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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


Market identification (which country to enter- attractiveness of a market ) Determine the Market potential ( Demographic features of the population(population urban/rural , level of literacy, level of education ) The characteristics of the households in the area ( income level, age profile Competition and compatibility starting a gift shop near department store or theatre Laws and regulations- hours, minimum wages, holidays required Trading area analysis Primary trading area, secondary and tertiary area analysis

1. 2. 3.


Factors Affecting The Choice Of Market

Demographics of population & area


Trade area analysis

Laws & Regulation

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


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 type1.

3. 4. 5.


Traffic Accessibility of the market Total no. of stores and types of stores that exists in the area amenities available To buy or to lease The product mix offered


Pedestrian traffic Vehicular traffic Parking facilities Transportation Store Composition Number of people, type of people Number of vehicles, type of vehicles, traffic congestion Number and quality of parking spots, distance to stores, availability of employee parking Availability of mass transport, access from major highways, ease of delivery 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
Ownership or leasing terms, operations and maintenance cost, taxes and other restrictions General location and specific store

Terms of Occupancy Overall rating

Select the best site available


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. 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

good location long store hours and a good parking less hectic atmosphere

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 retailers 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

Neighborhood and Community Centers

Managed as a unit
The McGraw-Hill Companies, Inc./Andrew Resek, photographer

Attached row of stores

Onsite parking

Power Centers
Big box stores Available parking Open air set up Many located near enclosed malls Large trade areas
PhotoLink/Getty Images

Free-standing stores
Low occupancy costs Limited small specialty stores

Convenient Desirable shopping experience

Modest vehicular and pedestrian traffic

Lifestyle Centers

Photo provided by ICSC and used with permission of Aspen Grove Lifestyle Center

Courtesy of General Growth Properties


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


Fashion Specialty Centers


The McGraw-Hill Companies, Inc./Lars A. Niki, photographer

Upscale apparel shops Need to be anchored Dcor is elegant

Outlet Centers
These shopping centers contain mostly manufacturers and retail outlet stores

Courtesy of Bealls, Inc.


Other Retail Location Opportunities

Mixed Use Developments Airports Resorts Hospitals Store within a Store


Alternative Locations
Mixed Use Developments MXDs Hotels
Rob Melnychuk/Getty Images

Office Buildings

Civic Centers

D. Falconer/PhotoLink/Getty Images

Skip Nall/Getty Images


Alternative Locations

Airports: Why wait with nothing to do?

Rents are 20% higher than malls Sales/sqft are 3-4 times higher than malls Best airports are ones with many connecting flights


Kim Steele/Getty Images

Alternative Locations

Captive audience Well-to-do customer Customers have time to shop


Alternative Locations

Patients cannot leave Gifts are available



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

1. Huffs model of trading area analysis
2. The index of Retail saturation/ Saturation Theory 3. Reillys law of retail gravitation

Huffs 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

Huffs 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

Huffs Model Formula

S j Tij b Pij n S j Tij b j 1 Where Pij Probabilit y of a customer at a given point of origin i traveling to a particular shopping center j S j Size of shopping center j Tij Travel time or distance from customer' s starting point to shopping center b An exponent t o Tij that reflects the effect of travel time on different kinds of shopping trips

University and Shopping Centers: Gravity Model Illustration

Huffs 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 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 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 Theories

Index of Retail Saturation (IRS)
where IRS is the index of retail saturation H is the number of households in the area RE is the annual retail expenditures for a particular line of trade per household in the area RF is the square footage of retail facilities of a particular line of trade in the area (including square footage of the proposed store)

Reillys 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 Theories

Buying power index (BPI) is an indicator of a markets 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 markets ability to buy

Is expressed as a percentage of the total COUNTRYS. potential

Retail Location Theories

Buying Power Index
BPI = 0.5(the areas percentage of effective buying income)
+ 0.3(the areas percentage of retail sales) + 0.2(the areas percentage of population)

Classification Of Cities And Towns