EVALUATING SPECIFIC AREAS FOR LOCATIONS

ECONOMIC CONDITIONS

Large fully employed population means high purchasing power

Ensures high level of sales
Duration of growth period and its effect on demand is to be considered
Areas that are growing quickly (and why) are to be identified
Growing areas and those with large population are preferable
New strip shopping centres- anticipation that surrounding suburban area will be
develop enough to support the stores

COMPETITION
Level of competition affects demand
Underserved markets are attractive because of
- Lack of competition
- High level of disposable income of residents
- Large, untapped labour force

 STRATEGIC FIT

Areas must have enough target customers

Right demographic and lifestyle profile
Size and composition of households is an important determinant

OPERATING COSTS

Costs vary across areas

Affected by proximity of the areas in which the retailer already operates
Effected by local and state legal and regulatory environment

NUMBER OF STORE IN AN AREA

ECONOMIES OF SCALE FROM MULTIPLE STORES

Multiple stores: promotion and distribution economies of scale

Increase sales per store and reduce costs
Greater span of control over a regional market
Ease in store visits to assess competitive situations

CANNIBALIZATION
Diminishing returns associated with locating too many stores
Primary objective- earning profits must be kept in mind
Marginal revenues achieved by opening a new store > marginal costs
Objectives of franchisor: maximising the sales of all stores
Franchisees interest: sales and profits from its stores

EVALUATING A SITE FOR STORE LACTION

1. SITE CHARACTERISTICS
. TRAFFIC FLOW AND ACCESSIBILITY
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Number of vehicles and pedestrians that pass by (traffic flow) affect sales
Greater traffic: large number of consumers are likely to stop and shop
Traffic count measures assess a sites attractiveness
Not always better; a question of balance
Calculated by site visits or commissioning a specialised firm
Accessibility affects sales (natural and artificial barriers)

. LOCATION CHARACTERISTICS
. PARKING: Standard thumb rule 5.5spaces : 1000 sq.ft. for shopping centres and
10-15 : 1000 sq.ft. for super markets.
. STORE VISIBILITY: Direct, unimpeded view of stores
. ADJACENT RETAILERS: Help in building traffic

. RESTRICTIONS AND COSTS

. Relate to legal and lease related issues

2. TRADE AREA CHARACTERISTICS

Factors affecting size of the trade areas
Measuring the trade area for a retail site
Sources of information for the trade areas
Competition in the trade area
3. ESTIMATING POTENTIAL SALES FOR A RETAIL STORE SITE

Huff Gravity model: larger the store more the pulling power, nearer the
stores more the pulling power
Regression Analysis: Factors affecting the existing store will have
same impact on new sites
Analog Method: Attempts are made to find a site with characteristics
similar to the retailers most successful stores