STEPS IN SELECTING A BUSINESS

LOCATION FOR RETAILERS

Three major business location:

1. Choosing a viable community,

2. Selecting the trading area, and
3. Evaluating the specific site.
Choosing a Viable Community
•A viable community is defined
as "one that will provide an
adequate and profitable sales
volume for business."
Economics
• Areas may be classified into two economic types:
1. Those with stable economic base, and
2. Those without stable economic base.

• Areas which have a balanced mix of business

establishments indicate economic stability. Those
areas with few types of businesses must be viewed
with some concern, however.
Three general factors used to determine the
best geographic area or city:
1. Economics
2. Population
3. Competition.
• Areas that are predominantly agricultural
may not be able to support even a small
manufacturing concern. However,
businesses that will complement or
supplement farming or fishing may be
applicable in those areas. Examples are the
wholesaling and retailing of fertilizer and
pesticides, and manufacturing of farm
implements.
Population
• Information about the relevant characteristics of
population must be obtained.

Important population aspects that must be reviewed:

1. Size of population of the area under consideration.
2. Growth trend of the population.
3. Average income of the potential customers.
4. Population changes in recent years.
Competition
• Areas, no matter how large they are, can support
only a certain number of competing firms. If too
many of the same type of business are located in
one area, they may have difficulty in attaining sales
volumes they desire. Some may even bankrupt
because of this.
Selecting the Trading Area
• A trading area is " the geographic area from which
a business draws its customers." In choosing a
location, several trading areas must be considered
and evaluated.
The following aspects must be considered in
trending area analysis:
1. The demographic and socioeconomic
characteristics of consumers;
2. The focus of promotional activities;
3. The determination of whether the proposed
location will service new customers or take bawat
business from existing competition;
4. The determination of the number of outlets that
can be operated;
5. The geographic weaknesses of the proposed
trading area; and
6. Others factors like competition, availability
of financial institutions, availability of labor,
location of suppliers, legal restrictions,
projected growth, etc.
The size and shape of Trading
Areas:
1. Primary trading area - This is where 50 to 70
percent of retailer's customers come from.
2. Secondary trading area - This is where 20 to 25
percebt of the firm's customers come from.
3. Fringe trading area - This is where the remaining
of the firm cine from.
Types of location
1. The central business district,
2. The shopping center, and
3. The free-standing location
The Central Business District
• The first type of location, the central business
district (CBD), refers to an unplanned shopping area
around the geographic point at which all public
transportation systems in converge.
The advantages of locating in the CBD are the
following:
1. Easy access to public transportation
2. Wide product assortment
3. Variety in images, prices, and services
4. Proximity to commercial activities
Among the disadvantages of locating in the
CBD are following:
1. Inadequate parking
2. Older stores
3. High rents delivery congestion
4. Potentially high crime congestion
5. Traffic and delivery congestion
6. The generally decaying conditions of CBDs in
many cities
The Shopping Center
• A shopping center refers to “a centrally owned
and/or managed shopping district which is
planned, has balanced tenancy and is surrounded
by parking facilities.
The shopping center offers the following
advantages to the retailer:
1. Heavy customer traffic resulting from the wide
range of product offerings,
2. Nearness to population,
3. Cooperative planning and sharing of common
costs,
4. Access to highway and availability of parking,
5. Lower crime rate,
6. Clean neat environment, and
7. More than adequate parking space.
Some disadvantages of the shopping center
are as follows:
1. Inflexible store hours
2. High rents
3. Restrictions as to merchandise the retailer may
carry
4. Inflexible operations
5. Possibility of too much competition
6. Dominance of smaller stores by the lead store.
Free-Standing Locations
• A free-standing retailer is generally located “along
major traffic arteries without any adjacent retailers
selling competing products to share traffic.”
The following advantages are inherent to free-
standing retailers:
1. Lack of direct competition,
2. Generally lower rents,
3. Freedom in operations and hours,
4. Facilities that can be adapted to individual needs
of retailers,
5. Inexpensive parking, and
6. Zoning laws that may restrict some activities.
Selecting the Specific site
• After determining the trading area where the small
retail business will be located, the Specific site must
be pinpointed. A listing of specific sites must be
made. This will be followed by evaluation of the
sites considering the following: pedestrian traffic,
vehicular traffic, parking facilities, transportation,
store composition, internal characteristics of the
specific sites, and terms of occupancy.
The internal characteristics of the proposed
site must be evaluated:
1. Visibility,
2. Placement in the location,
3. Size and shape of the lot,
4. Size and shape of the building, and
5. Condition and age of the lot and building.
The terms of occupancy of the site must also
be evaluated:
1. Ownership and lease options,
2. Operations and maintenance costs,
3. Taxes,
4. Zoning restrictions, and
5. Voluntary restrictions like uniform store hours
cooperative security forces.
Locating the small manufacturing firm

• The small manufacturing firm is saddled with

certain limitations in choosing a location.
There are some manufacturing firms which cannot be
logically situated away from the raw materials source.
This may be so because of the following:
1. The factory produces much waste in processing
the product,
2. The manufacturing process deals with perishable
raw materials (in which case, the factory should
be located close to its raw materials);
3. The raw materials, such as iron ore and stone, are
very bulky; and
4. Distribution methods or expenses make one site
more cost-effective than another.