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Retail Locations:
Chapter 7
Section 3:
Other Locations,
Location and Retail
Strategy, and Legal
Considerations
Matthew Sullivan
Questions:
* What types of locations are available to
retailers?
* What are the relative advantages of each
location type?
* Why are some locations particularly well
suited to specific retail strategies?
* Which types of locations are growing in
popularity with retailers?
The Importance of Store Location
- Store location is most often the
first consideration in a store choice
- Having a good location increases
chances of developing a strong
sustainable competitive advantage
- Location decisions can be risky and
should be well-thought out
Process of Choosing Particular Locations
- Size of the trade area
- Occupancy cost of the location
- Pedestrian and vehicle customer traffic location
- Restrictions on operations by property managers
- Convenience of location for customers
Trade area: the geographic area that encompasses most of
the customers who would patronize a specific retail site
Section 1
- Types of locations
- Unplanned retail locations
Milton Law
Types of Retail Locations
- Freestanding Sites such as
outparcels and merchandise
kiosks
- City or Town Locations such as
central business districts,
main streets, and inner city
locations
Advantages and Disadvantages
of Freestanding Locations
- Convenience for customers
- Limited trade area when
not around nearby retailers
- High vehicular traffic and
visibility
- Higher Occupancy costs that
strip centers
- Modest occupancy costs
- Separation from competition
- Usually located where there
is little pedestrian traffic
Freestanding Sites
Retail locations for an individual, isolated store unconnected to other retailers
Outparcels
Merchandise Kiosks
Merchandise kiosks
Small selling spaces, typically located in the walkways of enclosed
malls, airports, train stations, or office building lobbies.
Market Analysis Model
City or Town Locations
- Lower occupancy costs
- Higher pedestrian traffic
- Traffic is limited due to
congestion
- Parking problems reduce
consumer convenience
Central Business Districts
(CBD)
- Draws people during
business hours
- High security required
- Heavy public transportation
- Parking is poor
- Pedestrian traffic
- Evenings and weekends are
slow
- Residential area as well
- Shoplifting
Main Streets vs. CBD’s
- Occupancy costs are generally lower than CBD’s
- Fewer people are employed
- Smaller selection due to fewer stores
- Range of entertainment is usually smaller
- City planning sometimes restrict store operations
Inner City
High density urban areas with higher unemployment and lower median
incomes than surrounding areas
- Retailers here achieve higher sales volume and
higher margins, thus producing higher profits
- Redevelopments in inner cities can cause
increased traffic and parking difficulties,
causing them to be controversial
Section 2
- Shopping centers
Shaina Lacher
- Convenient locations
- Easy parking
- Low occupancy costs
- Limited trade area
- Lack of entertainment
- No protection from
weather
Power Centers
Consist primarily of collections of big box retail stores
- Target
- Costco
- Lowe’s
- Sports Authority
- Toys “R” Us
Shopping Malls
Less than 1 million square feet
More than 1 million square feet
Shopping Malls
- Wide variety of stores
- Wide assortment of
merchandise
- Shopping and entertainment
- No inclement weather
- Uniform hours of operation
- Attracts many shoppers
- Occupancy costs are
generally higher
- Mall control over business
operations
- Competition can be intense
Enhancing the Mall Experience
- Common areas
- Family lounges
- Great food
- Playgrounds
- Entertainment
Mall renovations and redevelopment
Lifestyle Centers
Shopping centers with an open-air configuration of specialty stores, entertainment, and restaurants
with design ambience and amenities
- Ease of parking
- Relaxed open-air
environment
- Pedestrian traffic tends to
be higher
- Occupancy costs and
operating restrictions are
less
- Less retail space
- Smaller trade areas
- Attract fewer customers
Fashion/Specialty Centers
- Tiffany
- Gucci
- Max Mara
- Giorgio Armani
- Tommy Bahama’s
Outlet Centers
- Strong entertainment component
- Becoming more popular outside the
United States
- Tourism is important for outlet
centers
Theme/Festival centers
- Located in places of historic
interests or for tourists
- Anchored by restaurants
and entertainment facilities
- Generally targeted at
tourists, they may also
attract local customers
- A common element of these
centers is entertainment,
although some rely solely on
the shopping experience
Omnicenters
Omnicenters are becoming
more popular in the U.S.
partly from the desire of
tenants for lower commonarea maintenance charges
and the growing tendency
of consumers to crossshop.
Mixed Use Developments
- Offer an all-inclusive
environment so that
consumers can work, live,
and play in a proximal area
- Combine several different
uses into one complex,
including shopping centers,
office towers, hotels,
residential complexes, civic
centers, and convention
centers
Section 3
- Other Locations
- Location and Retail
Strategy
- Legal
Considerations
Matthew Sullivan
Other Location Opportunities
- Airports
- Temporary or pop-up stores
- Resorts
- Store within a store
Airports
- High pedestrian traffic
- Sales per square foot are
higher than mall stores
- Rent is higher
- Hours are longer
- Inconvenient location for
workers means higher wages
Temporary Locations (pop-up stores)
- Good for businesses trying
to create a little hype
- Good introduction for new
stores or products
- Provide visibility for a
business
- Provide additional sales
during holidays and special
events
Resorts
- Captive audiences
- Wealthy customers
- People with time on their
hands
Store within a store
- This concept benefits both
companies to attract more
customers
- Helps fill holes in product
offerings
Farmville
Businesses take advantage
of locations where
customers are, like the
internet and online games,
and provide them with
alternative ways to spend
money
Location and Retail Strategy
- Shopping behavior of
consumers
- Size of Target Market
- Uniqueness of Retail
Offering
Shopping Situations
- Convenience shopping
- Comparison shopping
- Specialty shopping
Convenience Shopping
- Wants to exert little effort to
acquire product or service
- Wants convenient location
- Less concerned with price
- No hassles
Comparison Shopping
- General idea about product
or service
- No strong brand preference
- No strong retailer
preference
Offer the benefits of comparison shopping
Consumers can see almost all brands and models in one store
Destination stores
7-40
The McGraw-Hill Companies, Inc./Andrew Resek, photographer
Specialty Shopping
- Knows what they want
- Accepts no substitute
- Strong loyalty to product or
brand
Size of Target Market
For most retailers, the size of the target market and the location of the highest density of their
target market will help determine where their business should be located.
- Estimate max # of customers eligible
-
-
to purchase product or service
Estimate percentage of potential
customers
Estimate # times customers could
purchase the product or service in a
year
Estimate highest density of target
market
Uniqueness of Retail Offering
- Location doesn’t matter as
much because the product
is that important or unique
Legal Considerations
- Above ground risks
- Sign restrictions
- Hazardous materials
- Licensing requirements
Environmental Issues
Environmental Issues
“Above-ground” risks - such as asbestos-containing
materials or lead pipes used in construction.
Hazardous materials - e.g. dry cleaning chemicals,
motor oil, that have been stored in the ground.
Retailers’ Protection
Stipulate in the lease that the lessor is responsible
for removal and disposal of this material if it’s
found.
Retailer can buy insurance that specifically
protects it from these risks.
Zoning and Building Codes
Other Legal Issues
Zoning and Building Codes
Zoning determines how a particular site can be
used.
Building codes determine the type of building,
signs, size, type of parking lot, etc. that can be used
Signs
Restrictions on the use of signs can also impact a
particular site’s desirability
Licensing Requirements
Some areas may restrict or require a license for
alcoholic beverages
7-48