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Store Site Location & Selection
Location is an important decision for a retailer-why?
Location is an important decision for a retailer because -once started ,it is very difficult to change (loyal customers and employees lost, store fixtures cannot be easily removed)
90% of retail formats are store based
A good retail location may let a retailer succeed
STEPS INVOLVED IN CHOOSING A RETAIL LOCATION
Market identification (which country to enter- attractiveness of a market )
Determine the Market potential
1. ( Demographic features of the population—(population –urban/rural , level of literacy, level of education )
2. The characteristics of the households in the area –( income level, age profile
3. Competition and compatibility –starting a gift shop near department store or theatre
4. Laws and regulations- hours, minimum wages, holidays required
5. Trading area analysis –Primary trading area, secondary and tertiary area analysis
5
Factors Affecting The Choice Of Market
Demographics of population & area
Competition
Laws & Regulation
Trade area analysis
TRADING AREA ANALYSIS
A trading area is geographic area containing the customers of a particular firm. it is the geographic area that generates the majority of the customers for the store.
Knowing the boundaries of the trade area helps the retailer estimate the number of potential customers that may patronize store .
Helps the retailer in gathering information about demographic and lifestyle
Understanding of the trade areas also gives key inputs to the retailer for the promotional and communication strategies to be adopted by the firm
Internationally many retailers use GIS software's to understand the characteristics of trading area
Primary trading area- covers between 50- 80 % of the stores customers and the area closest to the store- 4 miles.
Secondary trading area- 15-25 % of the stores customers-5 miles.
The fringe of tertiary trade area- covers the balance customers-10 miles
THE SEGMENTS OF A TRADING AREA
Retail Trading Area Identification
Spotting Techniques: “spot” customer origins – license plate surveys– customer surveys– customer records– customer activities (contests, sweepstakes)
Demographic data & GIS Vendors– Census– Buying Power Index (BPI)– Measuring Competition
Demographic Data and GIS Vendors
Demographic data vendors specialize in repackaging and updating census-type data.
Geographic Information System (GIS) is a computer system that enables analysts to visualize information about their customers’ demographics, buying behavior, and other data in a map format.
• GIS is a spatial database that stores the location and shape of information.
• Analysts can identify the boundaries of a trade area and isolate target customer groups
Analyze alternative sites in the specified retail location type-
1. Traffic
2. Accessibility of the market
3. Total no. of stores and types of stores that exists in the area
4. amenities available
5. To buy or to lease
6. The product mix offered
SITE EVALUATION CRITERIA
Pedestrian traffic Number of people, type of people
Vehicular traffic Number of vehicles, type of vehicles, traffic congestion
Parking facilities Number and quality of parking spots, distance to stores, availability of employee parking
Transportation Availability of mass transport, access from major highways, ease of delivery
Store Composition Number and size of stores, retail balance and affinity(similarity)
Specific site Visibility ,placement in the location, size and shape of the lot, size and shape of the building, condition and age of the building
Terms of Occupancy Ownership or leasing terms, operations and maintenance cost, taxes and other restrictions
Overall rating General location and specific store
Select the best site available
TYPES OF RETAIL LOCATIONS
1.THE ISOLATED STORE/Free standing location- is a free standing retail outlet located on either a highway or a street; there are no adjacent retailers
Advantages
No competition
Rental costs are low
Larger space may be obtained
Better road and traffic visibility
More parking space
Disadvantages
Initial customers may be difficult to attract
Many people will not travel very far to get to one store on a continuous basis
Many people like variety in shopping
A store must often be built rather than rented
Costs such as outside lighting, security etc are not shared
2.THE BUSINESS DISTRICT- is the place of commerce in a city ,which developed historically as the centre of trade and commerce in the city or town. It can be classified into central business district, secondary or a neighborhood business district.
CENTRAL BUSINESS DISTRICT- is the main centre of commerce and trade in the city. eg.in Mumbai –colaba or Nariman point and in Delhi- Connaught place
Characteristics-peak land rates, intense development, vehicular and pedestrian traffics are very high ,shoppers drawn from the whole urban area and has at least one major department store and a number of specialty and convenience stores
Advantages
excellent goods /service assortment
access to public transportation
variety of store type
wide range of prices and customer services
high level of traffic and nearness to social and entertainment facilities
Disadvantages
inadequate parking
traffic and delivery congestion
more travel time for those living in the suburbs
high rent and high cost for property
discontinuity of offerings, such as four shoes store and no pharmacy
SECONDARY BUSINESS DISTRICT- is one which has evolved over a period of time, with the spread of population within the city .A city may have more than one SBD
Characteristics- stores are smaller than those in the CBD, smaller trading area and
it includes traditional department stores and some specialty stores
Advantages
access to public transportation
less crowding and personal service
placement nearer to residential area
Disadvantages
discontinuity of offering
high rent and parking difficulty
fewer outlets
NEIGHBORHOOD BUSINESS DISTRICT- is an unplanned shopping area that appeals to the convenience shopping and service needs of a single residential area. It contains several small stores, such as dry cleaner, stationary sore, barber shop, liquor store and a restaurant .The leading retailer is a supermarket or a large drug store
Advantages
good location
long store hours and a good parking
less hectic atmosphere
Disadvantages
limited selection of goods and services
price is higher
less competition
STRING- it is located along a street or highway .A string may start with an isolated store ,success then breeding competitors
3.PLANNED SHOPPING CENTRE- A group of retail and other commercial establishments that is planned ,developed, owned and managed as a single property. Availability of parking is an important feature of a shopping centre
Positive attributes family shopping sharing of common costs creation of distinctive ,but unified shopping centre image pedestrian traffic parking space access to highway low theft rate
Limitations reduce retailer’s flexibility (working hours) higher rate than isolated store domination by large stores competition expansion is a problem
The International Council of Shopping Centers has defined eight principal shopping center types, shown in the accompanying table.
Types of Shopping Centers
Neighborhood and Community Centers (Strip Centers)
Power Centers
Enclosed Malls
Lifestyle Centers
Fashion Specialty Centers
Outlet Centers
7-23
Neighborhood and Community Centers
Attached row of stores
Managed as a unit
Onsite parking
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7-24
Power Centers
Big box stores
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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
7-25
Lifestyle Centers
Courtesy of General Growth Properties
Photo provided by ICSC and used with permission of Aspen Grove Lifestyle Center
7-26
Lifestyle Centers
Usually located in affluent residential neighborhoods
Open-air configuration
Design ambience and amenities
Upscale stores
Restaurants and often a cinema or other entertainment
Small department store format may be there
7-27
Fashion Specialty Centers
Upscale apparel shops
Need to be anchored
Décor is elegant
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7-28
Outlet Centers
These shopping centers contain mostly manufacturers and retail outlet stores
Courtesy of Beall’s, Inc.
7-29
Other Retail Location Opportunities
Mixed Use Developments AirportsResorts HospitalsStore within a Store
Royalty-Free/CORBIS
7-30
Alternative LocationsMixed Use Developments MXDs
Skip Nall/Getty Images
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Civic Centers
Office Buildings
Hotels
7-31
Alternative LocationsAirports
Airports: Why wait with nothing to do?
Rents are 20% higher than mallsSales/sqft are 3-4 times higher than mallsBest airports are ones with many connecting flights
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7-32
Alternative LocationsResorts
Captive audience
Well-to-do customer
Customers have time to shop
Royalty-Free/CORBIS
7-33
Alternative LocationsHospitals
Patients cannot leaveGifts are available
Royalty-Free/CORBIS
7-34
Matching Location to Retail Strategy
Department Stores Regional Mall (a shopping mall which is designed to service a larger area (15 miles) than a conventional shopping mall.)
Specialty Apparel Central Business District, Regional Malls
Category Specialists Power Centers, Free Standing
Grocery Stores Strip Shopping Centers
Drug Stores Stand Alone
Retail Location Theories/ Methods of evaluating a trading area
Retail Location Theories/ Methods of evaluating a trading area
1. Huff’s model of trading area analysis
2. The index of Retail saturation/
Saturation Theory
3. Reilly’s law of retail gravitation
Huff’s Model
Based on the premise that the probability that a given customer will shop in a particular store or shopping center becomes larger as the size of store or center grows and distance or travel time from customer shrinks
Huff’s Law
Assumptions:
The proportion of consumers patronizing a given shopping area varies with the distance from the shopping area
The proportion of consumers patronizing various shopping areas varies with the breadth and depth of merchandise offered by each shopping area
The distance that consumers travel to various shopping areas varies for different types of products purchased
The “pull” of any given shopping area is influenced by the proximity of competing shopping areas
Huff’s Model Formula
tripsshopping of kinds different on time travelofeffect thereflects that oexponent tAn
center shopping point to starting scustomer' from distanceor timeTravel
center shopping of Size
center shopping particular a to travelingorigin ofpoint given aat customer a ofy Probabilit
Where
ijT b
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ijP
University and Shopping Centers: Gravity Model Illustration
Huff’s Model: The Solution
Pij = 1000 32
(1000 32) + (500 52) + (100 12)
Probability = .43
.43 x 12,000 students = 5,160 customers
5,160 customers x $150 = $774,000
• Repeat steps 1 to 3 for the remaining areas and then sum them.
Retail Location TheoriesRetail Location Theories
Saturation theory
examines how the demand for goods and services of a potential trading area is
being served by current retail establishments in comparison with
other potential markets.
Retail Location TheoriesRetail Location Theories
Index of retail saturation (IRS)If a market has a low level of retail saturation, the likelihood of success is higher. In the following formula, a higher IRS indicates a lower level of saturation, thereby increasing the likelihood of retail success.
His theory basically implies that a retailer needs to clearly check the demand for a particular product or service that he wishes to retail and the number of stores offering the same. Thus, checking demand and supply is of importance.
Retail Location TheoriesRetail Location TheoriesIndex of Retail Saturation (IRS)
where IRS is the index of retail saturationH is the number of households in the areaRE is the annual retail expenditures for a particular line of trade per
household in the areaRF is the square footage of retail facilities of a particular line of
trade in the area (including square footage of the proposed store)
IRS = (H X RE)/RF
Reilly’s law of retail gravitation
When two cities compete for retail trade area from immediate rural (suburban) area, the breaking point for the attraction of such trade will be more or less in direct proportion to the population of the two cities and in inverse proposition to the square of the distance from the immediate area of each city.
Retail Location TheoriesRetail Location Theories
Buying power index (BPI)is an indicator of a market’s overall retail
potential and is composed of the weighted measures of effective buying income (personal income, including all
nontax payments such as social security, minus all taxes), retail sales,
and population size.
Buying Power Index (BPI)
• Published annually in Demographics
• Measures a given market’s ability to buy
• Is expressed as a percentage of the total COUNTRY’S. potential
Retail Location TheoriesRetail Location Theories
Buying Power IndexBPI = 0.5(the area’s percentage of effective buying income)
+ 0.3(the area’s percentage of retail sales)
+ 0.2(the area’s percentage of population)
Classification Of Cities And Towns
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