Retailing Strategy
Retail Locations Chapter 7
Site LocationsChapter 8
Human Resource Management
Chapter 9
Information and Distribution Systems Chapter 10
Customer Relationship Management Chapter 11
Retail Market and Financial Strategy
Chapter 5, 6
Assignment 1
• Individual
• Choose a retail type (i.e. Specialty Store, Convenience, Department Store, etc.)
• Name your store (i.e. My Shop, More Food, Malee-Mart)
• Choose a secondary channel (besides B+M) and explain your choice in one paragraph. (i.e. kiosk better than electronic because…..)
• One typed page due July 5
What Are the Three Most Important Things in Retailing?
Location! Location! Location!
Retail Locations
Shopping Centers
– Strip Shopping Centers
– Shopping Malls
City or Town Locations
– Inner City
– Main Street
Free Standing Sites
Other Location Opportunities
Types of Strip Shopping Centers
Traditional
Mom and Pop Local Merchants, Children’s Place, GapKids, Blockbuster Video
Power Centers
Target, Home Depot, Office Depot, PetsMart, Best Buy, Sports Authority,Toys R Us
Elements in Retail Mix
Customer Service
MerchandiseAssortment
PricingCommunication Mix
Store DisplayAnd Design
Location Strategy
Types of Shopping Malls
Regional Centers
Super regional Centers
Lifestyle Centers
Fashion/Specialty Centers
Outlet Centers
Theme/Festival Centers
Merchandise Kiosks
Problems Facing Regional Malls
• Competition from Alternative, More Convenient Locations
• Focus on Apparel – Weak Apparel Sales
• Aging
• Demographic Shifts
The Most Expensive Shopping Streets in the World
Street Location Cost / sq foot / year
Fifth Avenue (48th to58th St.)
57th Street (5th Ave.to Madison Ave.)
Oxford Street
Madison Avenue (57thto 72nd St.)
Ave. des Champs Elysee
New York City
New York City
London
New York City
Paris
$580
$500
$400
$375
$360
Tradeoff Between Locations
Rent
Traffic
There are relative advantages and disadvantages to consider with each location.
Relative Advantages of Major Retail Locations
Location City Strip Shopping Free
Issues Center Mall Standing
Large size + - + -draws peopleto area
People + + - -working/livingin areaprovided sourceof customers
Source of ? - + -entertainment/recreation
Protection - - + -against weather
Relative Advantages of Major Retail Locations
Location CBD Strip Shopping Free
Issues Center Mall Standing
Security - - + -Long, uniform - + + + hours ofoperation
Planned - - + -shoppingarea/balancedtenant mix
Parking - + - +Occupancy ? + - +costs(e.g. rent)
Relative Advantages of Major Retail Locations
Location City Strip Shopping Free
Issues Center Mall Standing
Pedestrian + - + -traffic
Landlord + + - +control
Strong + + - +competition
Tax ? ? ? ?incentives
Other Retail Location Opportunities
Mixed Use Developments AirportsResorts HospitalsStore within a Store
Matching Location to Retail Strategy
• Department Stores Regional Mall
• Specialty Apparel Central Business District, Regional Malls
• Category Specialists Power Centers, Free Standing
• Grocery Stores Strip Shopping Centers
• Drug Stores Stand Alone
Types of Leases
Percentage
Fixed - Rate
Percentage leases – lease based on a % of sales.
Retailers also typically pay a maintenance fee based on a percentage of their square footage of leased space.
Most malls use some form of percentage lease.
Variations of Percentage Leases
Percentage lease with specified maximum -
percentage of sales up to a maximum amount.
Rewards retailer performance by allowing retailer to hold rent constant above a certain level of sales
Percentage lease with specified minimum -
retailer must pay a minimum rent no matter how low sales are.
Sliding scale - percentage of sales as rent decreases as sales go up.
Fixed Rate Leases
Fixed Rate Leases - used by community and neighborhood centers.
-Retailer pays a fixed amount per month over the life of the lease.
-Not as popular as percentage leases
Graduated Lease - a variation of the fixed rate lease
-Rent increases by a fixed amount over a specified period of time.
Percentage or Fixed Rate Leases
Maintenance-increase-recoupment lease - used with either a percentage or fixed rate lease.
Rent increases if insurance, property taxes, or utility bills increase beyond a certain point.
Net lease - retailer is responsible for all maintenance and utilities.
Prohibited Use Clause
Limits the landlord from leasing to certain tenants.
Some tenants take up parking spaces and don’t bring in shoppers: bowling alley, skating rink, meeting hall, dentist, or real estate office.
Some tenants could harm the shopping center’s wholesome image: bars, pool halls, game parlors, off-track betting establishments, massage parlors and pornography retailers.
Exclusive Use Clause
Prohibits the landlord from leasing to retailers selling competing merchandise
Specify no out parcels
Specify if certain retailer leaves center, they can
terminate lease.
Escape Clause
Allows the retailer to terminate its lease if sales don’treach a certain level after a specified number of years, or if a specific co-tenant in the center terminates its lease.
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