Store location

 Trading area analysis  Site analysis

Objectives
 Importance of store location for a retailer and to outline the process of choosing a store location  Concept of a trading-area and its related components  Types of locations available to a retailer: isolated stores, unplanned business districts, and planned shopping centers  Decisions necessary in choosing a general retail location

Location, Location, Location
 Little flexibility once a site is chosen
 Involves a sizeable investment

 Store fixtures at an old site cannot be
transferred to a new site  Requires extensive decision making….

Location, Location, Location
 Criteria to consider include:  population size and traits  competition  transportation access  parking availability  nature of nearby stores  property costs  length of agreement  legal restrictions

Choosing a Store Location
Step 1: Evaluate alternate geographic (trading) areas in terms of residents and existing retailers Step 2: Determine whether to locate as an isolated store or in a planned shopping center Step 3: Select the location Step 4: Analyze alternate sites contained in the specific retail location type

Trading-Area Analysis A trading-area is a geographic area containing the customers of a particular firm or group of firms for specific goods or services .

Benefits of Trading-Area Analysis  Discovery of consumer demographics and socioeconomic characteristics  Opportunity to determine focus of promotional activities  Opportunity to view media coverage patterns  Assessment of effects of trading area overlap  Ascertain whether chain’s competitors will open nearby  Discovery of ideal number of outlets. supplier location. labour availability. geographic weaknesses  Review of other issues (e. transportation) .g.

Trading-Areas of Current and Proposed Outlets Net increase in sales = Revised sales of existing stores + Sales of new store – Previous sales of existing store .

proposed. and competitor locations .GIS Software in T-A analysis Geographic Information Systems Combine digitized mapping with key location-specific data to graphically depict trading-area characteristics such as: population demographics data on customer purchases listings of current.

competitors’ sites and had to collect and analyse data With GIS: Firms can access computer-generated maps and quickly research the attractiveness of different locations .GIS Software in T-A analysis Till GIS: Retailers placed different colour pins on paper maps to show current and proposed locales.

GIS Software in Action The analysis examines the relationship between total purchase behaviour and the distance each customer travels to patronize the store .

GIS Software in Action Impact on existing customers if the location of a store/site is changed Red and yellow polygons represent a 9-minute drive around each location – 80% of customer base .

GIS Software in Action The correlation between purchase behavior of customers and lifestyle segment of the neighborhood in which they live .

of customers and their spending for one retail site – customer database is “geocoded” .GIS Software in Action No.

shoppertrak.000 shopper traffic.counting devices that have been installed in 70 countries around the world.Technology in Retailing ShopperTrak (www. ShopperTrak devices count shopper visits and can refine the counts to exclude children and retail employees from its overall count. Their traffic counts are between 96 percent and 98 percent accurate. . ShopperTrak’s new FlashTraffic system conveys traffic data on an hourly basis to retailers’ point-of-sale systems to enable retail managers to adjust and optimize store staffing levels.com) has 70.

analysed and differentiated according to region. The results yielded detailed information regarding the most suitable locations. This served as a foundation for the company to gain insight into the proposed location’s full market potential. including site location characteristics. The firm recently did a location analysis in Peking to determine customer buying power for a German clothing firm seeking to do business in China: “Using the GIS software RegioGraph. accessibility. With the help of these data. Further calculations on location-related factors were carried out. and the nature and structure of existing businesses in the immediate vicinity. as well as regions to be avoided. nearby competition.Example GFK GeoMarketing offers GIS software services that assist international retailers wanting to expand into such countries as China. population data were prepared. consumer potential was determined.” .

The Segments of a Trading-Area .

It is located outside the primary area.The Size and Shape of Trading-Areas  Primary trading-area (50-80% of a store’s customers) of customers to population and the highest per capita sales. and they are the most widely . It is the area closest to the store and possesses the highest density  Secondary trading-area (15-25% of a store’s customers) widely dispersed. There is little overlap with other trading areas. includes all the remaining customers. The fringe trading area typically includes some outshoppers who travel greater distances to patronize certain stores. and customers are more  Fringe trading-area (all remaining customers) dispersed.

secondary and fringe trading areas of a store .Delineating Trading-Area Segments The GIS map clearly depicts primary.

the location of competitors. The size and shape of a trading area are influenced by store type. . store size. They adjust to the physical environment. travel time and traffic barriers and media availability.Size and shape of Trading Areas Trading areas do not usually follow such circular patterns. housing patterns.

promotion. and image Generate trading-areas much larger than competitors Parasite stores  Do not create their own traffic and have no real trading-area of their own  These stores depend on people who are drawn to area for other reasons .Destination Versus Parasite Stores Two stores can have different trading areas even if they are in the same shopping district or shopping center Destination stores Have a better assortment.

Largest Supermarkets TRADING AREAS Department stores Apparel stores Smallest Convenience stores . its trading area usually increases. because store or center size generally reflects the assortment of goods and services.Trading Areas and Store Types As a store or center gets larger.

Tools are:  Trend analysis .Trading-Area of a New Store A trading area with less-defined shopping and traffic patterns must be evaluated in terms of opportunities rather than current patronage and traffic patterns. the factors attracting people to a new store. public transport. etc.by examining government and other data for predictions about population.  Computerized trading-area analysis models .  Consumer surveys – information is gathered about the time and distance people would be willing to travel to various possible retail locations. etc. auto registrations. the addresses of those most apt to visit a new store. location. new housing.

new store’s expected market share at that location. such as population size. the distance between consumers and a given site. average income. and store image are included in this model. . nearby competitors. The distance between consumers and competitors. competition at a prospective location. number of households. transportation barriers and traffic patterns.Computerized Trading-Area Analysis Models Analog Model Potential sales for a new store are estimated on the basis of revenues for similar stores in existing areas. Gravity Model People are drawn to stores that are closer and more attractive than competitors’ stores. Regression Model Series of mathematical equations showing the association between potential store sales and several independent variables at each location. size and density of the location’s primary trading area.

. Assumptions: 1. Retailers in the two areas are equally effective. Other factors (such as population dispersion) are held constant or ignored.Reilly’s Law of retail gravitation Reilly’s law establishes a point of indifference between two cities or communities so that the trading-area of each can be determined Point of indifference is the geographic breaking point between two cities (communities) at which consumers are indifferent to shopping at either. 3. Two competing areas are equally accessible from a major road 2.

Computation .

some people will travel shorter distances along cross streets  Distance traveled does not reflect travel time. Many people are more concerned with time traveled than with distance .Limitations of Reilly’s Law  Distance is only measured by major thoroughfares.

Chief Factors to Consider in Evaluating Retail Trading-Areas Population Size and Characteristics Availability of Labor Closeness to Sources of Supply Economic Base Competitive Situation Availability of Store Locations Regulations .

Chief Factors to Consider in Evaluating Retail Trading-Areas Population Size and Characteristics  Total size and density  Age distribution  Average educational level  Percentage of residents owning homes  Total disposable income  Occupation distribution  Trends .

Chief Factors to Consider in Evaluating Retail Trading-Areas Availability of Labor  Management  Management trainees  Clerical .

Chief Factors to Consider in Evaluating Retail Trading-Areas Closeness to Sources of Supply  Delivery costs  Timelines  Number of manufacturers  Number of wholesalers  Availability of product lines  Reliability of product lines .

Chief Factors to Consider in Evaluating Retail Trading-Areas Economic Base  Dominant industry  Extent of diversification  Growth projections  Economic and seasonal fluctuations  Availability of credit and financial facilities .

Chief Factors to Consider in Evaluating Retail Trading-Areas Competitive Situation  Number and size of existing competition  Evaluation of competitor strengths and weaknesses  Short and long-run outlook  Level of saturation .

Chief Factors to Consider in Evaluating Retail Trading-Areas Availability of Store Locations  Number and type of store locations  Access to transportation  Owning versus leasing opportunities  Costs .

Chief Factors to Consider in Evaluating Retail Trading-Areas Regulations  Taxes  Licensing  Operations  Minimum wages .

Site analysis .

Overview  Step 1: Determine what type of location is desirable  Step 2: Select the general location  Step 3: Evaluate alternative specific store sites .

Three Types of Locations Isolated Store Planned Shopping Center Unplanned Business District .

Unplanned Business Districts and Isolated Locations .

Big Bazaar) and convenience-oriented retailers (Spencer’s Super) are usually the retailers best suited to isolated locations because of the challenge of attracting a target market. Advantages * No competition * Low rental costs * Flexibility * Good for convenience stores * Better visibility * Adaptable facilities Disadvantages * * * * * * Difficulty attracting customers Travel distance Lack of variety for customers High advertising expenses No cost sharing Restrictive zoning laws * Easy parking Large-store formats (e. .g.Isolated Stores A freestanding retail outlet located on either a street or a highway. There are no adjacent retailers with which this type of store shares traffic.

Unplanned Business Districts Two or more stores situate together (or in close proximity) in such a way that the total arrangement or mix of stores is not due to prior long-range planning. Central Business District Neighborhood Business District Secondary Business District String .

Central Business District  CBD is the hub of retailing in a city. and luck.  Both vehicular and pedestrian traffic are very high. first located). .  The arrangement of stores follows no pre-set format. retail trends.  Shoppers are drawn from the whole urban area and include all classes of people. it depends on history (first come.  It exists where there is the greatest density of office buildings and stores.

 The kinds of goods and services sold in an SBD mirror those in the CBD.  SBD is an unplanned shopping area in a city or town that is usually bounded by the intersection of two major streets. and congestion are less for the SBD .Secondary Business District  This format is now more important because cities have “sprawled” over larger geographic areas.  An SBD has smaller stores. less width and depth of merchandise assortment. and it sells a higher proportion of convenienceoriented items.  Parking problems. travel time. and a smaller trading area (consumers will not travel as far).

 An NBD offers a good location. The leading retailer is typically a supermarket or a large drugstore. . long store hours.  But there is a limited selection of goods and services.  An NBD contains several small stores. and a less hectic atmosphere than a CBD or SBD. such as a stationery store.Neighbourhood Business District  NBD is an unplanned shopping area that appeals to the convenience shopping and service needs of a single residential area. a barber shop and/or a beauty salon. a dry cleaner and a restaurant. prices tend to be higher because competition is less than in a CBD or SBD. good parking. This type of business district is situated on the major street(s) of its residential area.

apparel retailers often situate in strings.  An individual store’s increased traffic flow.String  A string is an unplanned shopping area comprising a group of retail stores. a string store has competition at its location. success then breeding competitors. . There is little extension of shopping onto perpendicular streets. may be greater than the customers lost to competitors. It means less control over prices and less loyalty toward each outlet. This draws more people to the area.  May start with an isolated store. with similar or compatible product lines. located along a street. Car dealers. due to being in a string rather than an isolated site.  Unlike an isolated store.

based on balanced tenancy. family shopping Disadvantages Limited flexibility Higher rent Restricted offerings Competition Requirements for association memberships * Too many malls * Domination by anchor stores * * * * * * Cost sharing * Transportation access * Pedestrian traffic . and accompanied by parking facilities. and mix of stores are related to the trading area served.Planned Shopping Centers Consists of a group of architecturally unified commercial establishments on a site that is centrally owned or managed. Its location. Advantages * Well-rounded assortments * Strong suburban population * One-stop. size.

Characteristics of Centers .

Location/Site Evaluation Checklist The Optimum Site for a Particular store .

Pedestrian Traffic  The most crucial measures of a location/site’s value are the number and type of people passing by  Proper pedestrian traffic count should include:  age and gender (exclude very young children)  count by time of day  pedestrian interviews  spot analysis of shopping trips .

detours. and poor roads).Vehicular Traffic  Different for:  convenience stores  outlets in shopping centers  petrol pumps  suburban areas with limited pedestrian traffic  Some retailers count only homeward-bound traffic. People normally avoid congested areas and shop where driving time and driving difficulties are minimized. some exclude vehicles on the other side of a divided road  Retailer should study the extent and timing of congestion (from traffic. .

Parking Considerations     Number and quality of spots Distance of spots from stores Price to charge customers for parking Employee parking .

or who would not otherwise shop in an area with traffic congestion. taxis. trains. The availability of buses.  . who commute to work. subways.Transportation  Closeness to public transport is important for people who do not own cars. and other kinds of public transport is a must for such areas.

and there is a proper mix of store types (balanced tenancy). blend and cooperate with one another.Store composition  If the stores at a given location (be it an unplanned district or a planned center) complement. affinity exists. Proper retail balance occurs when the number of store facilities for each merchandise or service classification is equal to the location’s market potential.  . the sales of each store are greater due to the high customer traffic than if the stores are apart. When affinity is strong. there is an adequate assortment within any category.

The condition and age of the building should be studied. A corner location may be desirable because it is situated at the intersection of two streets and has “corner influence. . its size and shape should be noted.”  When a retailer buys or rents an existing building. High visibility aids store awareness.Specific site  Visibility is a site’s ability to be seen by pedestrian or vehicular traffic.  Placement in the location is a site’s relative position in the district or center.

include required membership in merchant groups. cooperative security forces) . uniform hours.Terms of Occupancy Considerations  Ownership versus leasing (ownership is more common in small stores or at inexpensive locations)  Operations and maintenance costs  Taxes  Voluntary regulations (prevalent in planned shopping centers.

 Leasing advantages:  Minimizes the initial investment.Ownership vs. rent increases. restrictions on subletting and selling the business.  Property value will appreciate over time resulting in a financial gain if the business is sold.  Operations are flexible.  Ownership Disadvantages:  High initial costs. a retailer can break down walls. allows access to prime sites that cannot hold more stores. . the long-term commitment. reduces risk. inability to readily change sites. leasing  Ownership Advantages:  There is no chance that a property owner will not renew a lease or double the rent when a lease expires.  Retailers feel they can open more stores or spend more on other aspects of their strategies by leasing. leads to immediate occupancy and traffic. and not gaining from rising real-estate values. and reduces the long-term commitment. possible nonrenewal problems.  Leasing disadvantages:  Firms that lease accept limits on operating flexibility.

Overall rating  (1) Each location under consideration is given an overall rating based on the criteria. .  (3) The same procedure is used to evaluate the alternative sites within the location. and the best location is chosen.  (2) The overall ratings of alternative locations are compared.

. or an area may have excellent potential but take two years to build a store. but the site in the center may be poor.  The attributes should be weighted according to their importance.  The general location may be a good shopping center.Conclusion  It is often difficult to compile and compare composite evaluations because some attributes may be positive while others are negative.

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