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Key Issues

Process of selecting a site Retail growth strategies Types of retail locations Types of shopping centers Trade area & trade area analysis Methods to analyze trade areas

Retail Location I 7.1

You own a single successful fresh juice outlet, especially popular during lunch & right after work. You want to add a 2nd location. What will you look for as you shop for a site? Where would you find the information you need?
Retail Location I 7.2

If Its In a Mall

You own a single successful fresh juice outlet, especially popular during lunch & right after work. You want to add a 2nd location. If you were to locate your site inside a mall, where would you want to be?

Retail Location I 7.3

Location Analysis

Regional Analysis

Area Analysis

Site Analysis
Retail Location I 7.4

Selecting a Retail Site

The Expansion Stage
Use real estate firms, local personnel, etc. to identify a large number of possible sites

The Qualitative Stage

Use checklists or examine performance of analogous stores to screen possible sites for the best sites

The Quantitative Stage

Use quantitative modeling to further screen the likely sites by generating forecasted potentials for each site

The Decision Stage

Make a site selection decision based on the results of both the quantitative qualitative assessments
Retail Location I 7.5

Retail Development Strategies

Old Product
Old Market New Market
Market Penetration

New Product
Product Development

Market Development

Product Diversification

Retail Location I 7.6

Retail Growth Strategies


Retail Location I 7.7

Types of Retail Locations

CBDs & MXDs Secondary shopping areas Neighborhood shopping districts Highway outlets Freestanding units Shopping centers
Neighborhood Community Power center Regional & super-regional Strip mall
Retail Location I 7.8

Shopping Centers
A shopping center is a group of retail and other commercial establishments that is planned, developed, owned, and managed as a single property. Two main configurations: Strip centers have parking in front of the stores and do not have enclosed walkways linking the stores. Malls have a pedestrian focus; customers park in outlying areas and walk to the stores. Traditional malls are enclosed with walkways between two facing strips of stores.
Retail Location I 7.9

Types of Shopping Centers

Concept Square Feet Number of Anchors Types of Anchors Trade Area

Convenience 30,000 150,000

General mdse, convenience

Power Center
Category-dominant anchors Usually not enclosed

One or more

Two or more
Discount store, supermarket, home improvement, warehouse store, etc.

Three or more
Discount store, supermarket, home improvement, warehouse store, etc.


~ 3 miles

3 7 miles

Less than 15 minutes

Source: Levy & Weitz

Retail Location I 7.10

Types of Shopping Centers

Concept Square Feet Number of Anchors Types of Anchors Trade Area

Regional Mall
General mdse, fashion Usually enclosed 400,000 800,000

Super Regional
Similar to regional but with greater variety & assortment

Outlet Mall
Mfrs outlet stores

Three or more Full-line dept store, discount dept store 5 15 miles

Three or more Full-line dept store, discount dept store 5 25 miles

Mfrs outlet stores, restaurants, entertainment


Source: Levy & Weitz

Retail Location I 7.11

The Largest U.S. Shopping Malls



Gross Leasable Space in Square Feet

4,200,000 3,000,000 2,900,000 2,700,000 2,300,000

Mall of America Del Amo Fashion Center South Coast Plaza/Crystal Court Woodfield Mall SawGrass Mills

Bloomington, MN Torrance, CA Costa Mesa, CA Schaumberg, IL Sunrise, FL

Retail Location I 7.12

Retail Trade Areas

store 60 65% of Customers

Retail Location I 7.13

Trade Area for Provo Towne Centre?

Source of Map:

Retail Location I 7.14

Trade Area Influences

roads natural obstacles other barriers (e.g., crime areas)

Magnetism of store or shopping

center Competition level of competition

proximity to competitors
Retail Location I 7.15

Analyzing Retail Trade Areas: A Site-Selection Framework

Source of data
Delivery & Billing Analysis Checklists Customer Spotting Zip Code Analysis Trend Analysis Survey Research GIS Software 2ndary Research

Resident data

Frequency of Shopping, Average Size of Purchase ($), Concentration of Customers by Geographic Area, Age Distribution, Avg Educational Level, % Home Ownership, Disposable & Per Capita Income, Occupational Distribution, Trends

Competitor data

No. & Size of Competitors, Sq Ft of Retail Space, Front Ft of Retail Space, Saturation of Area (people/retailer, avg store sales, sales/capita, sales/ft, sales/employee)

Retail Location I 7.16

New Site for Hogi Yogi

Source of data
Delivery & Billing Analysis Checklists Customer Spotting Zip Code Analysis Trend Analysis Survey Research GIS Software 2ndary Research

What would be important in selecting a site?

Retail Location I 7.17

Typical Checklist for Site Evaluation

Local Demographics

Site Characteristics
Number of parking spots available Distance of parking areas Visibility of site from street Size and shape of the lot Condition of existing building (if any) Ingress and egress quality

Traffic Flow and Accessibility

Number of vehicles Type of vehicles Number of pedestrians Type of pedestrians Availability of mass transit Access to major highway Level of street congestion Quality of access streets

Legal and Cost Factors

Type of zoning Length of lease Local taxes Operations and maintenance costs Restrictive clauses in lease Voluntary regulations by local merchants

Retail Structure
Number of competitors in area Number and types of stores in area Complementarity of neighboring stores Proximity to commercial areas Joint promotion by local merchants

Retail Location I 7.18

Source of data

Delivery & Billing Analysis


Customer Spotting

Zip Code Analysis

Trend Analysis

Survey Research

GIS Software

2ndary Research

Done among analog stores What would this yield? Why would you do this? How would you collect this information?

Parade Magazine Winners

Retail Location I 7.19

Source of data

Delivery & Billing Analysis


Customer Spotting

Zip Code Analysis

Trend Analysis

Survey Research

GIS Software

2ndary Research

What kinds of questions might you ask?

Retail Location I 7.20

Source of data

Delivery & Billing Analysis


Customer Spotting

Zip Code Analysis

Trend Analysis

Survey Research

GIS Software

2ndary Research

Source: Claritas Corporation

Retail Location I 7.21

Source of data

Delivery & Billing Analysis


Customer Spotting

Zip Code Analysis

Trend Analysis

Survey Research

GIS Software

2ndary Research


Retail Location I 7.22

Source of data

Delivery & Billing Analysis


Customer Spotting

Zip Code Analysis

Trend Analysis

Survey Research

GIS Software

2ndary Research

Census Data
Land Area Population Age distribution Gender Household size, type Marital status Owner-occupied housing

Rental status Persons in unit Race and ethnicity Country of origin Place of birth Language spoken at home School Enrollment

Educational Enrollment Fertility Departure time for work Occupation Class of worker Disability Income type Poverty status

Utah Statistics

Statistical Abstract

Dept of Census

Retail Location I 7.23

Retail Site Selection When Are these Decisions Made?

Openings Expansions Closings

What are the effects of proposed changes in retail sites on the revenues of new and existing stores?
Retail Location I 7.24

Retail Site Selection Why Does It Matter?

Access to consumers
Number Characteristics Growth Locations of other stores Cannibalization own stores Agglomeration Competition Complementarity

According to Wal-Marts Real Estate group, the difference between good and bad locations exceed $25 million in gross profit
Retail Location I 7.25

Retail Site Selection How Is It Done?


Geographic market Site within the geographic market If an opening or expansion, the format/size of
the store to be opened

Retail Location I 7.26

Retail Site Selection Agglomeration

Agglomeration captures the countervailing

effects of complementarity and competition among retailers Intra-type - Stores of the same type locating near
one another

Facilitates consumer search Examples: motor miles and restaurant rows

Inter-type - Stores of different types locating near

one another

Facilitates multi-purpose shopping, virtual one-stopshopping, and offers a wider variety of goods to choose from Recognizes thatshopping consumers may use multiple stores Examples: centers and shopping malls to meet their needs - shopping strategically!! Retail Location I 7.27

Retail Site Selection Agglomeration

Trip chaining Make

unrelated purchases on the same trip Price search Search until you find an attractive price Cherry picking Visit multiple stores for their bargain prices
Retail Location I 7.28

Retail Agglomeration Trip Chains

Trip chains reflect the routing problem faced

by shoppers Consumers minimize shopping costs by reducing travel,
subject to fulfilling diverse product/service needs

Price search
Our research incorporates price uncertainty, allowing
shoppers to terminate or continue a shopping trip (unplanned)

Data limitations require that we:

Consider visits only to selected store formats Assume that shopping trips begin from the consumers
Retail Location I 7.29

Retail Site Selection Agglomeration

How does retail location affect multi-store shopping? RETAIL LOCATION (research with Steve Postrel and Amanda McLaughlin)
Relative to customers Relative to other stores

Retail Competition

Destination Effect

Specifically, how are retailer revenues affected by nearby supermarkets, drug stores, mass merchandisers and supercenters, dollar stores and warehouse clubs?
Retail Location I 7.30

Retail Site Selection Where Do Consumers Work?

Another consideration in retail site selection is

where consumers work Do shopping trips begin from home? From work?

Retail Location I 7.31

Retail Site Selection How Is It Done?


Location information of stores and consumer panelists, along with demographics, trends and seasonality, are used to analyze consumer spending across retail chains to assess the revenue impact of potential store sites
Panel Data
Store Location Block-Group Demo and Size Data and Pop Data

Revenue Forecasting for Retail Sites

Retailer 4 Retailer 3 Retailer 2 Retailer 1 Revenues

Retail Location I 7.32

RFRS Data Inputs

Panel data

Including demographics Currently available in 21 major markets Sources are IRI and AC Nielsen Store and shopper locations We can use straight-line distances, road distances, or

Store square footage A wide variety of competing retailers can be

incorporated into the model

traffic-adjusted travel times for shoppers to stores

Retail Location I 7.33

RFRS Model

For every household in the panel, our models predict: (1) Number of visits quarterly (2) Spending per visit Predictors (1) Travel times/distances (2) Store sizes (3) Retail agglomeration

(4) Trends (5) Seasonality (6) Demographics

Retail Location I 7.34

RFRS Forecasting

Model estimates form the basis for

forecasting and sensitivity analysis whenever new sites or scenarios are considered Potential/actual new stores Potential/actual store closings Future periods Population changes

Retail Location I 7.35

RFRS An Example

What is the impact of the closing of

Montgomery Wards stores in Chicago? Which Montgomery Wards locations would offer the most advantageous sites?

Retail Location I 7.36

RFRS An Example

Montgomery Wards store locations and sample of shoppers providing expenditure data

Retail Location I 7.37

RFRS An Example

Where will Montgomery Wards sales go?

71.9% 10.7% 4.8% 2.7% 9.9%

Target Sam's Club

Wal-Mart Other


Retail Location I 7.38

RFRS An Example

What if Kmart opened a store at any current MW site?

Retail Location I 7.39

RFRS An Example

What if Target opened a store at any current MW site?

Retail Location I 7.40

RFRS An Example

What if WalMart opened a store at any current MW site?

Retail Location I 7.41

Retail Locations

Retail Location I 7.42

Section 3: Other Locations, Location and Retail Strategy, and Legal Considerations Matthew Sullivan


What types of locations are available to retailers? What are the relative advantages of each location type? Why are some locations particularly well suited to specific retail strategies? Which types of locations are growing in popularity with retailers?

Retail Location I 7.43

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

Retail Location I 7.44

risky and should be well-

Process of Choosing Particular Locations

- Size of the trade area - Occupancy cost of the location - Pedestrian and vehicle customer traffic location - Restrictions on operations by property managers - Convenience of location for customers
Trade area:
the geographic area that encompasses most of the customers who would patronize a specific retail site

Retail Location I 7.45

Section 1

- Types of locations - Unplanned retail locations

Retail Location I 7.46

Milton Law

Types of Retail Locations

Freestanding Sites such as outparcels and merchandise kiosks

City or Town Locations such as central business districts, main streets, and inner city locations

Retail Location I 7.47

Advantages and Disadvantages of Freestanding Locations

Advantages Disadvantages

- Convenience for
customers visibility

- High vehicular traffic and - Modest occupancy costs - Separation from


Limited trade area when not around nearby retailers Higher Occupancy costs that strip centers Usually located where there is little pedestrian traffic

Retail Location I 7.48

Freestanding Sites
Retail locations for an individual, isolated store unconnected to other retailers


Merchandise Kiosks

Retail Location I 7.49

Merchandise kiosks
Small selling spaces, typically located in the walkways of enclosed malls, airports, train stations, or office building lobbies.

Retail Location I 7.50

Market Analysis Model

Retail Location I 7.51

City or Town Locations



Lower occupancy costs Higher pedestrian traffic

Traffic is limited due to congestion Parking problems reduce consumer convenience

Retail Location I 7.52

Central Business Districts (CBD)

Advantages - Draws people during business hours - Heavy public transportation - Pedestrian traffic Retail Location I 7.53 - Residential area as

Disadvantages - High security required - Shoplifting - Parking is poor - Evenings and weekends are slow

Main Streets vs. CBDs

- Occupancy costs are generally

Retail Location I 7.54

lower than CBDs Fewer people are employed Smaller selection due to fewer stores

Inner City
High density urban areas with higher unemployment and lower median incomes than surrounding areas

Retailers here achieve higher sales volume and higher margins, thus producing higher profits Redevelopments in inner cities can cause increased traffic and parking difficulties, causing them to be controversial

Retail Location I 7.55

Section 2

- Shopping centers

Shaina Lacher

Retail Location I 7.56



Convenient locations Easy parking Low occupancy costs

Limited trade area Lack of entertainment No protection from weather

Retail Location I 7.57

Power Centers
Consist primarily of collections of big box retail stores Examples

- Target - Costco - Lowes - Sports

Authority Toys R Us

Retail Location I 7.58

Shopping Malls

Regional Malls Less than 1 million square feet

Super Regional Malls More than 1 million square feet

Retail Location I 7.59

Shopping Malls

Wide variety of stores Wide assortment of merchandise - Shopping and entertainment - No inclement weather - Uniform hours of Retail Location operation I 7.60


Occupancy costs are generally higher Mall control over business operations Competition can be intense

Enhancing the Mall Experience

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 Entertainme nt

Retail Location I 7.61

Mall renovations and redevelopment

CORPUS CHRISTI, TX La Palmera Mall Redevelopment

Retail Location I 7.62

Lifestyle Centers
Shopping centers with an open-air configuration of specialty stores, entertainment, and restaurants with design ambience and amenities



- Ease of parking - Relaxed open-air environment Pedestrian traffic tends to be higher Occupancy costs and operating restrictions are less

- Less retail space - Smaller trade areas - Attract fewer


Retail Location I 7.63

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

Stores in Phipps Plaza

- Tiffany - Gucci - Max Mara - Giorgio Armani Tommy Bahamas

Retail Location I 7.64

Outlet Centers
Shopping centers that contain mostly manufacturers outlets

Strong entertainment component

- Becoming more popular

outside the United States

Tourism is important for outlet centers Las Vegas Outlet Center

Retail Location I 7.65

Theme/Festival 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

Retail Location I 7.66

Combines enclosed malls, lifestyle centers, and power centers

Omnicenters are becoming more popular in the U.S. partly from the desire of tenants for lower common-area maintenance charges and the growing tendency of consumers to crossRetail Location I 7.67 shop.

St. Johns Town Center, Jacksonville, FL

Mixed Use Developments

Offer an all-inclusive environment so that consumers can work, live, and play in a proximal area Combine several different uses into one complex, including shopping centers, office towers, hotels, residential complexes, civic centers, and convention centers

Mizner Park, Boca Raton, FL

Retail Location I 7.68

Section 3

- Other Locations - Location and Retail

Strategy - Legal Considerations

Retail Location I 7.69

Other Location Opportunities

Airports Temporary or pop-up stores Resorts Store within a store

Retail Location I 7.70


High pedestrian traffic Sales per square foot are higher than mall stores Rent is higher Hours are longer Inconvenient location for workers means higher wages

Airport Apple store

Retail Location I 7.71

Temporary Locations (pop-up stores)

Good for businesses trying to create a little hype Good introduction for new stores or products Provide visibility for a business Provide additional sales during holidays and special events

Target pop-up store

Retail Location I 7.72


St. Regis Aspen Resort, CD

- Captive audiences
Wealthy customers People with time on their hands

Retail Location I 7.73

Store within a store

Occurs when a manufacturer has its own store and salespeople inside a retailer store

- This concept benefits

both companies to attract more customers Helps fill holes in product offerings

Retail Location I 7.74


Businesses take advantage of locations where customers are, like the internet and online games, and provide them with alternative ways to spend money

Social Networking Game

Retail Location I 7.75

Location and Retail Strategy

Factors that affect location choice

Shopping behavior of consumers Size of Target Market

- Uniqueness of
Retail Offering
Retail Location I 7.76

Shopping Situations

3 Shopping Behaviors

Convenience shopping Comparison shopping Specialty shopping

Retail Location I 7.77

Convenience Shopping

Shopper Mentality

- Wants to exert little effort

to acquire product or service

- Wants convenient location - Less concerned with price - No hassles

Retail Location I 7.78

Comparison Shopping

Shopper Mentality

General idea about product or service No strong brand preference No strong retailer preference

Retail Location I 7.79

Specialty Shopping

Shopper Mentality

Knows what they want Accepts no substitute Strong loyalty to product or brand

Retail Location I 7.80

Size of Target Market

For most retailers, the size of the target market and the location of the highest density of their target market will help determine where their business should be located.

Estimates to determine size of target market

- Estimate max # of customers -

eligible to purchase product or service Estimate percentage of potential customers Estimate # times customers could purchase the product or service in a year Estimate highest density of target market

Retail Location I 7.81

Uniqueness of Retail Offering

Consumer mentality

Location doesnt matter as much because the product is that important or unique

Retail Location I 7.82

Legal Considerations
Zoning and Building Codes

Environmental Issues

- Above ground risks

Hazardous materials

- Sign restrictions
Licensing requirements

Retail Location I 7.83

Environmental Issues

Above-Ground Waste

Hazardous Materials

Retail Location I 7.84

Zoning and Building Codes



Retail Location I 7.85