Module 10 Lesson 2

Factors Affecting Business Location

Convenience goods: Items bought out of habit and sold in numerous outlets; should be available close to consumer’s home or along the route traveled regularly. Examples: bread, milk, gasoline

Appropriate Locations for the Sale of Different Types

of Consumer Goods

•Shopping goods: Items purchased after comparing prices and features; should be located where customers can easily compare prices and features. Examples: cars, clothes, appliances

•Specialty goods: Items that consumers purchase infrequently and will make an extra effort to buy; location is not a major factor since customers will go out of their way to make these purchases. Care should be taken to locate near businesses of comparable quality and prices. Examples: specific brands, designer items, or exclusive merchandise

Appropriate Locations for the Sale of Different Types

of Consumer Goods

•Downtown/central shopping district

•Neighborhood shopping center

•Community shopping center

•Regional shopping center or mall

•Super-regional shopping center

•Industrial park

•Stand-alone/freestanding

•Home-based

Downtown Area

•Centrally located and easily accessible

•Offices and professional businesses

•Varying rental rates depending on the town/city

Neighborhood Shopping Center

•Close to residential areas to meet the convenience needs of the nearby neighborhood residents

• Usually includes a supermarket or drug store as an anchor tenant

•Suitable location for goods and services purchased frequently

Community Shopping Center•Serves residents of many neighborhoods

•Combines convenience goods and shopping goods

•One or two major stores plus 10 or more smaller stores

•Variety or junior department store as anchor tenants

•Rent affordable, but higher than neighborhood shopping center

Regional Shopping Center or Mall

•Combines three or four anchor stores with 40 or more other stores

•Located to serve several towns or cities in the region

•Less accessible for some customers due to distance customers due to distance

•Rent may be high

Super Regional Shopping Center• Extremely large - exceeds 750,000 square feet

• Many anchor stores and hundreds of smaller stores

•Designed to attract customers willing to travel great distances to shop

•Rent very high

•Not recommended for new business owners

•Example: Mall of America

Industrial Park

•Business properties developed on less expensive sections of land away from housing developments and downtown areas

•May be subsidized by communities in order to attract industrial businesses

Stand-Alone/Free Standing

•Separate from other businesses

•Often, but not always, located just outside shopping centers

•Dependent on drive-by traffic

•Must advertise

•Rent usually lower

Home-based

•Located in a private residence

•Suitable for businesses requiring little personal contact with customers or where work is picked up or dropped off

•No rent to pay

•Possible tax savings

Before Selecting a Site, Several Factors to Consider

• Local competition

• Area population

• Chosen land and/or building

• Features

• Proximity to target customers

• Proximity to other businesses

Local Competition

•Direct Competition: Businesses selling the same products or services.

•Indirect Competition: Businesses offering different products or services yet competing for the same consumer dollars.

•Complementary Competition: Businesses that sell products or services that can be used with other purchases.

Area Population

Cultural characteristics – various ethnic backgrounds

Vocation - what the people in that area do for a living

Age – important due to purchasing patterns

Income – how much are the people in the area willing or able to spend

Mobility - do they have their own transportation or are they dependant on public transportation

Under-served consumers - people whose needs aren’t being met

Zoning – what types of businesses or other structures can build in the area. See zoning laws.

Cost – highly popular area may cost more

Traffic patterns - congested, free-flowing, easy access, etc.

Chosen Land and/or Building

Other Features of Importance

• Adequate space• Safe, well-lighted area• Easy access and exit• Adequate parking• Proximity to target customers• Proximity to other businesses (helps ensure

customer traffic and may boost positive image)