This document discusses factors to consider when selecting a retail store location. It identifies 7 key factors: types of goods sold, population and customers, accessibility and traffic, signage and zoning, competition, location costs, and building infrastructure. It then provides details on determining the appropriate size for a retail building based on planned sales volume. The rest of the document discusses different types of retail locations including free standing sites, city/town locations, shopping centers, and other opportunities such as airports and stores-within-stores. It emphasizes matching a retailer's location strategy to their target market and shopping behaviors.
8. 1. TYPES OF GOODS
a. Convenience
b. Shopping
c. Specialty
2. POPULATION AND CUSTOMER
3. ACCESSIBILITY, VISIBILITY AND TRAFFIC
4. SIGNAGE, ZONING AND PLANNING
5. COMPETITION AND NEIGHBORS
6. LOCATION COSTS
7. BUILDING INFRASTRUCTURE
12. 7-12
Questions
■ What types of locations are available to
retailers?
■ What are the relative advantages of each
location type?
■ Why are some locations particularly well suited
to specific retail strategies?
■ Which types of locations are growing in
popularity with retailers?
13. 7-13
Elements in Retail Mix
Customer Service
Merchandise
Assortment
Pricing
Communication Mix
Store Display
And Design
Location Strategy
14. 7-14
Why is Store Location Important for a Retailer?
■ Location is typically prime consideration
in customer’s store choice.
■ Location decisions have strategic
importance because they can help to
develop sustainable competitive
advantage.
■ Location decisions are risky: invest or
lease?
F. Schussler/PhotoLink/Getty Images
15. 7-15
Types of Retail Locations
■ Free Standing Sites
■ City or Town Locations
n Inner City
n Main Street
■ Shopping Centers
n Strip Shopping Centers
n Shopping Malls
■ Other Location Opportunities
16. 7-16
Selecting a particular location type
Involves evaluating a series of trade-offs between
■ The size of the trade area (geographic area
encompassing most of the customers who would
patronize a specific retail site)
■ the occupancy cost of the location
■ The pedestrian and vehicle customer traffic
■ The restrictions placed on store operations by the
property manager
■ The convenience of the location for customers
18. 7-18
Unplanned Retail Locations
■ Freestanding Sites – location for individual store
unconnected to other retailer
■ Advantages:
n Convenience
n High traffic and visibility
n Modest occupancy cost
n Separation from competition
n Few restrictions
■ Disadvantages:
n No foot traffic
n No drawing power The McGraw-Hill Companies, Inc./Andrew Resek, photographer
JCPenney, Sears, Walgreens are shifting to stand alone locations
19. 7-19
Unplanned Retail Locations
Merchandise Kiosks – small temporary selling
stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
Kent Knudson/PhotoLink/Getty Images
20. 7-20
City or Town Locations
Gentrification is bringing population back to the cities.
The McGraw-Hill Companies, Inc./Andrew Resek, photographer
Advantage to Retailers:
•Affluence returned
•Young professionals
•Returned empty-nesters
•Incentives to move provided by cities
•Jobs!
•Low occupancy costs
•High pedestrian traffic
21. 7-21
Central Business District (CBD)
■ Draws people into areas during business hours
■ Hub for public transportation
■ Pedestrian traffic
■ Residents
■ High security required
■ Shoplifting
■ Parking is poor
■ Evenings and weekends are slow
AdvantagesDisadvantages
Spike Mafford/Getty Images
22. 7-22
Main Streets vs. CBDs
■ Occupancy costs lower
than CBDs
■ They don’t attract as
many people
■ There are not as many
stores
■ Smaller selections offered
■ Not as much
entertainment
■ Some planners restrict
store operations
23. 7-23
Inner City
Inner city retailers achieve high sales volume,
higher margins and higher profits
Unmet demand tops
25% in many inner city
markets
Inner city customer wants branded merchandise
24. 7-24
Shopping Centers
Shopping Center Management Controls:
•Parking
•Security
•Parking lot lighting
•Outdoor signage
•Advertising
•Special events for customers
The McGraw-Hill Companies, Inc./Andrew Resek, photographer
25. 7-25
Types of Shopping Centers
■ Neighborhood and Community Centers (Strip
Centers)
■ Power Centers
■ Enclosed Malls
■ Lifestyle Centers
■ Fashion Specialty Centers
■ Outlet Centers
26. 7-26
Neighborhood and Community Centers
Attached row of stores
Managed as a unit
Onsite parking
TheMcGraw-HillCompanies,Inc./AndrewResek,photographer
Advantages
Convenient locations
Easy parking
Low occupancy costs
Disadvantages
Limited trade area
Lack of entertainment
No protection from weather
27. 7-27
Power Centers
Shopping centers that consist primarily of
collections of big-box retail stores such as
discount stores (Target), off-price stores
(Marshall’s), warehouse clubs (Costco),
and category specialists (Lowe’s, Best Buy,
Dick’s)
■ Open air set up
■ Free-standing anchors
■ Limited small specialty stores
■ Many located near enclosed malls
■ Low occupancy costs
■ Convenient
■ Modest vehicular and pedestrian traffic
■ Convenient
■ Modest vehicular and pedestrian traffic
■ Large trade areas
PhotoLink/GettyImages
28. 7-28
Shopping Malls
■ Regional shopping
malls (less than 1
million square feet)
■ Super regional malls
(more than 1 million
square feet)
The South China Mall in Dongguan, China
30. 7-30
Advantages and Disadvantages of
Shopping Malls
Advantages:
Many different types of stores
Many different assortments available
Attracts many shoppers
Main Street for today’s shoppers
Never worry about the weather
Comfortable surrounding to shop
Uniform hours of operation
Disadvantages:
Occupancy costs are high
Tenants may not like mall management control of operations
Competition can be intense
PhotoLink/GettyImages
31. 7-31
Challenge to Malls
■ Time pressured society makes it impractical to wander malls
■ Fashion apparel sold in malls experiencing limited growth
■ Malls are getting old and rundown – unappealing to shop
■ Anchor tenants are decreasing due to retail consolidation
■ Strategies?
n Make shopping more enjoyable (e.g., sofas, children’s playing areas)
n Great food destination (fast food and full-service restaurants)
n Tailor make its offering to cater to changing demographics (e.g.,
repositioning older shopping centers for Hispanic markets)
n Mall renovation and redevelopment
33. 7-33
Lifestyle Centers
■ Usually located in affluent
residential neighborhoods
■ Includes 50K sq. ft. of upscale
chain specialty stores
■ Open-air configuration
■ Design ambience and
amenities
■ Upscale stores
■ Restaurants and often a
cinema or other entertainment
■ Small department store format
may be there
34. 7-34
Fashion Specialty Centers
■ Upscale apparel shops
■ Tourist areas/central business
districts
■ Need not to be anchored
■ Décor is elegant
■ High occupancy costs
■ Large trade area
■ Ex. Phipps Plaza in Atlanta
TheMcGraw-HillCompanies,Inc./LarsA.Niki,photographer
37. 7-37
Larger, Multi-format Developments:
Omnicenters
■ Combines enclosed malls, lifestyle center, and
power centers
■ Larger developments are targeted
n to generate more pedestrian traffic and longer
shopping trips
n To capture cross-shopping consumers
38. 7-38
Mixed Use Developments (MXDs)
■ Combine several
different uses into one
complex, including
shopping centers, office
tours, hotels, residential
complexes, civic centers,
and convention centers.
■ Offer an all-inclusive
environment so that
consumers can work,
live, and play in a
proximal area
40. 7-40
Alternative Locations
Airports
Airports: Why wait with nothing to do?
Rents are 20% higher than malls
Sales/square ft are 3-4 times higher than malls
Best airports are ones with many connecting flights
KimSteele/GettyImages
42. 7-42
■ Located within other, larger stores
■ Examples:
n Grocery store with service providers (coffee bars,
banks, clinics, video outlets)
n Sephora in JCPenney
Alternative Locations
Store within a Store
44. 7-44
Matching Location to Retail Strategy
The selection of a location type must reinforce the retailer’s
strategy
be consistent with
n the shopping behavior
n size of the target market
n The retailer’s position in its target market
■ Department Stores è Regional Mall
■ Specialty Apparel è Central Business District, Regional
malls
■ Category Specialists è Power Centers, Free Standing
■ Grocery Stores è Strip Shopping Centers
■ Drug Stores è Stand Alone
45. 7-45
Shopping Behavior of Consumers
in Retailer’s Target Market
■ Factors affecting the location choice
n Consumer Shopping Situations
• Convenience shopping
• Comparison shopping
• Specialty shopping
n Density of Target Market
• Ex. Convenience stores in CBD; comparison
shopping stores next to Wal-Mart
n Uniqueness of Retailing Offering
• Convenience of locations is less important
• Ex. Bass Pro Shop
46. 7-46
Convenience Shopping
Minimize the customer’s effort to get
the product or service by locating
store close to where customers are
located
TheMcGraw-HillCompanies,Inc./AndrewResek,photographer
47. 7-47
Comparison Shopping
Customers have a
good idea of what
type of product they
want, but don’t
have a strong
preference for
brand, model or
retailer.
Ryan McVay/Getty Images
Typical for furniture,
appliances, apparel,
consumer electronics,
hand tools and
cameras.
Competing retailers locate
Near one another
48. 7-48
Category Specialists
Offer the benefits of comparison shopping
Consumers can see almost all brands and models in one store
Destination stores
The McGraw-Hill Companies, Inc./Andrew Resek, photographer
49. 7-49
Environmental Issues
“Above-ground” risks - such as asbestos-containing
materials or lead pipes used in construction.
Hazardous materials - e.g. dry cleaning chemicals,
motor oil, that have been stored in the ground.
Retailers’ Protection
Stipulate in the lease that the lessor is responsible
for removal and disposal of this material if it’s
found.
Retailer can buy insurance that specifically
protects it from these risks.
50. 7-50
Other Legal Issues
Zoning and Building Codes
Zoning determines how a particular site can be
used.
Building codes determine the type of building,
signs, size, type of parking lot, etc. that can be used
Signs
Restrictions on the use of signs can also impact a
particular site’s desirability
Licensing Requirements
Some areas may restrict or require a license for
alcoholic beverages
54. The farthest distance consumers are willing to
travel to purchase retail goods and services.
The size of a retail trade area depends on the
variety of goods and services offered in the
community and its proximity to competing
retail markets.
Trading Area
55. Trade area analysis and mapping tell you:
•Where a store's customers are coming from
•How many customers you have in a trade area
•Where to look for more customers
Why Trading Area Analysis is important?
56. • Identify gaps or overlaps in the market coverage of your
existing store network, and make corrections by opening,
closing or moving stores
• Define a geographic area to analyze for market potential,
market penetration, and competitive threats
• Become more efficient and effective at target marketing by
reaching out only to those customers and prospects in a store's
trade area
• Use as a key input into customer profiling
• Promotional Activity Focus can be determined
• Proper Number of Stores can be calculated
Benefits of Trade Area Analysis
57. ¯Discovery of consumer
demographics and
socioeconomic
characteristics
¯Opportunity to
determine focus of
promotional activities
¯Opportunity to view
media coverage patterns
¯Assessment of effects of
trading area overlap
¯Ascertain whether
chain’s competitors will
open nearby
¯Discovery of ideal
number of outlets,
geographic weaknesses
¯Review of other issues,
such as transportation
Benefits of Trade Area Analysis
58. • A trade area should account for more than 50% or
higher sales
• Trade area can be a nation/ single neighbor block
• Size of area depends on retailer’s objectives, like,
how many customers are needed to achieve
profitability? What sales is required to achieve
breakeven?
• Ray Kroc of McDonald’s insisted that franchisees
live in trading area so they would understand the
local market
Characteristics of Trade Area
60. Various Zones of Trading Area
Primary Secondary Tertiary
- 55-70% of
customers originate
- 15-20% of
Customers
- 5-15% of Customers
Main Trade Area
(MTA)
Beyond Trade Area
(BTA)
67. A.Concentric Circles or Ring Studies
B.Drive Time
C.Zip Code Tabulation
D.Point of Sale Data
E.Traffic Flow
F.Commuting time to work
1. Analogue Models
68. A. Concentric Circles or Ring Studies
Within 8 kms
8-10 kms
11-15 kms
16-20 kms
>20 kms
69. • Defines the trade area based on the amount of time it
takes to drive to a community or retail location.
• Drive time trade area will always be irregularly shaped
because of the layout of road systems, difference in speed
limits on roads/freeways and geographic barriers.
This methodology is often used in urban setting with high
population density.
A rule-of-thumb used in retail industry is that consumers
will typically drive 20 minutes to shop.
B. Drive Time
70. • Tabulate the number of customers by their zip codes.
• Zip code collection can be built into point-of-sale machines.
• Customer’s zip code can be input to a cash register and
then downloaded into a ready-to-use spreadsheet format.
• Once zip codes are in spreadsheet format, this information
can be summarized by the number and percentage of people
originating in each zip code.
• When the zip code percentages are known, they can be
categorized into a trade area.
• Trade area is defined as those zip codes that comprise
about 75% of the customers.
C. Zip Code Tabulation
71. Customer point-of-sale (POS) data is collected by:
-In-store surveys
-Courtesy card programs
-License plate surveys
-Credit card transactions
-Through raffles
-Business card collection
From this information a trade area map can be developed to
provide a very accurate and precise picture of the spatial
distribution and characteristics of store trade areas
D. Point of Sale Data
72. is the random canvassing of parking lots at major locations
in town at different times on different days and over several
weeks.
The locations might include the various identified areas,
major shopping destinations such as shopping malls and
centers, Big Bazars, Reliance Marts, Home Depot, and
other popular establishments in town.
E. Traffic Flow
73. Commuting time to work by local residents is another way of
delineating a community’s retail trade area.
Converting commuting time to work into spatial distances or
miles and plotting these data on a map, provide a visual
picture of the geographic size of its trade area.
F. Commuting Time to Work
74. • Select store performance measure & variables
used to predict performance.
• Solve the regression equation and use it to
project performance for future sites
2. Regression Analysis
75. aka Spatial (flows betweenlocations) Interaction
Model
A spatial interaction is a realized movement of
people,freight or information betweenan origin and
a destination.
The gravity model is based on the assumption
that interaction betweentwo locations is
proportional to their size and inversely proportional
to their distance (or impedance).
3. Gravity Models
76. Reilly’s law of retail gravitation, a traditional means
of trading-area delineation, establishesa point of
indifference between two cities or communities,
so the trading area of each can be determined
City
A
City B30 Kms10 Kms
Point of indifference
Population 10,000
Population 90,000
1. Reilly’s Law
78. Limitations of Reilly’s Law
Reilly’s law rests on 2 assumptions:
Competing areas will be accessible from the major road
– Distance is only measured by major thoroughfares;
some people will travel shorter distances along cross
streets
Retailers in the two areas will be equally effective.
Other factors such as dispersion of population are ignored.
Travel time does not reflect distance traveled. Many people
are more concerned with time traveled than with distance
Actual distance may not correspond with perceptions of
distance
79. “The principal retail districts within a metropolitan
trading area attract trade from the residential sections of
the area approximately in direct proportion to the size of
the retail districts and in inverse proportion to the square
of the driving time distance from each residential section
to the retail districts” (Ellwood, 1954 in Carn, et al. 1988,
p.190).
Where,
B= percentage of consumer want to visit shopping center
S= retail area
T= travel time
a, b= two shopping centers (a and b)
Although Ellwood has modified the Reilly’s law, the equation can analyze only two shopping
centers.
2
2. Elwood’s Modification
80. Huff’s law of shopper attraction delineates trading areas on the
basis of product assortment (of the items desired by the
consumer) carried at various shopping locations, travel times from
the shopper’s home to alternative locations, and the sensitivity of
the kind of shopping to travel time.
Where,
P (Cij) = the probability that a consumer living at site i will shop at retail center j
Sj = the size of the retail center j
Tij = the travel time from site i to retail center j
n = the numver of retail center in the immediate area
l = a parameter that reflects the effect of travel time on different kinds of shopping trips
(Huff discovered valuesof 3.19 for furniture and 2.72 for clothing)
3. Huff’s Law
81. Huff model have advantage, which could measure the
shoppers’ image to competitiveness among shopping
center and their response.
However, the weakness of this model is assumed that
demography characteristic of shoppers are equal and they
have similar shopping behavior.
88. Delineating The Trading Area Of
An Existing Store
Store records or special study can be used to measure the trading area.
Primary, secondary and fringe areas can be described in terms of:
•Frequency with which people from various geographic areas shop at
a particular store.
•The average rupee purchase at a store by people from given
geographic areas.
•The concentration of a store’s credit card holders from given
geographic areas.