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RETAIL LOCATION
DECISIONSModule III
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TYPES OF LOCATION
Free standing/Isolated Store
Part of a Business District
Part of a shopping Center
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ISOLATED STORE
Located along a major
traffic artery
Limited competition
Less rentHigh advertising costs
Gas stations and
convenience stores etc
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PART OF A BUSINESS DISTRICT
The place of commerce
in the city
No preset format or
structure
Can be central,
secondary or
neighborhood
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PART OF A SHOPPING CENTER
Shopping center –
Group of retail and
other commercial
establishments that is
planned, owned andmanaged as a single
property
Neighborhood
Community
Regional
Super regional
Fashion/Specialty
Power Center
Theme Center
Outlet Center
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CHOOSING A RETAIL LOCATION
1. Market Identification
2. Determine the market
potential
3. Identify the mostattractive sites
4. Select the best site
available
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1. MARKET IDENTIFICATION
Identify the market
attractiveness
Especially important
to identify the region's
peculiarities and
needs
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2. DETERMINE THE MARKET
POTENTIAL
Demographic features of the population
Characteristics of the households
Competition and compatibility
Laws and regulationsTrade area analysisTrade area – Geographic area that generates
majority of the customers for the store
Primary, Secondary and Teritiary
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3, 4. IDENTIFY ALTERNATE SITES
AND SELECT THE SITE
Traffic
Accessibility of the market
Number and types of store
Amenities availableBuy or Lease?
Product mix offered
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HOW TO EVALUATE TRADING AREA?
Herfindahl - Herschman Index (HHI)
Index of retail Saturation (IRS)
Reilly’s Law of Retail Gravitation
Central Place TheoryHuff’s Model of Trading Area Analysis
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HERFINDAHL – HERSCHMAN INDEX
A commonly accepted measure of market concentration
Determined by adding the squares of the market
shares of each competitor within the relevant market.
Takes into account the relative size and distribution of
the firms in a market Approaches zero when a market consists of large
number of firms of relatively equal size.
Index Meaning
Above 1800 Concentrated
1000- 1800 Moderately concentrated
Less than 1000 Less Concentrated
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INDEX OF RETAIL SATURATION
Based on the assumption that if a market has a
low retail saturation, the likelihood of success is
high
Takes into consideration the number of stores
H = No of households; RE = Annual Retail
expenditure; RF = Total square footage includingthe proposed store
IRS = H*RE/RF
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REILLY’S LAW OF RETAIL
GRAVITATION
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