retail location.ppt

7/29/2019 retail location.ppt

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Marketing Selection and Retail Location

Analysis

Copyright 2005 by South-Western, a division of Thomson Learning. All rights reserved.


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Target Market

A well-defined target market:the moderate-income, career-

oriented woman who is fashionconscious.

Loriel, Santro, Wills Lifestyle


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Importance of location decision:

Requires complex decision making

Costs lots of money

Little flexibility once a location has been

chosen

Attributes of location have a strong impact

on the retailers strategy


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Type of Retail Stores

The Isolated Store or a freestanding location

Part of a business district

Part of a shopping center'


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Location can differentiate the store andprovide a competitive advantage

Location affects marketing strategy

Determines customer patronage

Impacts store image and personality

Location affects the financial strategyDetermines cost

Affects store volume


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Checklist for Site Evaluations

Local Demographics

Population and/or household base

Population growth potential

Lifestyles of consumers Income potential

Age makeup

Population of nearby special markets,

that is, daytime workers, students,

and tourists, if applicable

Occupation mix


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Traffic Flow and Accessibility

Number and type of vehicles passing location

Access of vehicles to location Number and type of pedestrians passing

location

Availability of mass transit, if applicable

Accessibility of major highway artery

Quality of access streets Level of street congestion

Presence of physical barriers that affect

trade area shape


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Location of Store-Based Retailers

Store-Based Retailers operate from afixed store location that requirescustomers to travel to the store toview and select merchandise orservice.

Nonstore-Based Retailers intercept

customers at home, at work, or at aplace other than a store where theymight be susceptible to purchasing.


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Central Business Districts (CBD) usually

consists of an unplanned shopping areaaround the geographic point at which allpublic transportation systems converge; itis usually in the center of the city and oftenwhere the city originated historically.

Secondary Business District (SBD) is ashopping area that is smaller than the CBD

and that revolves around at least onedepartment or variety store at a majorstreet intersection.


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Neighborhood Business District (NBD) is a shoppingarea that evolves to satisfy the convenience-orientedshopping needs of a neighborhood, generally contains

several small stores (with the major retailer being asupermarket or a variety store), and its located on amajor artery of a residential area.

Shopping Center (or mall) is a centrally owned ormanaged shopping district that is planned, has

balanced tenancy (the stores complement each otherin merchandise offerings), and is surrounded byparking facilities.

LO 2


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Anchor Stores are the stores in a shopping centerthat are the most the most dominant and areexpected to draw customers to the shopping

center.Free-Standing Retailer generally locates alongmajor traffic arteries and does not have anyadjacent retailers to share traffic with.


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Shopping Center Advantages over a CBD

Heavy traffic resulting from thewide range of product offerings.

Cooperative planning and sharing

of common resources.Access to highways and availabilityof parking.

Lower crime rate.

Clean, neat environment.


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Shopping Center Disadvantages

Inflexible store hours (open during mall hours only).

High rents.

Restrictions as to what merchandise the retailer maysell.

Inflexible operations and required membership in thecenters merchant organization.

Possibility of too much competition and the fact that

much of the traffic is not interested in a perticularproduct offering.

Dominance of the smaller stores by the anchortenants.

LO 2


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Advantages of Freestanding Retailing

Lack of direct competition.

Generally lower rents.

Freedom in operations and hours. Facilities that can be adapted to individual needs.

Inexpensive parking.

LO 2


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Limitations of Freestanding Retailing

Lack of drawing power from complementary stores.

Difficulties in attracting customers for the initial visit.

Higher advertising and promotional costs. Operating costs that cannot be shared with others.

Stores that may have to be built rather than rented.

Zoning laws that may restrict some activities.


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Nonstore-based Retail Formats

Direct Selling

Street Peddling

Interactive TV Mail-Order

Internet

Automated Merchandising Systems

LO 2


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Selecting a Retail Location

LO 4: Exhibit 7.5Identify the most attractive

markets in which to operate

Select the best site(s)

available

Identify the most attractive

sites that are available

within each market


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Market Identification

Trading Area

Is the geographic area from which a retailer, or groupof retailers, or community draws its customers.

LO 4


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Retail Location Theories

Retail Gravity Theory

Saturation Theory

Buying Power Index

LO 4


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Retail Gravity Theory

Suggests that there are underlying consistencies inshopping behavior that yield to mathematical analysis

and prediction based on the notion or concept ofgravity.

LO 4


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Reillys Law of Retail Gravitation based on Newtoniangravitational principles, explains how large urbanizedareas attract customers from smaller rural

communities.

LO 4

Dab

d

1 +

Pb

Pa

=

where Dabis the breaking point from city A, measured in miles along theroad to city B;

dis the distance between city A and city B along the major highway;

Pais the population of city A; and

Pbis the population of city B.


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Point of Indifference

Is the extremity of a citys trading area wherehouseholds would be indifferent between shopping in

that city or an alternative city in a differentgeographical direction.

LO 4


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Trading Area for City A

LO 4: Exhibit 7.6

City B

(Population 14,000)

3.5 miles

City A

(Population 240,000)

City C

(Population 21,000)

14.5miles

1.3 miles

X

YZ 3.7 miles

3.2 miles

City D

(Population 30,000)


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Saturation Theory

Examines how the demand for goods and services of apotential trading area is being served by current retail

establishments in comparison with other potentialmarkets.

LO 4


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Retail Store Saturation is a condition where there isjust enough store facilities for a given type of store toefficiently and satisfactorily serve the population and

yield a fair profit to the owners. Understored is a condition in a community where thenumber of stores in relation to households is relativelylow so that engaging in retailing is an attractiveeconomic endeavor.

Overstored is a condition in a community where thenumber of stores in relation to households is so largethat engaging in retailing is usually unprofitable ormarginally profitable.

LO 4


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Index of Retail Saturation (IRS) is the ratio of demandfor a product (households in the geographic areamultiplied by annual retail expenditures for a particularline of trade per household) divided by availablesupply (the square footage of retail facilities of aparticular line of trade in a geographic area).

LO 4

IRS = (H X RE)/RF

Where IRS is the index of retail saturation for and area;H is the number of households in the area;RE is the annual retail expenditures for a particular line of tradeper household in the area;RF is the square footage of retail facilities of a particular line oftrade in the area (including square footage of the proposedstore).


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Buying Power Index (BPI) is an indicator of a marketsoverall retail potential and is composed of theweighted measures of effective buying income(personal income, including all nontax payments suchas social security, minus all taxes), retail sales, andpopulation size.

LO 4

BPI = 0.5(the areas percentage of U.S. effective buying income)

+ 0.3(the areas percentage of U.S. retail sales)+ 0.2(the areas percentage of U.S. population)


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Market Demand Potential

Population Characteristics

Buyer Behavior Characteristics

Household Income Household Age Profile

Household Composition

Community Life Cycle

Population Density

Mobility

LO 4


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Site Analysis

Site Analysis

Is the evaluation of the density of demand and supplywithin each market with the goal of identifying the best

retail site(s).

Size of Trading Areas

Description of Trading Area

Demand DensitySupply Density

Site Availability

LO 5


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Site Analysis

Size of Trading Areas

Description of Trading Area

Demand Density Supply Density

Site Availability

LO 5


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LO 5: Exhibit 7.12Local Demographics

Population and/or household base

Population growth potential

Lifestyles of consumers

Income potential

Age makeup

Population of nearby special markets, that is,daytime workers, students, and tourists, ifapplicable

Occupation mix


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LO 5: Exhibit 7.12Traffic Flow and Accessibility

Number and type of vehicles passing location

Access of vehicles to location

Number and type of pedestrians passing location

Availability of mass transit, if applicable

Accessibility of major highway artery

Quality of access streetsLevel of street congestion

Presence of physical barriers that affect trade areashape


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LO 5: Exhibit 7.12Retail Competition

Number and types of stores in area

Analysis of key players in general area

Competitiveness of other merchants

Number and location of direct competitors in area

Possibility of joint promotions with local merchants


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LO 5: Exhibit 7.12Site CharacteristicNumber of parking spaces availableDistance of parking areasEase of access for deliveryVisibility of site from streetHistory of the siteCompatibility of neighboring storesSize and shape of lotCondition of existing buildingEase of entrance and exit for trafficEase of access for handicapped customersRestrictions on sign usageBuilding safety code restrictionsType of zoning


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LO 5: Exhibit 7.12Cost Factors

Terms of lease/rent agreement

Basic rent payments

Length of lease

Local taxes

Operations and maintenance cost

Restrictive clauses in leaseMembership in local merchants association required

Voluntary regulations by local merchants


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Site Selection

Nature of Site

Terms of Purchase or Lease

Expected Profitability

LO 6


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Nature of Site

Traffic Characteristics

Types of Neighbors

LO 6


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Nature of Site

Store Compatibility

Exists when two similar retail businesses locate nextto or nearby each other and they realize a sales

volume greater than what they would have achieved ifthey were located apart from each other.

LO 6


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Terms of Purchase or Lease

Length of lease

Exclusivity clause

Guaranteed traffic rate Anchor clause

LO 6


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Expected Profitability

Net profit margin

Asset turnover

Return on assets

LO 6


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If Retailers Could Select Their Neighbors

LO 6

Fast-food restaurant Gas service station

Health food store Fitness center, medical center

Recycled merchandise Supercenter

Home improvement store Supercenter

Hardware store Wholesale club, supermarket

Zales Jewelry Sears, JCPenney, Mervyns

Record Giant Wal-Mart; Kmart

Payless Shoes Supercenters, KinderCareLongs Drug Stores TJMaxx, Kmart

Cato Fashion Kmart; Wal-Mart

Bennetton Nordstron; Bloomingdales

Nursery and Crafts Toys R Us; Circuit City

Retailer Next to


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Retail Formats for Accessing a Target Market

LO 2: Exhibit 7.2Retail Formats

Store-Based Nonstore-Based

Freestanding

BusinessDistrict

Nontraditional

ShoppingCenters/Malls

InteractiveTV

Mail-Order

Internet

AutomatedMerchandising

Systems

DirectSelling

StreetPeddling

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