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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


freestanding.

• 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
areas.

• 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


locations.

. 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
shoppers.

• 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
retailers.
 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
category.

• 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
location.

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


disaster.

• 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
stores.

 • 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
overstored.

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

 • 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


areas.

• 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.
A.
 Traffic counts are particularly important for
retailers offering merchandise and services bought
on impulse, but less important for destination
retailers.


 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,
China
• Central World, in Bangkok by central
group
• The SM mall of Asia, Philippines
• Dream mall, in Taiwan