CHAPTER 7: RETAIL

LOCATIONS
 Questions:
* 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?
 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
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 support a specific retail site
 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
 Advantages and Disadvantages
of Freestanding Locations
Advantages Disadvantages

- Convenience for customers - Limited trade area when

- High vehicular traffic and
visibility
- Modest occupancy costs
- Separation from competition
not around nearby retailers
- Higher Occupancy costs that
strip centers
- Usually located where there
is little pedestrian traffic
 Freestanding Sites
Retail locations for an individual, isolated store unconnected to other retailers

Outparcels Merchandise Kiosks

 Merchandise kiosks
Small selling spaces, typically located in the walkways of enclosed
malls, airports, train stations, or office building lobbies.
 City or Town Locations
Advantages
- Lower occupancy costs
- Higher pedestrian traffic
Disadvantages
- Traffic is limited due to
congestion
- Parking problems reduce
consumer convenience
 Central Business Districts
(CBD)

Advantages Disadvantages

- Draws people during - High security required

business hours - Shoplifting
- Heavy public transportation - Parking is poor
- Pedestrian traffic
- Residential area as well
Main Streets vs. CBD’s

- Occupancy costs are generally lower than CBD’s

- Fewer people are employed
- Smaller selection due to fewer stores
- Range of entertainment is usually smaller
- City planning sometimes restrict store operations
 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
 Advantages Disadvantages

- Convenient locations - Limited trade area

- Easy parking - Lack of entertainment
- Low occupancy costs - No protection from
weather
 Power Centers
Consist primarily of collections of big box retail stores

Examples

- Target
- Costco
- Lowe’s
- Sports Authority
- Toys “R” Us
 Shopping Malls

Regional Malls Super Regional Malls

Less than 1 million square feet More than 1 million square feet
 Shopping Malls

Advantages Disadvantages

- Wide variety of stores - Occupancy costs are

- Wide assortment of
merchandise
-Shopping and entertainment
- No inclement weather
- Uniform hours of operation
- Attracts many shoppers
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
- Entertainment
 Lifestyle Centers
Shopping centers with an open-air configuration of specialty stores, entertainment, and restaurants
with design ambience and amenities

Advantages Disadvantages

- Ease of parking - Less retail space

- Relaxed open-air - Smaller trade areas
environment - Attract fewer customers
- Pedestrian traffic tends to
be higher
- Occupancy costs and
operating restrictions are
less
Other Location Opportunities

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

- High pedestrian traffic

- Sales per square foot are Airport Apple store
higher than mall stores
-Rent is higher
- Hours are longer
- Inconvenient location for
workers means higher wages
Temporary Locations (pop-up stores)

Target pop-up store

- 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
 Resorts

St. Regis Aspen

Resort, CD
- Captive audiences

- Wealthy customers

- People with time on their

hands
 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
Location and Retail Strategy

Factors that affect

location choice

- Shopping behavior of
consumers

- Size of Target Market

- Uniqueness of Retail
Offering
 Shopping Situations

3 Shopping Behaviors

- Convenience shopping

- Comparison shopping

- Specialty shopping
 Convenience Shopping

Shopper Mentality

- Wants to exert little effort

to acquire product or service

- Wants convenient location

- Less concerned with price

- No hassles
 Comparison Shopping

Shopper Mentality

- General idea about product

or service

- No strong brand preference

- No strong retailer
preference
 Specialty Shopping

Shopper Mentality

- Knows what they want

- Accepts no substitute

- Strong loyalty to product or

brand
 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
 Legal Considerations

Environmental Issues Zoning and Building Codes

- Above ground risks - Sign restrictions

- Hazardous materials - Licensing requirements