community create tension where store owners have to work around prices to create profit margin?
This question has a lot of impact in terms of the way a business runs it’s day to day activities and how a business creates profit due to its product line. Many chain stores, now recently are competing with others chains in terms of prices and it affects the overall profit margin. For example, a store such as footlocker can be able to create a steady profit margin on its product line (footwear, clothing apparel, accersioris) due to it’s contract with big chains such as Nike, Puma, Adidas, etc and the competitive rates that they receive allows them to create an steady profit line overtime.
However, that may not be the case with small chains of stores that survive on sales from customers. Some small chain stores on many boulevards and mall strips have to pay an enormous amount of rent to be able to withhold their standing in that area of their choice. On top of that, many can’t hold/obtain contracts for Nike, Puma, Adidas and have to obtain these products through 3rd party sellers/distributors which will sell it at a higher cost rate, thus decreasing the store profit margin. The Pro in having a small store is that you can build a connection with customers and they will be able to keep returning to purchase more products. This may seem as a great value especially in a community that has a lot of chain of stores but, would it be enough to hold a profit margin or where the tension build up overtime causing stores to shut down?
