unit 7 location strategies

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UNIT – 7 LOCATION STRATEGIES Shopping centers 1 The international council of shopping centers has defined eight basic types of shopping centers. Neighbourhood shopping center Community shopping center Regional shopping center Super Regional center Fashion/ specialty center Power center Theme center Outlet center

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4 Freestanding sites A freestanding location is a store located along a major traffic artery, with out any other competitive retailers around. The biggest advantage of such a location is that there is no competition around. Discount retailers in the west were the first ones to opt for such locations. However, in a place like Mumbai, where travel from one point in the city to the other takes up a fair amount of time, customers may not really be willing to travel large distances to visit just one store. The distance that the target consumer is willing to travel to buy a particular product is a key factor that the retailer needs to take into consideration, to ensure that the eventual location that he choose for the store is successful.

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5 Location and retail Strategy Location The selection of the store site can be a non-systematic process, which is based on ‘gut feeling’ or ‘environmental observation’ or an imitation of competitors. Steps involved in choosing a retail location Step 1: Market identification Step 2: Determining the market potential Step 3&4: Identify alternate sites and select the site

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6 Step 1: Market identification The first step in arriving at a decision a decision on retail location is to identify the markets attractive to a retailer. This is important as he needs to understand the market well, especially in a country like India, where every region has its own peculiarities and needs. Step 2: Determining the market potential In order to determine the market potential, the retailer needs to take into consideration various elements. The chief among them are: Demographic features of the population The characteristics of the households in the area Competition and compatibility Laws and regulations Trade area analysis

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7 Demographic features of the population Understanding the features of the population is integral to developing a retail marketing strategy. The retailer also needs to understand the level of literacy and the level of education in the population. The characteristics of the house holds in the area The retailer needs to have a clear understanding of the average household income and the distribution of this income in the area. This is very essential as the level of income largely determines the kind of retail facilities required.

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8 Competition and compatibility While determining the market potential, it is necessary to check the compatibility of the retailer store with the other retailer outlets in an area. It is necessary to try and evaluate their strengths and weaknesses, to know the square foot area of the various stores in the area and the kind of returns that they are able to obtain per employee per square foot. Laws and regulations Before opening a retail store in a region, it is essential to have a good understanding of the laws and regulations for opening a retail shop in the area. Various permissions which are needed, the hours for which the store can operate, the minimum wages to be offered to the persons working, the holidays required, etc. can affect the profitability of the store.

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9 Trade area analysis An integral part of determining the market potential is the analysis of the trade areas. A trade area is the geographic area that generates the majority of the customers for the stores. Retail store Primary trading area Secondary trading area Tertiary trading area Types of trade areas

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10 Step 3&4 : identify alternate sites and select the site After having determined the market potential and taking a decision on the store, a retailer has to select the site to locate the store. Though each retailer strives to find the 100% perfect location, there are various factors which affect his decision. The chief among them are: Traffic Accessibility of the market is also a key factor Amenities available To buy or to lease The product mix offered

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11 Traffic This refers to both pedestrian and vehicular traffic. The traffic that passes the site is an important determinant of the potential sales that can be generated from that store. Accessibility of the market is also a key factor Accessibility of the market is defined in terms of availability of public transport and road/local transport train connections to reach the market. Amenities available Depending on the type of product to be retailed, facilities like free and ample parking become important.

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12 To buy or to lease An important factor to be considered before taking the decision on the site the decision to buy the store or to lease it. if the store is to be leased, then the terms of lease will have to be studied carefully. The product mix offered The kind of product mix to be offered by the retailer by the retailer also affects his choice of location.

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13 Retail strategy Marketing philosophy A retail company must declare its marketing philosophy early on so as design and deal with all issues right from its inception. A retail strategy is a statement summarising the company’s decisions that identify the following The retailers target market The format that the retailer plans to use to satisfy the target markets needs The base upon which the retailer plans to build a sustainable competitive advantage

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14 The target market is the market segments towards which the retailer plans to focus his resources and retail mix The retailer concept emphasises that retailer must consider both their customers and their competitors when developing a retail strategy. Successfully retailers satisfy the needs of customers in their target market better than their competition does. The final element in retail strategy is the retailers approach to build a sustainable competitive advantage. a sustainable competitive advantage is an advantage over competition that can be maintained over an extended period of time.

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15 The five important opportunities for retailers to develop sustainable competitive advantages concern: Customer loyalty Ideal location Strong vendor relations Effective management information and distribution systems Low cost operations.

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16 Factors effecting the demand for a region or Trade area Size & characteristics of population Level of competition Access to transportation Availability of parking Attributes of nearby stores Property costs Length of agreement (if lease) Population trends Legal restrictions

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17 Factors effecting the attractiveness of a site Local Demographics Traffic Flow and Accessibility Retail Competition Site Characteristic Cost Factors

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18 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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19 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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20 Retail 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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21 Site Characteristic Number of parking spaces available Distance of parking areas Ease of access for delivery Visibility of site from street History of the site Compatibility of neighboring stores Size and shape of lot Condition of existing building Ease of entrance and exit for traffic Ease of access for handicapped customers Restrictions on sign usage Building safety code restrictions Type of zoning

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22 Cost Factors Terms of lease/rent agreement Basic rent payments Length of lease Local taxes Operations and maintenance cost Restrictive clauses in lease Membership in local merchants association required Voluntary regulations by local merchants