Store locations

Retail Store Location

For long this P has been considered as a most important in retailing.Selecting a market area and specific location are two important decisions for a retailerSince 90% of retail sales are made at stores.It is an important part of retail strategy.Location decisions can be complex, costs can be quite high, there is often little flexibility once the location has been chosen.Location of store conveys a fair amount of its image.

Retail Store Location…

The ultimate goal is maximum customer accessMarket and location selection depends upon target marketRetailer need to understand who its current customers are, who its competitors customers are and who makes up the potential customer basesPeople who are alike tend to live in neighborhood and have similar behavior and psychographic traitsGeographic location matter because cost-effective product delivery and adaptation of websites to fit local market interests/ needs are necessary

Importance of Location

Good Location CAN Overcome Mediocre Strategy MixPoor Location Difficult to OvercomeRequires Extensive Decision MakingNot Flexible

Problem with shifting location

Heavy InvestmentNew Location May Not Have Same CharacteristicsStore Fixtures and Renovations May Not Transfer

EvaluateAlternate

Geographic(Trading)

Areas

SelectGeneralLocation

AnalyzeAlternate

Sites

DetermineType of Location

Site Selection Steps

Trading-Area Analysis

A trading area is a geographic area containing the customers of a

particular firm or group of firms for specific goods or services

Trading area analysis

A trade area should account for more than 50% or higher sales Trade area can be a nation/ single neighbor blockSize 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

Trading Area Parts

Often the trading area is broken down in primary, secondary, tertiary or fringe areasPrimary area should produce at least 60% of business, secondary area additional 15-20% and fringe areas the remainder

Trading Area

Size and Shape of Trading Area

Not ConcentricTwo Stores in Same Area Can Have Different Trading Areas (TA)

Trading Area Analysis Benefits

Consumer Characteristics DetailedPromotional Activity Focus DeterminedProper Number of Stores CalculatedGeographic Weaknesses Highlighted

Trading Area Influencers

Store SizeCompetitors’ LocationsNew StoresResidential Housing PatternsTravel or Driving TimePromotion-impact is temporary

Factors Affecting Demand for a Trading area

CompetitionBusiness climateDemographic and lifestyle characteristicsEconomies of scale versus cannibalization

Benefits of Trading Area Analysis

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

DECISION MAKING MODEL FOR TRADING AREA SELECTION

The Trading Areas of Current and Proposed Outlets

Trading Areas and Store Type

Largest

TRADINGAREAS

Smallest

Specialty Stores

Department stores

Apparel stores

Supermarkets

Gift stores

Convenience stores

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.

Delineating Trading Area of New Store

Different tools must be used when an area must be evaluated in terms of opportunities rather than current patronage and traffic patterns– Trend analysis– Consumer surveys– Computerized trading area analysis models

Computerized Trading-Area Analysis Models

Regression Model

Huff's Gravity Model

Huff’s Law…

Huff’s gravity model/ huff’s law of shopper attraction states that consumers will shop at a store more often if the size of the store is increased and the distance to shopping area is decreased.The theory says that because the center is larger, it may have larger/ wider assortment of goods and servicesDistance has the opposite effect on probability of patronageAll things being equal, consumer wants a shopping area close to home

Huff’s Law…

Huff’s Gravity Model (Huff’s Law of Shopper Attraction

n

PiJ = (SJ / TiJλ) / ∑ (SJ / TiJ

λ) Where; j=1

PiJ = Probability of consumer traveling from origin (i) to given shopping center or store (j)

SJ = sq. ft. of selling space in shopping location, expected to be devoted to particular product being sold

TiJ = travel timeλ = exponent reflecting effect of travel time on different types

of shopping trips (i.e. one may travel more for medical product)

n = no. of shopping locations available

Chief Factors to Consider in Evaluating Retail Trading Areas

Total size and densityAge distributionAverage educational levelPercentage of residents owning homes

Total disposable income

Per capita disposable income

Occupation distribution

Trends

Population Size and Characteristics


Management

Management trainee

Clerical

Availability of Labor


Delivery costs

Timeliness

Number of manufacturers

Number of wholesalers

Availability of product lines

Reliability of product lines

Closeness to Sources of Supply


Dominant industry

Extent of diversification

Growth projections

Freedom from economic and seasonal fluctuations

Availability of credit and financial facilities

Economic Base

Chief Factors to Consider in Evaluating Retail Trading Areas…

Number and size of existing competition

Evaluation of competitor strengths and weaknesses

Short-run and long-run outlook

Level of saturation

Competitive Situation

Chief Factors to Consider in Evaluating Retail Trading Areas…

Number and type of store locations

Access to transportation

Owning versus leasing opportunities

Zoning restrictions

Costs

Availability of Store Locations


Taxes

Licensing

Operations

Minimum wages

Zoning

Regulations

Location, Location, Location

Criteria to consider includepopulation size and traitscompetitiontransportation accessparking availabilitynature of nearby storesproperty costslength of agreementlegal restrictions

Destinations versus Parasites

Destination stores have a better assortment, better promotion, and/or better imageIt generates a trading area much larger than that of its competitorsDunkin’ Donuts: “It’s worth the trip!”

Parasite stores do not create their own traffic and have no real trading area of their ownThese stores depend on people who are drawn to area for other reasons

Types Of Location

Typically a store location may be:1. Freestanding/ isolated store2. Part of a planned business district3. Part of a unplanned business district

Isolated Store/ Freestanding Location

A freestanding location is a store located along a major traffic artery, without any competitive retailers around.

Generally the store is located off the main road, highway orStreet

Large retailers and medical retailers utilize isolated sites

Advantage is limited competition resulting in lower rental

It is harder to attract traffic to a freestanding site

Planned Business Sites

Generally planned business site/ district is centrally managed/ ownedThe key to successful planned business site is balanced tenant mix which offers complementary merchandise to the consumerPlanned business districts are developed to attract consumers from greater distancesHave at least one anchor store and enough parking space to attract traffic3 types of planned business sites are regional centers, community centers and neighborhood/ lifestyle centers

Planned Business Sites…Regional centers: attracts customers from an area of 5 to 15 milesProvides general merchandise and is typically enclosed with parking spaceMalls have balanced tenancy, convenient, free parking and vast selection of storesGenerally about 50 stores, besides one anchor store make up regional centerShould have about 4,00,000 sq. ft. of gross leasable area (GLA), though most regional centers are larger than thisMegamalls/ superregional centers – two of the world’s largest are – the West Edmonton Mall in Canada and the Mall of America in MinneapolisMall of America took $ 650 mn. to build, has 2.5 mn. sq. ft. of GLA and more than 4 mn. sq. ft. in total

Planned Business Sites…

Community shopping centers tend to be between 100,000 to 400,000 sq. ft.House a smaller branch department store, large discount store, a category killer or combination of these stores as an anchor Have a diverse tenant mix, that includes banks, pharmacies, hair salons and specialty storesNeighborhood centers are planned shopping districts with a smaller anchor store and focus more on convenience goods


Lifestyle centers is a neighborhood center targeted to upper-income shoppers, are typically outdoors with a main street type of ambience, tenants sell nonessential items, building and landscaping costs are higher than other retail developments and parking in front of the storesA lifestyle center is typically one-third size of a traditional regional center


Airport malls is a community shopping center located in an airport2 models for airport malls: Prime model and Developer modelIn Prime model, the airport is responsible for management of retail facilities whereas, in the Developer model, an outsider company serves as the mall manager and works to draw top retailers to the airportThe shops in the developer model are owned and operated by individual retailers, who do their own hiring

Unplanned Shopping Sites

Unplanned shopping sites result when two or more retailers move into the same area or in close proximity to each otherCentral Business Districts are city center areas/ downtown areas of citySecondary Business Districts generally a miniature CBD, located around major transportation intersections of citiesNeighborhood Business Districts generally relies on convenience products as the main product mix and provides shopping for a neighborhoodStrip shopping Districts have stores visible from the road and arranged in a long ‘strip’

Choosing Store Locations

In choosing store location, retailer should follow these four steps:1. Evaluate alternative trading areas in terms of characteristics of

residents and existing retailers- Market Identification.2. Determine whether to locate as an isolated store, in an

unplanned business district or in a planned shopping center within the geographic area.

3. Select the general isolated store, unplanned business district, or planned shopping center location.

4. Analyze alternate sites contained in the specified retail location type.

The choice of the location of the store depends on the target audience and the type of merchandise to be sold.

Store locations

Business

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