Unit 3Unit 3 Retail Store & LocationRetail Store & Location

Types of Retail Location, Importance of location decision, Types of Locations, Factors affecting location, Step involved in choosing a Retail Location,Selection of shopping center, Retail location theories, location assessment procedure

IntroductionIntroduction

Define Store: “A store is place , real or virtual , where the

shoppers comes to buy goods & services. The sales transaction occurs at this junction.”

• The location of retail store has for along time been considered the most important ‘P’ in retailing.

• Locating the retail store in the right place was considered to be adequate for success.

Location becomes a critical decision for a retailer for several reasons. As like;

Location is generally one of the most important factors customers consider while choosing a store.

A bad location may cause a retailer to fail even if its strategic mix is excellent.. On the other hand , a good location may help a retailer succeed even if its strategic mix is mediocre.

Store location is least flexible element of retailer’s strategic mix due to its fixed nature, the amount of investment, and the length of lease agreements

Importance of retail Location Decisions

• Change in location gives three potential problems– Loss of loyal customers and employers– New location may not have the same characteristics of old

location– Store fixtures cannot be moved to new location

• Location affects a store’s long run strategies• In short run, it affects specific elements of retail

mix

Factors affecting locationFactors affecting location

• Size and characteristics of market (population)• Level of competition• Access to transportation• Parking space availability• Attributes of nearby stores• Property costs• Length of agreement• Population trends• Legal restrictions• Other factors

• Various option are available to the retailer for choosing the location of store.

• The choice of the location of the store depends on the target audience and the kind of merchandise to be sold.

• A retailer has to choosing among alternate types of retail locations available . It may locate in an isolated place and pull the customer to the store on its own strength, such as a small grocery store or paan shop in a colony which attracts the customers staying close by

Types of Retail LocationTypes of Retail Location

Typically a store location may be:

1. Freestanding /Isolated store.

2. Part of Business District/Centers (unplanned Business Districts).

3. Part of a Shopping Center (Planned Shopping Centers)

1.1. Freestanding /Isolated storeFreestanding /Isolated store

• Where there are no other outlets in the vicinity of the store and therefore store depends on its own pulling power and promotion to attracts customers.

• A biggest advantages for freestanding stores is that there is no competition around.

• This type of location has several advantages including no competition, low rent, often better visibility from the road, easy parking and lower property .

• Neighborhood Stores; colony shops serves small locality.

• Highway Stores :Ebony store in Ludhiana .

How far the customer is willing to How far the customer is willing to travel?travel?

1km 2km 3km 4km 5km

Cosmetics – 4.05 km

Apparel 2.5Km

Jwellery – 1.5 km

Grocery – 4 km

Books – 2.74km

Music – 2.54 km

Source : KSA – Technopack consumer outlook, 2004

Business Associated Location: These are location where a group of retail outlets offering a variety of merchandise work together to attract customers to their retail area, but also compete against each other for the same customers.two types includes in ;

1. Part of Business District/Centers (unplanned Business Districts).

2. Part of a Shopping Center (Planned Shopping Centers)

2.2. Part of Business District/Centers Part of Business District/Centers (unplanned Business Districts).(unplanned Business Districts).

• A retail store can also be located as a part of a business district. Or we can refer this as unplanned business centers

• A business district is place of commerce in a city which developed historically as the center of trade and commerce in the city or town.

• A business districts can be a central, secondary or a Neighborhood business district.

• A Central business District CBD is the main center of commerce and trade in the city. (high land rates , intense development)

• A CBD is the hub of retailing activity in a city.

• CBD served different sections of population for Examples of Cannaught place in Delhi, Colaba in Mumbai, Commercial Street and in Bangalore are up market CBD’s.

• CBD’s serving the upper and upper middle class customers across these cities like, chandani chowk in Delhi, Kalbadevi-Bhuleswar in Mumbai, Chickpet in Bangalore.

• Secondary Business District are composed of unplanned cluster of store often located on a major intersection of city they a customers from a large part of the city

3.3. Part of a Shopping Center (Planned Part of a Shopping Center (Planned Shopping Centers)Shopping Centers)

• A shopping center has been defined as “ a group of retail and other commercial establishments that is planned , developed, owned and managed as a single property”

• The basic configuration of a shopping centre is a “Mall ” or Strip centre.

• A mall is typically enclosed and climate controlled. A walkway is provided in front of the stores.

• A strip centre is a row of stores with parking provided in the front of the stores.

• In India we can planned shopping centre can categorize in two category

Regional shopping centers or Mall: Regional shopping centers or mall are the largest planned shopping centers..

• Often they are anchored by two or more major department stores have enclosed mall serve a large trading area and have high rents. (ansal plaza,spencers plaza crossroads, DLF city in Gurgaon)

• Neighborhood/community/shopping centers: Neighborhood /community centers usually have a balanced mix of stores including a few grocery stores , a chemist, a verity store and a few other stores selling convenience goods to the residents of the neighborhood.

• Gurgaon is set to get the mother of all malls — a humungous 40-lakh sq ft sprawling property that is being touted by its developer DLF Universal as the biggest mall of the world.

The average size of malls here is 2.5 lakh sq ft; this will be 16 times bigger.

The mall —- christened Mall of India -— will be spread over 32 acres and will have parking space for 10,000 cars.

These ambitious plans have been drawn up at a time when footfalls are down at Gurgaon malls and rental rates have virtually halved.

But DLF is unfazed. It says Gurgaon with so many malls will soon develop as a mega shopping district in the NCR region.

What's the basis of the claim that this will be the biggest in the world?

DLF spokerperson Kajal Aijaz said the biggest now is Mall of America in Minneapolis which has a covered area of 38 lakh sq ft, followed by a mall in Shanghai which is 30 lakh sq ft.

Mall of India would be bigger than these, she said.

The DLF mall — located on the Delhi-Jaipur highway — has been designed by Jerde Partnership which also designed the mega malls in Minneapolis and Shanghai.

The costs are not known but property consultants said it could be in the region of Rs 1,500 crore.

India to have mother of all malls

Selection of Shopping centre / marketSelection of Shopping centre / market• Shopping centers are distinctly different from the other

two major locations -- that is, downtown and local business strips. The shopping center building is pre-planned as a merchandising unit for interplay among tenants. Its site is deliberately selected by the developer for easy access to pull customers from a trade area. It has on-site parking as a common feature of the layout. The amount of parking space is directly related to the retail area.

• Customers like the shopping center's convenience. They drive in, park, and walk to their destination in relative safety and speed. Some shopping centers also provide weather protection and most provide an atmosphere created for shopping comfort. For the customer, the shopping center has great appeal.

What Are your ChancesWhat Are your Chances

• Developers and owners of shopping centers look for successful

retailers.• Then, the developer selects other types of stores

that will complement each other.• To finance a center, the developer needs major

leases from companies with strong credit ratings.• Your problem is to convince the developer that

the new store has a reasonable chance of success and will help the "tenant mix."

What a shopping centre can offer ?What a shopping centre can offer ?

• Neighbor hood shopping centre – 3 to 10acres, minimum trading population – 2500 to 40000

• Community shopping centre -10 -30 acres, minimum trading population 40,000 to 1,50,000

• Regional shopping centre – 30 to 50 acres, minimum trading population 1,50,000 and more

Selecting a shopping centreSelecting a shopping centre

• Trade area and its growth• General income level of the trade area• No of households• Demographics of trade area• Market analysis• Location of store in the centre• Space• Rent & lease• Fittings• Other services by developers

Types of shopping centersTypes of shopping centers

• Neighborhood shopping centers• Community shopping centers• Regional shopping centers

– Enclosed malls

• Specialty theme shopping centers

Regional Shopping CentreRegional Shopping Centre

Secondary business centersSecondary business centers

Central Business District

Secondary Business District

Neighborhood shopping centre

Isolated Location

Factors to be considered in selecting a Factors to be considered in selecting a shopping centershopping center

• Traffic Count : the qualitative information gathered about the passing traffic should include counting the individuals who seem to possess the characteristics appropriate to the desired clientele, judging their reasons for using that route, and calculating their ability to buy.

• Pedestrian Traffic Count : In making a pedestrian count you must decide: who is to be counted; where the count should take place; and when the count should be made. In considering who is to be counted, determine what types of people should be included.

• Estimate Of Store Sales :Data from a pedestrian traffic survey can give you information on whether or not the site would generate a profitable volume for your store.

• Automobile Traffic Count ;A growing number of retail firms depend on drive-in traffic for their sales. Both the quantity and quality of automotive traffic can be analyzed in the same way as pedestrian traffic.

Free standing / isolated locationFree standing / isolated location

• Advantages– No competition– Low costs– Flexibility

• No group rules• Larger space• Location by choice

– Better road and visibility– Customization – easy parking

• Disadvantages– Initial Difficulty in attracting costumers– Most people like variety in shopping– Travel time– Advertising costs – Operating cost are not shared– Built than renting– Unplanned and planned business

centers are preferred by costumers

Unplanned Business DistrictsUnplanned Business Districts

• Advantages– Excellent goods/service assortment– Variety of store types– Wide range of prices– Variety of customer services– High level of pedestrian traffic– Nearness to commercial or social facilities

• Disadvantages– Inadequate parking– Traffic congestion– Travel time for sub urban customers– Aging retail facilities– Decline condition of central cities– High rent and taxes– Movement of popular stores to suburbs– Discontinuity of offering

Planned Business districtsPlanned Business districts

• Advantages– Excellent goods/service assortment for long term plan– strong sub urban population– One stop shopping preferred by customers– Co-operative planning and sharing of common costs– Creation of unified, distinctive shopping center image– Maximization of pedestrian traffic– Access to high ways and parking spaces– More appealing than city shopping centers– Reasonable rent ( excluding enclosed malls)– Lower theft rates– Popularity of malls– Growth of new types of malls

• Disadvantages– Reduced operating flexibility– Higher rents– Restriction on goods and services sold by

stores– Competitive environment within malls– Membership in associations – which may of

little use– Too many malls in an area– Domination by large anchor stores

Step involved in choosing a Retail Step involved in choosing a Retail Location / site selectionLocation / site selection

• In order to arrive at the decision on where to locate the retail store a retailer needs to first on the region that he wants to locate the store.

• After identifying the region the following steps Have to be followed .

1. Identifying the market in which to locate the store.

2. Evaluate the demand and supply within that market. i.e. determine the market potential.

3. Identify the most attractive sites

4. Select the best site available

1. Market Identification: • The first step in arriving at a decision on retail

location is to identify the market attractiveness to a retailer.

• This is important that retail needs to understand the market well.

2. Determining the market Potential::• The retailer need to take into consideration various

elements as shown in format. (features of population)• Demographic features of the population• The characteristics of the household in the area

(average household income)• Competition and compatibility (Need to know

compatibility & competition in market)• Laws & regulations:( good understanding of the laws

Determining the market Potential

Demographics of population & area

Competition

Laws & Regulation

Trade area analysis

• Trade area analysis:• A trade area is the geographic area that generates

the majority of the customers for the store.

• Primary trade area: primary trading covers between 50-80% of the store’s customers.

• Secondary Trading Area: this area contains the additional 15- to 25% of the store’s customers.

• Tertiary trading area covers the balance customers

• These trading areas are dependent on distance and do not always have to be concentric in nature

Types of Trades areas.Types of Trades areas.

2 miles 2 miles

2 m

iles

2 m

iles

2 m

iles

2 m

iles

1 mile1 mile 1 mile

Store location A

Proposed store location

Trade Area Analysis

3 & 4 Identify Alternate sites and select the site:

After taking decision on the location and market potential the retailer has to select the site to locate the store based on these

• Traffic• Accessibility of the market is also a key factor• The total number of stores and the type of store

that exist in the area• Amenities • To buy or to lease • The product mix to be offered by the retailer