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Retail Location & Selection

 • Store location is often the most important

decision made by a retailer.

 • Location is typically the prime consideration in a

customer's store choice.

 • Location decisions have strategic importance

because they can be used to develop a
sustainable competitive advantage.

 • Location decisions are generally risky, They are

hard to change because retailers frequently
have to either make substantial investments to
buy and develop real estate or commit to long-
term leases with developers.

• Retailers have three basic types of
locations to choose from:

• A)Free Standing Sites

• B)City or Town Locations
– Inner City
– Main Street
• C)Shopping Centers
– Strip Shopping Centers
– Shopping Malls
• Other Location Opportunities

A. Freestanding Sites

• A freestanding site is a retail location that's not

connected to other retailers, however they might be

near other freestanding retailers.

• Retailers with large space requirements, such as

warehouse clubs and hypermarkets, are often


• Advantages of freestanding locations are greater

visibility, lower rents, ample parking, no direct

competition, fewer restrictions on signs, working
hours, or merchandise, and ease of expansion.

• The most serious disadvantage is the lack of synergy

with other stores. A retailer in a freestanding

location must be a primary destination point for
customers. It must offer customers something

B. City or Town Locations

• Some retailers are finding urban

locations attractive, particularly in
cities that are redeveloping their
downtowns and surrounding urban

• In general, urban areas have low

occupancy costs, and locations in the

central business districts often have
high pedestrian traffic.

Central Business Districts (CBD) is

1. Inner-City Locations : The inner city is

typically a high-density urban area consisting of
apartment buildings populated primarily by
ethnic groups.
Fact: There are about 8 million households in

America's inner cities and these constitute $85

billion in annual retail buying power – far more
than the entire country of Mexico.

 2. Main Street Locations : Main Street is the

CBD located in the traditional shopping areas of
smaller towns, or a secondary business district
in a suburb or within a larger city. Their
occupancy costs are lower than that of the
primary CBD.

 They do not draw as many people and offer

 C. Shopping Centers

• From the 1950s through the 1980s, suburban shopping

centers grew as populations shifted to the suburbs.

• A shopping center is a group of retail and other commercial

establishments that is planned, developed, owned, and

managed as a single property.

• Most shopping centers have at least one or two major

retailers, referred to as anchors.

1) Neighborhood and Community Shopping Centers

(Strip Centers) :

The primary advantages of these centers are that they offer

customers convenient locations and easy parking and they

entail relatively low rents for retailers.
2) Shopping Malls : Shopping malls have

several advantages over alternative


. First, because of the many different types

of stores, the merchandise assortments

available within those stores, and the
opportunity to combine shopping with
entertainment, shopping malls have
become the Main Street for today's

• Second, tenant mix can be planned.

Shopping mall owners control the number

of different types of retailers so that
customers can have a one-stop shopping
experience with a well-balanced assortment

Although shopping centers are an excellent

site option for many retailers, they have

some disadvantages.

First, mall rents are higher than those of

some strip centers, freestanding sites, and

many central business districts.

Second, some tenants may not like mall

managers' control of their operations.

Managers can, for instance, dictate store
hours and window displays.

 Third, competition within shopping

 • Shopping malls are facing several challenges.

 • First, there is increasing competition from other

types of retail location alternatives, such as
lifestyle centers, catalogs, and the Internet.

 • Second, many malls are getting old and are

therefore less appealing to customers than they
once were.

 • While few new shopping malls are being built,

considerable investment is being made in
renovating and redeveloping existing malls.

 • Renovating poorly performing malls is costly and

challenging. Frequently these malls cannot be
Others :

Lifestyle Centers : Lifestyle centers are shopping centers

with an open-air configuration of upscale specialty stores,

entertainment and restaurants with design ambience and
amenities such as fountains and street furniture.

• Lifestyle centers are typically located near affluent

neighborhoods and cater to the “lifestyles” of consumers in

their trade areas.

• Due to the ease of parking, lifestyle centers are very

convenient for shoppers.

Fashion/Specialty Centers : A fashion/specialty center is a

shopping center that is composed mainly of upscale

apparel shops, boutiques, and gift shops carrying selected
fashions or unique merchandise of high quality and price.

• Fashion/specialty centers are similar to lifestyle centers in

Outlet Centers : Outlet centers are

shopping centers that consist mostly of

manufacturers’ and retailers’ stores selling
their own brands.

• Consumer demand for stores in outlet

centers has diminished in recent years.

• Outlet centers are often located some

distance from regional shopping centers so

outlet tenants don't compete directly for
department and specialty store customers.

• Outlet centers can be located in strong

D) Other Location Opportunities

• Airports, resorts, hospitals, and stores

within a store are interesting, if not

unusual, location alternatives for many
 Location & Retail Strategy :

 The selection of a location type must

reinforce the retailer’s strategy.

 Factors effecting are :

 A) Shopping Behavior of Consumers in

Retailer’s Target Market

 • A critical factor affecting the location consumers

select to visit, is the shopping situation in which
they are involved. Three shopping situations are:

(1)Convenience shopping
(2)Comparison shopping and

1. Convenience Shopping : When

consumers are engaged in convenience

shopping situations, they are primarily
concerned with minimizing their effort to
get the product or services they want.

• Stores selling primarily convenience

goods usually locate their stores close to

where their customers are and make it
easy for them to park, find what they
want, and go about their other business.

2. Comparison Shopping : Consumers involved in

comparison shopping situations have a general idea

about the type of product or service they want, but
they do not have a strong preference for a brand,
model or specific retailer to patronize.

• Enclosed malls or shopping districts devoted to one

type of merchandise attract consumers by

facilitating their comparison shopping activities.

Category specialists offer the same benefit of

comparison shopping as a collection of co-located

specialty stores because consumers can see almost
all of the brands and models in a particular product

• This ability for one-stop comparison shopping makes

category killers destination stores, places where

3. Specialty Shopping

• When consumers go specialty shopping,

they know what they want and will not

accept a substitute.

• The retailer they patronize when

specialty shopping becomes a

destination store. Thus, consumers are
willing to travel to an inconvenient

B. Density of Target Market : The

density of a retailer’s target market in
relation to the location is another
important consideration. A good location
has many people in the Target market
that may be easily drawn in.

C. Uniqueness of merchandise

offering : The convenience of their

locations is less important for retailers
with unique, differentiated offerings than
for retailers with an offering similar to
other retailers. For these retailers,
customers will travel to wherever the

Retail site selection is a very strategic

decision. Once a location is chosen, a

retailer must live with it for many years.

Even if a retailer finds the "right“

neighborhood, the wrong site can spell


• Areas that retailers consider for locating

stores might be countries, areas within a

country such as a province or state,
particular cities or areas within a city

 D. Economic Conditions It is important to

examine an area’s level and growth of
population and employment because locations
involve a commitment of resources over a long
time horizon.

 • A large, fully employed population means high

purchasing power and high levels of retail sales.

 • Retail location analysis must also consider how
long growth will take place and how it will affect
demand for merchandise sold in the area’s

 • Most retailers prefer to locate in areas where the

population is large and growing. However, other
retailers adopt the strategy of moving into newly

 E. Competition The level of competition in an

area also affects demand for a retailer’s
merchandise. The level of competition can be
defined as saturated, understored, or

 • A saturated trade area offers customers a
good selection of goods and services, while
allowing competing retailers to make a good

 • An understored trade area is one that has

too few stores selling a specific good or service
to satisfy the needs of the population.

F. Operating Costs Costs of operating

stores can vary dramatically across


• Operating costs may be affected by the

population of the area, the proximity of

the area to other areas in which the
retailer operates stores or distribution
centers, and also the local and state
regulatory Environments.
Evaluating a Site for Locating a Retail Store

Traffic Flow and Accessibility : One of the most

important factors affecting store sales is the

number of vehicles and pedestrians that pass by
the store, or the traffic flow. When the traffic is
greater, more consumers are likely to stop in and
shop at the store.
 Traffic counts are particularly important for
retailers offering merchandise and services bought
on impulse, but less important for destination

 The accessibility of a site is the ease with which
a customer can get into and out of it. The
accessibility analysis has two stages; a macro
analysis followed by a micro analysis.

 Location Characteristics : The amount and

quality of parking facilities are critical to
shopping center’s overall accessibility. It’s hard
to assess how many parking spaces are enough,
although location analysts use parking ratios as
a starting point.

 • Congestion can refer to the amount of

crowding of either cars or people. Too much
congestion can make shopping slow, irritate
customers, and generally discourage sales. On
the other hand, a relatively high level of activity
in a shopping center creates excitement and can
stimulate sales.

 • Visibility refers to customers' ability to see the

store and enter the parking lot safely. Good
visibility is less important for stores with
• New South China Mall, Dongguan, China
• Golden Resources Shopping Mall, Beijing,
• Central World, in Bangkok by central
• The SM mall of Asia, Philippines
• Dream mall, in Taiwan