4f085Store Location I

7/30/2019 4f085Store Location I

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AMITY BUSINESS SCHOOL

Pooja Sehgal TabeckRMM

Elements in Retail Mix

Customer

Service

Merchandise

Assortment

PricingCommunication

Mix

Store Display

And Design

Location Strategy


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Importance of Location

Marketing opportunities should be BEST

at location. Retailer must take the store to where the

people are.

Every store strives for its competitiveadvantage.


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RETAIL STRATEGY ANDLOCATION

Before deciding where your retail location

should be, you first need to decide what

business you are actually in.


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Role of location in retail business

Location becomes a very critical decision for a retailer

for several reasons

location is generally one of the most important factors customers considerwhile choosing a store

store location is the least flexible element of a retailers strategy mix due to itsfixed nature, the amount of investment and the length of lease agreements

good location may let a retailer succeed even if its strategic mix is mediocre

a store inherits a lot of its character from its location


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CHOSSING A STORE

LOCATION

DETERMINE WHAT TYPE OF LOCATION IS DESIRABLE

RETAILER INVESTIGATES ALTERNATIVE TRADING AREA

SELECTS THE GENERAL LOCATION

EVALUATE ALTERNATIVE SPECIFIC STORE SITES


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A geographical area containing customers

of a particular firm or group of firms for

specific goods or services.

OR

A district size of which is usually determined by boundaries

within which it is Economical in terms of volume and cost formarketing unit or group to sell and/or deliver a good or

service.


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TYPES OF LOCATIONS

ISOLATED STORE

UNPLANNED BUSINESS DISTRICTS

PLANNED SHOPPING CENTER


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Isolated Retail Locations

Freestanding Sites location for individual store unconnected

to other retailer

Advantages: Disadvantages:

Convenience Travel Distance

High traffic and visibility No Cost Sharing

Modest occupancy cost High advertising expenses

Separation from competition Difficulty in attracting

customers


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Unplanned Business DistrictIs a type of retail location where two or more

stores situated together in such a way that the

total arrangement or mix is not due to prior longrange planning.


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Central Business DistrictCBD exists where there is greatest density of office building & stores

Advantage to Retailers:

Affluence returned

Young professionals

Returned empty-nesters

Incentives to move provided by cities

Jobs!

Low occupancy costs

High pedestrian traffic


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Central Business District Draws people into areas during business hours

Hub for public transportation

Pedestrian traffic Residents

High security required

Shoplifting

Parking is poor

Advantages

Disadvantage

s


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Unplanned Business Districts

Secondary Business District (Main Street

Location)

Neighborhood Business District

String


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Inner City

Inner city retailers achieve high salesvolume, higher margins and higher profits

Unmet demand tops25% in many inner city

markets

Inner city customerwants branded

merchandise


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Planned Shopping Centers

Shopping Center Management Controls:

Parking

Security

Parking lot lighting

Outdoor signageAdvertising

Special events for customers


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Types of Shopping Centers

Regional Shopping Center

Power Centers

Lifestyle Centers

Fashion Specialty Centers

Outlet Centers


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Power Centers

Big box stores

Limited small

specialty stores

Free-standing stores

Open air set up

Available parking

Desirable

shopping

experience

Many located near

enclosed malls

Large trade areas

Low occupancy costs Convenient

Modest vehicular and

pedestrian traffic


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Lifestyle Centers

Usually located in affluent residential neighborhoods

Includes 50K sq. ft. of upscale chain specialty stores

Open-air configurationDesign ambience and amenities

Upscale stores

Restaurants and often a cinema or other entertainment

Small department store format may be there


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Fashion Specialty Centers

Upscale apparel shops

Need to be anchoredDcor is elegant


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Outlet Centers

These shopping centers contain mostly manufacturers and retail outlet store


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Tradeoff Between Locations

Rent

Traffic

There are relative advantages

and disadvantages to consider

with each location.


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Relative Advantages of Major Retail Locations

Location City Strip Shopping Free

Issues Center Mall Standing

Large size + - + -draws people

to areaPeople + + - -working/living

in area

provided source

of customers

Source of ? - + -entertainment/

recreation

Protection - - + -against weather


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Relative Advantages of Major Retail Locations

Location CBD Strip Shopping Free


Security - - + -

Long, uniform - + + +hours ofoperation

Planned - - + -shopping

area/balanced

tenant mix

Parking - + - +

Occupancy ? + - +costs

(e.g. rent)

R l ti Ad t


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Relative Advantagesof Major Retail Locations

Location City Strip Shopping Free


Pedestrian + - + -traffic

Landlord + + - +control

Strong + + - +competition

Tax ? ? ? ?incentives


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Other Retail Location Opportunities

Mixed Use DevelopmentsAirports

Resorts

Hospitals

Store within a Store


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Floor area ratio (FAR) orfloor space

index (FSI) is the ratio of the total floor

area of buildings on a certain location to

the size of the land of that location, or thelimit imposed on such a ratio .

As a formula: Floor area ratio = (Total

covered area on all floors of all buildingson a certain plot)/(Area of the plot )

Matching Location to Retail
http://en.wikipedia.org/wiki/Ratiohttp://en.wikipedia.org/wiki/Ratio


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Matching Location to RetailStrategy

Department Stores Regional Mall

Specialty ApparelCentral Business District,

Regional Malls

Category Specialists Power Centers,

Free Standing

Grocery Stores Strip Shopping Centers

Drug Stores Stand Alone


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TERMS OF

OCCUPANCY

Ownership Vs Leasing Sale-leaseback

Types of Leases Straight lease

Percentage lease

Graduated lease

Maintenance increase recoupment lease

Net lease


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Terms of the Lease

Prohibited Use Clause

Exclusive Use Clause

Escape Clause


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Environmental Issues

Above-ground risks - such as asbestos-containingmaterials 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 itsfound.

Retailer can buy insurance that specifically

protects it from these risks.


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Other Legal Issues

Zoning and Building CodesZoning determines how a particular site can be

used.

Building codes determine the type of building,

signs, size, type of parking lot, etc. that can beused

Signs

Restrictions on the use of signs can also impact

a particular sites desirability

Licensing Requirements

Some areas may restrict or require a license for

alcoholic beverages


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Factors Affecting the Demand for a

Region or Trade Area


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Competition

Saturated Trade Area

Understored Trade Area

Overstored Trade Area


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Operating Costs Varies across areas

Affected by proximity of area considered vs.other areas where retailer operates

Local and state legal environment has effect


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How Many Stores to Open in an

Area?

Economies of Scale vs. Cannabilization

One promotional costs for all stores open stores as long as

profits increase

Justifies cost of distribution center

Increases sales per store

Target needs of regional market

Management has control of market


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Evaluating a Site

When evaluating and selecting a specific site, retailers consider:

The characteristic of the site

The characteristic of the trading area

The estimated potential sales that can be generated


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Site Characteristics


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Traffic Flow and Accessibility

When traffic is greater, more customers shop

Good for convenience retailers

Not necessary for destination retailers

Too much can impede access to store

Accessibility to store is as important as traffic flow

Convenience of Going to Site


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Convenience of Going to Site

Accessibility

Road pattern and condition

Natural and artificial barriers

Visibility

Traffic flow

Parking

Congestion

Ingress/egress


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What Should Retailers Consider for Parking?

Observe shopping center at various timesEmployee parking availability

Shoppers that use cars

Parking by non-shoppers

Typical length of a shopping trip


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Adjacent Tenants

Principle of Cumulative Attractiveness


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Cost and Restrictions

Costs Rent

Common Area Maintenance Fee/Insurance

Advertising Fee Restrictions

Signage

Tenant Mix Operating hours


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Steps in Evaluating Sales Potential of a

Site Define Trade Area

Drive Time vs. Geographic Distance

Primary, Secondary, Tertiary

Estimate Sales Potential

Gravity Model

Analog Approach

Regression Analysis


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Trade Area

Primary zone - 60 to 65 percent of its customers

Secondary zone - 20 percent of a stores sales

Tertiary zone - customers who occasionally shop

at the store or shopping center


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Factors Defining Trade Areas

Accessibility

Natural & Physical Barriers

Type of Shopping Area

Type of Store

Competition

Parasite Stores


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INFORMATION REQUIRED FOR

DEFINING TRADE AREAHOW MANY PEOPLE

ARE IN TRADE AREA ,

WHERE DO THEY LIVE

POTENTIAL

CUSTOMERS

ASSES

COMPETITION

Customer Spotting

Use Census Data

Geodemographic

Information Systems

Information on Competition

Yellow Pages


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Customer Spotting

Purpose: to spot, or locate, the residences ofcustomers for a store or shopping center.

How to obtain data: credit card or checks

customer loyalty programs

manually as part of the checkout process

automobile license plates


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Census Data of the India

Only once in 10 years.

Each household in the country is counted to determine thenumber of persons per household, household relationships,

sex, race, age and marital status.


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Geographic Information System(GIS)

GIS a system of hardware and software used to store,

retrieve, map and analyze geographic data along with the

operating personnel and the data that goes into the system.

coordinate system (latitude and longitude)

special features (rivers and roads) some firms offer services combine GIS with updated

census data, consumer spending patterns and lifestyles


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GIS Components

Data

Inputs

Physical GeographyLatitude/Longitude

Land/Water

Terrain

Rainfall/SnowTemperature

Cultural GeographyDemographics

Manmade Structures

Consumption Patterns

Work Patterns

Leisure Behavior

Deviant Behavior

GIS

(Data Aggregation and

Analysis via Computer)

Output

Maps and Other

Displays of Information

Indices for Assessing Sales
http://www.esri.com/mapmuseum/mapbook_gallery/volume17/business4.htmlhttp://www.esri.com/mapmuseum/mapbook_gallery/volume18/business3.htmlhttp://www.esri.com/mapmuseum/mapbook_gallery/volume18/business3.htmlhttp://www.esri.com/mapmuseum/mapbook_gallery/volume17/business4.html


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Indices for Assessing Sales

Potential

Market Potential Index (MPI)

Measures the demand of a Product or

Service in a Trade Area

MPI compares the demand of a product or

service in the trade area with the demand of

product or service nationally.

Spending Potential Index (SPI)Average Amount Spent on a Product or

Service by a Household in a Trade Area


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Retail Location Theories

Central Place Theory

Spatial Interaction Theory

Principle of Minimum Differentiation


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Methods of Delineating the Trading Area of

New Store

A Gravity Model

Analog Approach

Regression Analysis


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Reillys law of retail gravitation, a traditionalmeans of trading-area delineation,

establishes a point of indifference between

two cities or communities, so the tradingarea of each can be determined


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Gives the point of indifference between two cities Point of indifference is the geographic breakpoint between two

cities (communities) at which consumers are indifferent to

shopping at either.

1

ab

b

a

d

D P

P

Limit of city As trading area

(measured in miles along theroad to city B)

Distance in miles along a

major roadway between the

cities

Population of city b

Population of city a

S


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REILLYS LAW

It establishes a point of indifference

between two cities, so that trading area of

each can be determined.

Point of indifference is geographicbreaking point between two cities, at which

consumes are indifferent to shopping from

either.


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Distance is only measured by major

thoroughfares; some people will travel

shorter distances along cross streetsTravel 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

H ffs Gra it Model


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Huffs Gravity Model

BASIS OF HUFFS LAW1. PRODUCT ASSORTMENT CARRIED AT VARIOUS

SHOPPING CENTERS

2. TRAVEL TIME FROM SHOPPERS HOME TO

ALTERNATIVE LOCATION

3. SENSITIVITY OF THE KIND OF SHOPPING TO TRAVEL

TIME.


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Huffs Gravity Model


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P = Probability of consumers traveling from

home I to shopping location j S= Square footage of selling space in shopping

location j expected to be devoted to particular

product category

T= travel time from consumers home I to

shopping location j

=parameter used to estimate the effect of

travel time on different kind of shopping trips

N= no. of different shopping locations

ANALOG APPROCH


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AMITY BUSINESS SCHOOLANALOG APPROCH

ALSO KNOWN AS SIMILAR STORE APPROCH

DIVIDED INTO 3 STEPS

STEP-1 . Define Current Trade Area

STEP -2 Based on density of customers tertiary

trade zones are defined

STEP-3 Match characteristics of current store withpotential new store location to determine best site

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4f085Store Location I

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