Retail Locations

Sources – Berman-Evans, Sinha-Uniyal, Secondary Research,Prof. Ranjan Chaudhuri’s Inputs

Objectives

To thoroughly examine the types of locations available to a retailer: isolated store, unplanned business district, and planned shopping center

To understand the relative advantages of each of these locations

To note the decisions necessary in choosing a general retail location

To understand why are some locations particularly well suited to specific retail strategies?

The Importance of Store Location

- Store location is most often the first consideration in a store choice

- Having a good location increases chances of developing a strong sustainable competitive advantage

- Location decisions can be risky and should be well-thought out

Factors Affecting Selection of a Store Site

Strategic Fit with Target MarketCompetitionCost of Operating Stores

3 Types of Locations

Isolated Stores

Large-store formats Wal-Mart Costco

Convenience stores 7-Eleven

Freestanding/Isolated

Advantages* No

competition* Low rental

costs* Flexibility* Good for

convenience stores

* Better visibility

* Adaptable facilities

* Easy parking

Disadvantages* Difficulty

attracting customers

* Travel distance* Lack of variety

for customers* High advertising

expenses* No cost sharing* Restrictive

zoning laws

Unplanned Business Districts

Central BusinessDistrict

SecondaryBusinessDistrict

NeighborhoodBusinessDistrict

StringDistrict

Unplanned Business Districts and Isolated Locations

CBD – Downtown - Advantages Assortment Public Transportation Store Types in Area Price Ranges Pedestrian Traffic

CBD - Disadvantages

Parking Congestion Travel Time Aging Facilities Condition of District Rent

Planned Shopping Centers

Advantages* Well-rounded

assortments* Strong suburban

population* One-stop, family

shopping* Cost sharing* Transportation

access* Pedestrian traffic

Disadvantages* Limited flexibility* Higher rent* Restrictions on

offerings* Competitive

environment* Requirements for

association memberships

* Too many malls* Domination by

anchor stores

Characteristics of Regional Centers

Features Regional CenterTotal site area 30-100+

Total sq. ft. leased 400,001-2,000,000+

Principal tenant 1, 2 or more departmentstores

Number of stores 50-100

Minimum # of people intrading area

100,000+

Driving time of tradingarea

Up to 30 minutes

Location Outside central city onhighway

Characteristics of Community Centers

Features Community CenterTotal site area 10-30

Total sq. ft. leased 100,000-400,000

Principal tenant Branch department store

Number of stores 15-25

Minimum # of people intrading area

20,000-100,000

Driving time of tradingarea

Up to 20 minutes

Location Close to residentialareas

Characteristics of Neighbourhood Centers

India - Shopping Malls

- Wide variety of stores- Wide assortment of

merchandise- Shopping and

entertainment- No inclement weather- Uniform hours of

operation- Attracts many shoppers

- Occupancy costs are generally higher

- Mall control over business operations

- Competition can be intense

Advantages Disadvantages

Trends and Developments

Mall managers try to make malls more of an enjoyable experience in an effort to keep people shopping as long as possible

- Common areas- Family lounges- Great food- Playgrounds- Entertainment

Enhancing the Mall Experience

Composed mainly of upscale apparel shops, boutiques, and gift shops carrying selected fashions or unique merchandise of high quality and price

- Botega- Gucci- Jimmy Choo- Zegna

Stores in Emporio Mall

Fashion/Specialty Centers

Shopping centers that contain mostly manufacturers’ outlets

Las Vegas Outlet Center

Outlet Centers

- Strong entertainment component- Becoming more popular outside

the United States- Tourism is important for outlet

centers

Shopping centers that typically employ a unifying theme reflected in the individual shops, design, and to some extent their merchandise

- Located in places of historic interests or for tourists

- Anchored by restaurants and entertainment facilities

- Generally targeted at tourists, they may also attract local customers

- A common element of these centers is entertainment, although some rely solely on the shopping experience

Theme/Festival centers

Ibn Battuta Mall, Dubai

Site Selection and McDonald’s

Now, Think and Write

McDonalds in India has a multi location strategy. Basis your learning in today’s session, mention all the locations that McDonalds in India is in and discuss advantages and disadvantages of each.

Evaluating a Site for Locating a Retail Store

When evaluating and selecting a specific site, retailers consider:

•Location characteristics•Site Restrictions•Traffic•The estimated potential sales •Competition•Strategic Fit•Operating Costs

Site Characteristics

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

PhotoLink/Getty Images

• Road pattern and condition

• Natural and artificial barriers

• Visibility

• Traffic flow

• Parking

• Congestion©McGraw-Hill Companies/Jill Braaten, photographer

Traffic Flow and Accessibility

What Should Retailers Consider regarding Parking?

Observe shopping center at various timesEmployee parking availabilityShoppers that use carsParking by non-shoppersTypical length of a shopping trip

The McGraw-Hill Companies, Inc./Andrew Resek, photographer

Adjacent Tenants

Complementary (also competing) adjacent retailers build traffic

What other retailers would Big Bazaar want to be located near? Star Bazaar, Apna Bazaar, Spencers? All target price-sensitive consumers

In an enclosed mall, what retailers would Lifestyle want to be located near? Westside, Shoppers Stop?

Locations within a Shopping Center Affects both sales and occupancy costs In a strip shopping center – closest to the

supermarket for impulse buying In a enclosed shopping mall – retailers who

sell comparison shopping goods locate close to the department store anchors

Locate stores that appeal to similar target markets because consumers shop at places with a good assortment of merchandise

Cities like Ahmedabad and Pune have approximately 50% of their income as surplus after household expenses. They have large populations, and combined with the surpluses, this forms a massive economic opportunity.

Competition8-40

Some retailers are going rural:Lack of competitionHigher level of disposable incomeLarge, untapped labor force

The McGraw-Hill Companies, Inc./John Flournoy, photographer

Strategic Fit

Demographic, lifestyle profile, size and composition of households in an area

Royalt

y-F

ree/C

OR

BIS

REI – outdoor enthusiasts

The McGraw-Hill Companies, Inc./John Flournoy, photographer

McDonald’s – families with kids

Fashion apparels as a must-have amenity in luxury condominium towers in Mumbai

Operating Costs

• Vary across areas• Affected by proximity of area considered vs. other areas where retailer operates• Local and state legal environment has effect

Terms of Occupancy - Some Considerations

Ownership versus Leasing Type of Lease Operations and Maintenance

Costs Taxes Zoning Restrictions

Trade area characteristics

A contiguous geographic area that accounts for the majority of a store’s sales and customers Primary zone

60 to 65 percent of its customers Secondary zone

20 percent of a store’s sales Tertiary zone

customers who occasionally shop at the store or shopping center

Indices for Assessing Sales Potential

Market Potential Index (MPI) Number of Households Purchasing a

Product or Service in a Trade Area Spending Potential Index (SPI)

Average Amount Spent on a Product or Service by a Household in a Trade Area