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Chapter 08 - Retail Site Location

Chapter 08
Retail Site Location

Multiple Choice Questions


1. (p. 218) When evaluating specific areas for locations, U.S. Retailers often focus their analysis
on a(n) _____________ because consumers tend to shop within this area.
A. Metropolitan Urban Development
B. Competitive Statistical Area
C. Statistical Demographic Area
D. Metropolitan Statistical Area
E. trade area

Difficulty: Easy
Type: Definition

2. (p. 218) A city of 50,000 or more inhabitants, or an urbanized area of at least 50,000
inhabitants, with adjacent communities having a high degree of economic and social
integration with the core community is called a(n):
A. Metropolitan Urban Development
B. Competitive Statistical Area
C. Statistical Demographic Area
D. Metropolitan Statistical Area
E. trade area

Difficulty: Easy
Type: Definition

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Chapter 08 - Retail Site Location

3. (p. 218) Which of the following describes the use of Metropolitan Statistical Area (MSA)?
A. U.S. Retailers often focus their analysis on MSA in evaluating specific areas for location
decisions.
B. Media coverage information is organized by MSA.
C. Demographic data for analyzing location opportunities are organized by MSA.
D. All of the above.

Difficulty: Medium
Type: Comprehension

4. (p. 218) Which of the following unit of analysis would consider a town of 10,000 inhabitants
in its core urban area?
A. Micropolitan Statistical Area
B. Competitive Statistical Area
C. Statistical Demographic Area
D. Metropolitan Statistical Area
E. trade area

Difficulty: Medium
Type: Definition

5. (p. 218) Which of the following does NOT affect the long term profit generated by stores
when considering an area?
A. the economic conditions
B. competition
C. the strategic fit of the areas' population with the retailer's target market
D. the cost of operating stores
E. the corporate centralization

Difficulty: Medium
Type: Comprehension

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6. (p. 218) Which of the following is NOT true?


A. The best areas for locating stores are those that generate the highest return on investment in
a short term.
B. It is important to examine an area's level and growth of population and employment and
how long such growth will continue and how it will affect demand for merchandise sold in its
stores.
C. It is important to have the strategic fit of the areas' population with the retailer's target
market.
D. It is important to consider local and state legal and regulatory environments affecting
operating costs.
E. All of the above are true.
Because locations involve a commitment of resources over a long time horizon, retailers
consider the locations that generated the highest long-term profits.

Difficulty: Hard
Type: Application

7. (p. 220) Which of the following would NOT affect the operating costs of a store?
A. having a large MSA
B. having a small MSA
C. proximity of the store to the distribution center
D. state regulatory environment
E. congestion of people and cars

Difficulty: Medium
Type: Comprehension

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8. (p. 221) Retailers must consider the trade-offs between lower operating costs and potential
___________ from having multiple stores in an area.
A. economies of scale
B. economies of scope
C. sales cannibalization
D. channel integration
E. congestion of people

Difficulty: Hard
Type: Comprehension

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Chapter 08 - Retail Site Location

9. (p. 221) Although retailers gain scale economies from opening multiple locations in an area,
they also suffer diminishing returns associated with locating too many additional stores in an
area. This is called:
A. channel competition
B. economies of scope
C. sales cannibalization
D. channel integration
E. channels competition

Difficulty: Hard
Type: Comprehension

10. (p. 222) When evaluating a specific site for a retail store, a retailer should consider:
A. characteristics of the site
B. characteristics of the trading area
C. estimated sales
D. traffic flow past the site
E. All of the above

Difficulty: Easy
Type: Comprehension

11. (p. 222) Alysha McDermitt-Chou plans to open a store for soccer enthusiasts, and has found
an affordable location in a small strip center off of a major state highway. What concerns
should she have when she considers the accessibility of the site?
A. road patterns
B. artificial barriers like railroads
C. visibility
D. traffic flow
E. All of the above

Difficulty: Easy
Type: Application

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12. (p. 223) One of the most important factors affecting store sales is the number of vehicles and
pedestrians that pass by the site, or the ________________.
A. traffic congestion
B. traffic flow
C. accessibility
D. traffic stimulator

Difficulty: Easy
Type: Definition

13. (p. 223) Access to major highways, pedestrian traffic, and availability of mass transit are
examples of which site characteristic?
A. Traffic flow and accessibility
B. Location characteristics
C. Restrictions
D. Costs
E. Competitive advantages

Difficulty: Easy
Type: Comprehension

14. (p. 223) Which of the following site characteristics refers to the customer's ability to exit the
highway and enter the parking lot safely?
A. Micro analysis
B. Natural barriers
C. Viscosity
D. Road development
E. Traffic flow and accessibility

Difficulty: Easy
Type: Definition

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Chapter 08 - Retail Site Location

15. (p. 223) What retailer would consider traffic count particularly important?
A. 7-Eleven
B. Macy's
C. Bed, Bath and Beyond
D. Wal-Mart Supercenter
E. Bill's Wash-n-Fold

Difficulty: Medium
Type: Comprehension

16. (p. 223) Why is traffic count particularly important for convenience stores?
A. Convenience stores offer impulse merchandise.
B. Convenience stores locate only in MSA's that have a target market.
C. Traffic count means more pedestrian traffic.
D. Traffic count determines flow and accessibility.
E. None of the above.

Difficulty: Medium
Type: Comprehension

17. (p. 223) Traffic count is less important for:


A. Convenience stores
B. Destination retailers
C. Rural communities
D. Mall accessibility
E. Specialty retailers

Difficulty: Medium
Type: Comprehension

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18. (p. 223) The ___________ of a site is the ease with which customers can get into and out of
the site.
A. traffic flow
B. traffic restriction
C. accessibility
D. vehicular traffic bypass
E. macro analysis

Difficulty: Medium
Type: Comprehension

19. (p. 224) LeeAnn was overwhelmed by the brutal traffic outside of her local discount retailer.
Her experience in the store was no better. The aisles were packed. The lines were long and the
customers (as well as the cashier) were irritable. To LeeAnn, this discounter didn't consider
the problem of ___________ when choosing the site for the store.
A. congestion
B. non-shopper access
C. flow of traffic
D. visibility
E. vulnerability

Difficulty: Easy
Type: Comprehension

20. (p. 225) What is the advantage of having your adjacent tenant as a complementary recruiter?
A. Shared parking expense
B. Better lease negotiations
C. Visibility
D. Less tenant restrictions
E. Builds customer traffic

Difficulty: Medium
Type: Comprehension

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21. (p. 225) Which of the following is NOT true in describing adjacent tenants?
A. Complementary adjacent retailers have the potential to build traffic.
B. Competing adjacent retailers have the potential to build traffic.
C. Complementary retailers target the different market segments and have a different,
noncompeting merchandise offering.
D. The principle of cumulative attraction states a cluster of similar and complementary
retailing activities have greater drawing power than isolated stores.
Complementary retailers target the same market segment but have a different, noncompeting
merchandise offering.

Difficulty: Hard
Type: Comprehension

22. (p. 225) The grouped location approach is based on the principle of __________, which
states that a cluster of similar and complementary retailing activities will generally have
greater drawing power than isolated stores that engage in the same retailing activities.
A. multiple risk
B. Analog approach
C. cumulative attraction
D. consumer spotting
E. diminishing adjacent

Difficulty: Medium
Type: Comprehension

23. (p. 225) Which of the following principles explains the success of a shopping center whose
tenants include The Home Depot, a nail salon and a grocery store?
A. Multiple risk
B. Analog approach
C. Cumulative attraction
D. Consumer spotting
E. Diminishing adjacent

Difficulty: Medium
Type: Comprehension

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24. (p. 227) A contiguous geographic area that accounts for the majority of a store's sales and
customers is called a:
A. Demographic
B. Metropolitan complex
C. Site location
D. Trade area
E. Target market

Difficulty: Easy
Type: Definition

25. (p. 226) Locations in a shopping center affect both sales and occupancy costs. Which of the
following is NOT true in describing the relationships?
A. The more expensive locations are closest to the supermarket in a strip shopping center
B. Shops, like a flower shop, which attract impulse buyers should be close to the supermarket
in a strip shopping center
C. A destination store, like a shoe repair store, should be located close to supermarket in a
strip shopping center
D. Stores that cater to consumers engaging in comparison shopping are benefited from being
located in more expensive locations near the department store anchors
E. A retailer such as Foot Locker need not be in the most expensive location because
customers are in the market for this type of product before they even go shopping
Destination stores (e.g., a shoe repair store, Foot Locker) could be in lower traffic location
farther away from the supermarket in a strip shopping center or from department stores
anchors in enclosed malls because customers in need of this service or product will seek out
the store.

Difficulty: Hard
Type: Application

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26. (p. 217) Retailers try to locate their stores that appeal to similar target markets. Which of the
following is NOT true in explaining how and why retailers do it?
A. Customers want to shop where they will find a good assortment of merchandise
B. Retailers consider complementary retailers in location selections
C. Retailers must avoid locating close to other retailers that compete directly
D. Retailers such as the Builder-A-Bear Workshop, which sells stuffed animal toys, the
Disney Store try to have locations close to each other
E. The principle of cumulative attraction states that a cluster of similar and complementary
retailing activities have greater drawing power than isolated stores that engage in the same
retailing activities
Retailers may want to consider locating close to other retailers that compete directly because
the principle of cumulative attraction applies not only to complementary retailers but also to
those that compete directly with one another.

Difficulty: Easy
Type: Application

27. (p. 227) Fishing enthusiasts come for miles to shop at Shabby Bills, a shack that sells limited
tackle and bait on the North Carolina Outer Banks. Bill attracts this crowd because of his
expertise in the Outer Banks and local folklore. The Outer Banks would be considered Shabby
Bills':
A. Site location
B. Demographically similar area
C. Target market
D. Metropolitan complex
E. Trade area

Difficulty: Easy
Type: Application

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28. (p. 227) A(n) _____________ is a contiguous geographic area that accounts for the majority
of a store's sales and customers.
A. shopping area
B. trading area
C. media area
D. sale area
E. attractive area

Difficulty: Easy
Type: Application

29. (p. 227) Which of the following is TRUE in describing different categories of trade areas?
A. The primary trading area is the geographic area from which the shopping center or store
site drives 80% of its customers.
B. The secondary trading area is the geographic area of secondary importance in terms of
customer sales, generating about 20-30 percent of the site's customers.
C. The tertiary trading area includes the area where customers who shop at stores are coming
from widely dispersed areas.
D. All of the above.
The primary trading area is the geographic area from which the shopping center or store site
drives 50-70 percent of its customers.

Difficulty: Easy
Type: Definition

30. (p. 227) In terms of trade areas, the owner of Bubba's Bar and Grille defines his
___________ as the geographic area in which 70% percent of his customers live.
A. primary trade area
B. fundamental market
C. geographic market
D. secondary trade area
E. tertiary trade area

Difficulty: Medium
Type: Application

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31. (p. 227) Schnuck's Grocery Store is located in St. Louis, Missouri. Its owner has taken a
map, and drawn polygons around the store's location. Those people who fall within a 50-mile
radius of the store but outside its secondary zone are in what's referred to as the store's:
A. Geographic market
B. Market trade area
C. Delineated market
D. Tertiary trade area
E. Inclusive trade area

Difficulty: Medium
Type: Application

32. (p. 228) Which of the following is NOT a factors affecting the size of the trade area?
A. Type of store
B. Location of alternative stores
C. Assortment offered
D. Nature of merchandise sold
E. All of the above

Difficulty: Medium
Type: Comprehension

33. (p. 228) Which of the following is NOT true in describing the size of trade area?
A. Convenience stores' trade areas are relatively small
B. Category specialists have relatively large trade areas
C. A retailer like Starbucks has large size of trade area
D. A retailer like IKEA has large trade areas
E. A retailer like Best Buy has large trade areas
A Starbucks in a central district may have a trade area of only two or three blocks.

Difficulty: Hard
Type: Application

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34. (p. 228) Aliya needed a new stirrup for her bridle. She had to drive 30 miles to a Western
Tack store in order to make the purchase. To Aliya, the Western Tack store is an example of a:
A. Destination store
B. Drawing store
C. Magnet store
D. Country goods store
E. Tertiary-zoned store
A destination store is one in which a unique feature acts as a magnet for customers.

Difficulty: Medium
Type: Application

35. (p. 228) Which of the following retailers might customers consider as a destination store?
A. the only shoe store in town that will dye shoes to match dresses
B. the store in town with the lowest priced pharmaceuticals
C. the only store in town that carries Goobers and Raisinettes
D. the store in town with the largest selection of computer games
E. any of the above could be an example of a destination store
A destination store is one in which a unique feature or selection or low price acts as a magnet
for customers.

Difficulty: Medium
Type: Application

36. (p. 228) Which of the following is NOT a destination store?


A. RadioShack
B. IKEA
C. AMC Movie Theaters
D. The Home Depot
E. Kroger grocery store

Difficulty: Medium
Type: Application

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37. (p. 229) A store that does not create its own traffic and whose trade area is determined by the
dominant retailer in the shopping center is considered a:
A. Freeloading retailer
B. Cart or kiosk
C. Arbitrary retailer
D. Parasite store
E. Traffic-dependent store

Difficulty: Easy
Type: Definition

38. (p. 229) The Coffee Cup is a small, town donut shop located in the heart of the central
business district. Hundreds of people pass the entrance on their way into their shops and
offices; they feel compelled to stop and satiate their cravings. The Coffee Cup is an example
of a(n):
A. Attraction store
B. Parasite store
C. Freeloading retailer
D. Kiosk or cart
E. Traffic-dependent store
A parasite store is one that does not create its own traffic and whose trade area is determined
by the dominant retailer in the shopping center.

Difficulty: Medium
Type: Application

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39. (p. 229) No one goes out of his or her way to go to Toasty Warm, a shopping kiosk that
features gloves and mittens. Its traffic comes from its location outside a large winter coat
outlet retailer. Toasty Warm is an example of a:
A. Detour store
B. Parasite store
C. Freeloading retailer
D. Dependent kiosk or cart
E. Traffic-dependent store
A parasite store is one that does not create its own traffic and whose trade area is determined
by the dominant retailer in the shopping center.

Difficulty: Medium
Type: Application

40. (p. 229) The Mediterranean Cafe features light cuisine and folk entertainment. It is located in
the middle of an upper-class neighborhood. The owners are curious about where the customer
base lives so that it can focus direct mail to those areas. For the last several weeks, employees
scoped the parking lot noting license plate numbers so they could have a private research
company trace them to the owners. The Mediterranean Caf is engaging in:
A. Customer clustering
B. Residential research
C. Financial demographics
D. Geographic research
E. Customer spotting

Difficulty: Medium
Type: Application

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41. (p. 229) _______________ is the process of locating the residences of customers for a store
on a map and displaying their positions relative to the store location.
A. Customer spotting
B. Buying power tracking
C. The analog approach
D. Customer clustering
E. None of the above

Difficulty: Medium
Type: Definition

42. (p. 229) Which of the following can be used to determine how many people are in a trade
area, and where they live?
A. Customer spotting
B. Demographic USA's Buying Power Index
C. Analog approach
D. Customer clustering
E. None of the above

Difficulty: Medium
Type: Definition

43. (p. 229) The Village Green, a woman's clothing store, took a map of the city and the checks
written by its customers during the last quarter. The store's owner then marked the address of
each customer on the map with a map pin. By looking at where the pins clustered on the map,
she could determine her trade area. She was engaged in:
A. Geographic research
B. Customer spotting
C. Financial demographics
D. Customer clustering
E. Residential research

Difficulty: Medium
Type: Application

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44. (p. 230) What is the drawback of using the Decennial Census of the United States?
A. The information in it is only for metropolitan areas.
B. The information included is taken only once every ten years.
C. It is expensive to purchase and retailers usually find other means for the information.
D. The Census offers only numbers not specifics like household income, level of education,
etc.
E. The information provided is not user friendly requiring interpretation by analysts.

Difficulty: Medium
Type: Comprehension

45. (p. 231) What is a census block?


A. an area bounded on all sides by visible (roads, river, etc.) and invisible (county, state
boundaries) features
B. a block of specific residents sharing similar demographics
C. a specific decennial used in comparison studies to demonstrate regional changes
D. a block including a specific educational and economic status
E. a collection of adjacent blocks that contain between 300 and 3,000 people

Difficulty: Medium
Type: Definition

46. (p. 231) What is NOT true about U.S. census data?
A. The census track is the smallest geographic entity for which census data is available.
B. There are seven million census blocks in the United States, each containing the residences
of about 40 people.
C. The block group is a collection of adjacent blocks that contain between 300 and 3,000
people.
D. Census data are collected every ten years.
E. All of the above are true.

Difficulty: Hard
Type: Comprehension

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47. (p. 231) A _____ is a system of hardware and software used to store, retrieve, map and
analyze geographic data along with the operating personnel and the data that go into the
system.
A. Geographical Information System (GIS)
B. projection map (PM)
C. trade area topographical map (TATM)
D. Retail Information System (RIF)
E. PRIZM system

Difficulty: Easy
Type: Definition

48. (p. 231) Which of the following is NOT true regarding GIS?
A. It is used by retailers to find locations that maximize their sales and profits.
B. Its use develops a deeper understanding of the trade areas.
C. It combines demographic data, consumer spending patterns, and lifestyles in a geographic
area.
D. It is based only on the most updated demographic census data.
E. Examples of GIS suppliers include ESRI, Claritas, and MapInfo.

Difficulty: Medium
Type: Comprehension

49. (p. 231) A Geographic Information System (GIS):


A. is a system of hardware and software used to store, retrieve and map data
B. is identified with a coordinate system that can reference a particular place on earth
C. includes special features like rivers and roads
D. includes descriptive information like street addresses
E. is accurately described by all of the above

Difficulty: Medium
Type: Definition

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50. (p. 232) ESRI and other GIS suppliers have developed schemes for classifying geographic
areas. The ESRI Community Tapestry segmentation scheme classifies neighborhoods into 65
categories. How would you classify the following person?
Thomas is a recent college graduate who accepted an assistant buying position with Macy's in
New York City. After six months, his commitment to the company led him to a promotion,
and a raise! Thomas rents an apartment with his girlfriend Grace, who works as a stockbroker.
Together they spend weekends shopping and meeting friends, and sometimes they travel to
Boston for a change in scenery.
Thomas can be described as:
A. Generation X
B. Metro renter
C. Metro spender
D. Metron
E. Tapestry scheme

Difficulty: Medium
Type: Application

51. (p. 234) Which of the following is TRUE about the spending potential index?
A. It compares average expenditure in a particular area for a product and compares it to the
amount spent on that product nationally.
B. It compares sales predictions based on various retail locations.
C. It is an index that provides retailers who are thinking of expanding into international
markets with data on what consumers spend.
D. It compares what retailers spend on real estate in a given market and compares it to the
national average.
E. It offers retailers information on property values as well as local tax information so they are
better able to compare prior to purchasing.

Difficulty: Medium
Type: Definition

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52. (p. 234) Donald plans to open an arcade on the beach in Atlantic City, but is curious as to the
competition in the area. Aside from paying a GIS vendor, how can Donald secure this
information?
A. He could look into the most recent issue of the Yellow Pages.
B. He could look in trade association directories.
C. He could stop in the Atlantic City Chamber of Commerce and inquire about business
information.
D. He could talk with municipal and county officials.
E. All of the options above.

Difficulty: Medium
Type: Application

53. (p. 234) Gretchen will be opening her party store in greater Dallas, but she's concerned about
competition. Where should she look to understand about potential competition?
A. Local newspaper advertising departments
B. Internet
C. Chain Store Guide
D. Local chamber of commerce
E. All of the above

Difficulty: Easy
Type: Application

54. (p. 235) The objective of Huff's Gravity Model is to:


A. determine the hierarchy of retailing activities according to the assortment of merchandise
available
B. define the relative ability of two cities to attract customers from the area between them
C. define the relationship between the size of a shopping area and the area's income levels
D. determine the probability that a customer residing in a particular area will shop at a
particular shopping center
E. create a comparative model which allows the retailer to determine the ideal location

Difficulty: Medium
Type: Definition

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55. (p. 235) According to the Huff Gravity Model, the two factors which attract consumers to a
store location are:
A. travel time for a customer to get to location and the number of customers in a trade area
B. the size of the store and travel time for a customer to get to a store location
C. the size of the store and the number of customers in a trade area
D. travel time for a customer to get to location and the distance between customer location
and store location
E. the distance between customer location and store location and the number of customers in a
trade area

Difficulty: Medium
Type: Definition

56. (p. 235) Which of the following is NOT true about Huff Gravity Model?
A. It is used for estimating the sales of a retail store based on the concept of gravity
B. It predicts the probability of a customer going to a specific store location
C. The formula indicates that the larger the size of the store compared with competing stores'
sizes, the greater the probability that a customer will shop at the location
D. It is assumed that a larger size is generally more attractive in consumers' eyes because it
means more merchandise assortment and variety
E. The greater travel time or distance from the consumer, compared with that of competing
locations, the higher probability that the consumer will shop at the location

Difficulty: Hard
Type: Comprehension

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57. (p. 236) Why is it important to use the Huff's Gravity Model in conjunction with the analog
and regression methods?
A. The Huff's model does not utilize demographic variables.
B. The analog and regression methods consider too many variables other than demographic.
C. There has been additional supportive research since the Huff's model that can supplement
the findings of the Huff's model.
D. The Huff's model only offers comparative data and is unable to assist in choosing specific
sites.
E. The Huff's model only offers information about income levels in comparison to the size of
the shopping area.

Difficulty: Medium
Type: Comprehension

58. (p. 237) What is the difference between multiple regression analysis and the analog
approach?
A. The analog approach gathers its information through nationwide customer surveys.
B. Multiple regression analysis uses geo-demographic segmentation systems to determine
potential sales in a new market.
C. The analog approach uses statistics rather than judgment to predict sales.
D. Multiple regression analysis uses statistics rather than judgment to predict sales for a new
store.
E. Multiple regression analysis cannot be used to determine potential sales like the analog
approach.

Difficulty: Medium
Type: Definition

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59. (p. 237) Which of the following does NOT describe the appropriate use of different
approaches for site selection?
A. Large retailers often use the Huff Gravity Model to estimate potential sales for a store site
before site selection
B. Regression analysis can consider the effects of wide range of factors affecting sales in
stores
C. The regression analysis is appropriate for small chains to find the best location
D. Using the analog approach, the retailer describes the site and trade area characteristics for
its most successful stores and attempts to find a site with similar characteristics
E. The analog approach is not recommended for large chain stores like Wal-Mart
The regression analysis is not appropriate for small chains because small chain retailers need
data about site characteristics from a large number of stores and trade areas.

Difficulty: Hard
Type: Application

60. (p. 237) With regression analysis used in location analysis, predictor variables are selected.
Which of the following predictor variables would be more useful for a retailer who is
contemplating opening a day care center than for a retailer of used books?
A. number of households with children not attending school
B. educational level of households
C. average age of homes in trade area
D. average age of head of household
E. average number of cars in each household
The number of young children in its potential trade area would be a good predictor of its
potential success.

Difficulty: Medium
Type: Application

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61. (p. 241) Which of the following are the two basic types of leases?
A. the service lease and the strip lease
B. the percentage lease and the fixed-rate lease
C. the incentive and the parallel lease
D. the development lease and the associated lease
E. the multiplex lease and the single unit lease

Difficulty: Easy
Type: Comprehension

62. (p. 241) With a percentage lease, retailers pay a percentage of sales as well as a(n)
______________ which is based on a percentage of their square footage of leased space.
A. maintenance fee
B. inflation surcharge
C. space charge
D. minimum fee
E. cushion fee

Difficulty: Easy
Type: Comprehension

63. (p. 241) Which of the following leases are most commonly used by community and
neighborhood centers?
A. Percentage lease
B. Pro bono lease
C. Claused lease
D. Fixed-rate lease
E. Variable-rate lease

Difficulty: Medium
Type: Comprehension

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64. (p. 242) Demarkus finally received financial backing from his wealthy aunt in order to open
a video arcade. He contacted the landlord of a nearby shopping center since he had his eye on
a vacant storefront. To his surprise, his request for a lease was denied. If you were the
landlord, what would stop you from leasing to Demarkus?
A. a fixed-rate clause
B. an escape clause
C. a licensing clause
D. a prohibited use clause
E. an exit clause

Difficulty: Hard
Type: Application

65. (p. 242) A(n) __________________ prohibits the landlord from leasing to retailers that sell
competing products.
A. Prohibited use clause
B. Exclusive use clause
C. Escape clause
D. Fixed-rate leases
E. Inclusive use clause

Difficulty: Easy
Type: Definition

Essay Questions
66. (p. 218) What factors should be considered in locating stores? Why should retailers consider
those factors?
Factors that retailers should consider when evaluating an area for locating stores include the
economic conditions, competition, the strategic fit of the area's population with the retailer's
target market, and the costs of operating stores. Because these decisions determine long-term
profits for the retailers and require significant investments in resources, location decisions
well considered with those factors can play as a firm's competitive advantage.

Difficulty: Medium

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Chapter 08 - Retail Site Location

67. (p. 218) What demographic characteristics would affect the location of a McDonald's?
The retailer would be concerned about the size and composition of the households in its
market areas as well as the age of the household members, the income-level of the
households, culture and diversity. Students may suggest other important variables.

Difficulty: Medium

68. (p. 219) Why are full-service restaurant chains opening locations in inner-city neighborhoods
that were once viewed as undesirable locations?
Companies are realizing that these under served markets are attractive because of the lack of
competition, the relatively high level of disposable income of the residents and the large
untapped labor force.

Difficulty: Easy

69. (p. 220) What are three ways site selection can affect operating costs of a retailer?
Operating costs are affected by the proximity of the area being considered to other areas in
which the retailer operates stores, operating costs can vary across areas, and local and state
legal and regulatory environment can also have a significant affect.

Difficulty: Medium

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Chapter 08 - Retail Site Location

70. (p. 221) When making the decision about how many stores to open in an area, retailers must
consider the trade-offs. Explain what trade-offs retailers should consider in deciding the
number of stores in an area.
Retailers must consider the trade-offs between lower operating costs from having more stores
in an area and potential sales cannibalization from having multiple stores in an area. Although
retailers can lower operating costs because of the promotion and distribution economies of
scale from multiple stores, they are potential to be suffered from diminishing returns
associated with locating too many additional stores in an area. However, the trade-offs can
vary by different store types and merchandise types. Retailers like Starbucks and gas stations
increase the number of stores in an area without diminishing sales. Retailers try to find the
optimal number of stores in area that maximize sales, profits, and return on their investments.

Difficulty: Hard

71. (p. 225) Why would Save-A-Lot choose to be located in the same strip mall as Dollar
General and Wal-Mart?
Save-A-Lot targets price-sensitive consumers as does Dollar General and Wal-Mart. Although
these stores share the same target market, they offer different non-competing merchandise.
Also based on the principle of the cumulative attraction, a cluster of similar and
complementary retailing provides drawing power.

Difficulty: Medium

72. (p. 224) For which kind of store is good visibility from the road an insignificant factor in an
accessibility analysis?
Good visibility is of less importance for stores that are well established with loyal customers
and for stores with limited market area because the customer knows where the store is and has
the store as a destination. It is very important in an area with a highly transient population like
a tourist center or a large city.

Difficulty: Hard

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Chapter 08 - Retail Site Location

73. (p. 227) Why would retailers consider tertiary zones as part of their trade area, when these
customers only occasionally shop at the store or shopping center?
There are several reasons retailers consider tertiary zones as a part of their trade areas. First,
these customers may lack adequate retail facilities close to home. Second, there may be
excellent highway systems to the store or center so customers can get there easily. Third,
customers may drive near the store on their way home from work. Finally, customers are
drawn to the store or center because it is in or near a tourist area.

Difficulty: Hard

74. (p. 228) What are some of the factors that define a trade area?
Some of the factors that define a trade area include the store's accessibility, natural and
physical boundaries, type of shopping area, type of store and competition.

Difficulty: Medium

75. (p. 229) Some people think that Wal-Mart can be a destructive force to competition and
therefore a detriment to have in a trade area, yet many retailers continue to be lucrative and
exist as Wal-Mart's neighbor in a shopping center. Comment on how this is possible.
Answers will vary, but some parasite stores have learned to survive against the giant by
providing products and services that complement rather than compete with Wal-Mart and
many actually benefit from its presence. Other retailers compete directly with Wal-Mart in
certain categories, but have learned to provide either a more interesting assortment or better
service.

Difficulty: Medium

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Chapter 08 - Retail Site Location

76. (p. 229) What are some of the ways retailers obtain information when customer spotting?
Retailers gain residence information from customer spotting by (1) credit card or check
purchases, (2) customer loyalty programs, (3) manually at the checkout and (4) sometimes by
collecting information on auto license plates and tracing them to the owner through purchased
information from the government or private research companies. Talbot's spotted addresses of
its catalog customers on a map to decide its store location.

Difficulty: Medium

77. (p. 235) On what premise are the gravitation models that are used to measure trade areas
based?
They are 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 the store or center grows and
the distance or travel time to the store decreases.

Difficulty: Medium

Fill in the Blank Questions


78. (p. 221) To avoid cannibalization, retailers should continue to open stores as along as
_________ continue to increase.
profits

Difficulty: Easy

79. (p. 220) Rental fee, length of lease and local taxes are examples of ___________ when
reviewing site characteristics.
operating costs

Difficulty: Easy

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Chapter 08 - Retail Site Location

80. (p. 223) The ___________ of a site is the ease with which a customer may get onto and off
of the nearby highway.
accessibility

Difficulty: Easy

81. (p. 223) On of the most important factors affecting store sales is the number of vehicles and
pedestrians that pass by the site, or the ______________.
traffic flow

Difficulty: Easy

82. (p. 226) Traffic count is not as important for _________ retailers as compared to retailers
who rely on impulse purchases.
destination

Difficulty: Medium

83. (p. 225) Some factors associated with specific locations that retailers consider when
evaluating a site are parking, store visibility, and ______________.
adjacent retailers

Difficulty: Medium

84. (p. 224) ____________ is the customer's ability to see the store form the street.
Visibility

Difficulty: Easy

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Chapter 08 - Retail Site Location

85. (p. 225) The principle of _______________ is when a cluster of similar and complementary
retailing activities generally have greater drawing power than isolates stores.
cumulative attraction

Difficulty: Medium

86. (p. 227) A ______________ is a contiguous geographic area that accounts for the majority of
a store's sales and customers.
trade area

Difficulty: Easy

87. (p. 227) The ________ is the geographic area from which a store or shopping center derives
50-70 percent of its customers.
primary trade area

Difficulty: Easy

88. (p. 228) Maria likes to shop at the region's largest retailer of silk flowers and plants. Since
neither the prices nor the assortments of the silk flowers and plants can be beat, people come
from a hundred miles away just to shop there. This retailer of silk flowers and plants would be
described as a _____ store.
destination

Difficulty: Easy

89. (p. 229) A ______________ store is one that does not create its own traffic and whose trade
area is determined by the dominant retailer in the shopping center.
parasite

Difficulty: Easy

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Chapter 08 - Retail Site Location

90. (p. 229) Even though Danitra does no advertising and sells her hand painted pots from a
small kiosk, she does not have to worry about sales because she is located outside the door of
one of the region's largest retailers of silk flowers and plants. Danitra's retail endeavor would
be described as a _________ store.
parasite

Difficulty: Easy

91. (p. 229) A store in which merchandise, selection, presentation, pricing and other unique
features acts as a magnet is called a ____________ store.
destination

Difficulty: Easy

92. (p. 229) _____________ is the process of locating the residences of customers for a store on
the map and displaying the position relative to the store location.
Customer spotting

Difficulty: Easy

93. (p. 234) The __________________ report compares the average expenditure for a particular
product or service to the amount spent on that product or service nationally.
spending potential index

Difficulty: Medium

94. (p. 235) The premise of ___________ is that the probability that a customer will shop at a
particular store becomes larger as the size of that store increases.
Huff's Gravity Model

Difficulty: Easy

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Chapter 08 - Retail Site Location

95. (p. 242) A(n) ________________ prohibits the landlord from leasing to retailers selling
competing products.
exclusive use clause

Difficulty: Easy

Short Answer Questions


96. (p. 218) What are the factors that affect the long term profit generated by stores of which
needs to be considered when evaluating an area?
(1) economic conditions, (2) competition, (3) the strategic fit of the areas' population with the
retailer's target market, and (4) the costs of operating stores

Difficulty: Medium

97. (p. 221) What are the two factors a retailer needs to consider when deciding on the number of
stores to operate in an area?
Economies of scale from multiple stores should be considered as promotional costs would be
the same for one or many stores. Many stores could also justify a distribution center.
Cannibalization should be considered because too many stores could eat away at sales in
existing stores.

Difficulty: Medium

98. (p. 221) When could cannibalization build a competitive advantage?


Shopping experience for customer can offer less congestion and/or multiple stores in an area
make it less attractive for a competitor to enter the area.

Difficulty: Medium

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Chapter 08 - Retail Site Location

99. (p. 212) Once a retailer decides to locate in an area, what three factors are considered for
choosing a specific site?
The characteristic of the site, the characteristic of the trade area and the estimated potential
sales that can be generated by a store at the site.

Difficulty: Medium

100. (p. 213) What are three site characteristics that affect store sales and are considered when
selecting a site?
(1) the traffic flow past the site and accessibility to the site, (2) the characteristics of the
location and (3) the costs associated with locating at the site.

Difficulty: Easy

101. (p. 213) Why do retailers use traffic counts to measure a site's attractiveness?
When traffic is greater, more consumers are likely to stop in and shop at the store.

Difficulty: Easy

102. (p. 215) Why is it common to see a Walgreen's on one corner, and a CVS on the opposite
corner of a busy intersection?
These retailers work to fulfill a need in the community, and will continue to build until
marginal costs override marginal revenues. In reference to this chapter, consumers want to
have a good assortment so they can shop around.

Difficulty: Medium

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Chapter 08 - Retail Site Location

103. (p. 217) Why are trade areas that are divided into two or three zones called polygons?
They are called polygons because their boundaries conform to streets and other map features.

Difficulty: Easy

104. (p. 220) What are the two ways that data from customer spotting can be processed?
It can be processed by manually plotting the location of each customer on a map or by using
the GIS system.

Difficulty: Easy

105. (p. 224) What are three methods of estimating potential sales for a new store?
A retailer can use the analog approach, regression analysis or Huff's gravity model.

Difficulty: Easy

106. (p. 226) Which of the approaches in determining the retail potential of a trade area uses
demographics and lifestyle segments and works best when dealing with retail chains with
many stores?
regression analysis works best as a chain has been able to analyze the factors affecting sales in
its existing stores to determine what model would best predict store sales.

Difficulty: Medium

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Chapter 08 - Retail Site Location

107. (p. 231) What are the two basic types of leases?
percentage lease and fixed rate lease.

Difficulty: Easy

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