Chapter 9: Location

Q. Comment on this statement: “A good location may let a retailer succeed even if its strategy mix is mediocre”. Is it always true? Give examples.

Answer: when we look from the perspective of marketing mix 4 p’s, one of the most

important aspect of strategy is place which is location to a retailer. Location is a place where

we keep our outlets and sell our product to the final customers.

For choosing a perfect location for a retailer their might arise different difficulties, such as

looking over the population of those area and traits, competition, transportation access,

parking availabilities, the nature of the nearby store, property cost, agreement and legal

restrictions.

To flourish a retailer, choosing a perfect location plays a vital role, if the decision of location

is perfect then the success of retail is high. For examples, if we keep a food lounge near a

super market then the chances of success will be high because all of the customer who goes

to that super market are tired after their shopping and want some food or drinks. Another

example might be keeping high brand product in high profile areas, because at this example

the area define the type of good that should be kept.

When planning to start retail or bringing new outlets for a retailer, the location is important

decision because all our effort/strategy can be seen when the location for that outlet or store is

suitable. Location defines our type of product/service. Location can conclude our profit ratio;

location can say what will be the number of customer coming to our store. We usually find

branded clothes and accessories like apple, addidas, Kfc, etc in high profile areas because at

there their product can have value brand and this type of product’s location is in high profile

areas.

So a perfect location is necessary if the strategy is mediocre.

Q. Explain Reilly’s law.

Answer: The purpose of Reilly's law of retail gravitation is to find a point of indifference

between two locations, so the trading area of each can be determined. This point is assumed

to be a function of the distance between two locations pondered by their respective size

(population often used for this purpose). A location can thus be more attractive than the other.

For instance, on the above figure two locations are 75 km apart. According to the hotelling

principle, the point of indifference should be halfway in between (35 km). However, since

location A has a larger population, it is assumed that it will draw more customers. Under such

circumstances, the point of indifference is 45.9 km away from location A.

Q. What is trading area overlap? Are there any advantages to a chain retailer having

some overlap among its various stores? Why or Why not?

Trading areas means a geographic area containing the consumer of a particular firm or group

of firms for specific goods or service. And trading area overlap means where the same

customers are served by both branches.

In having the overlap of its stores or outlets, it has advantages,

I. Its regular consumers will not go to other stores that are nearby the stores.

II. The total profit of the company will increase.

III. Increase in the overall customers in both outlets.

IV. According to book, total revised sales of existing store + sales of new store – total

previous sales of existing store, from this formula the profit will increase in its

overall outlets.

V. Increase in market share of the goods or service.

Example of trade overlap:

A retail store of Nepal that is, bhat bhateni of naxal of Kathmandu and its trading

area was up to Chakrapath or above it but the retail open its oulet in Chakrapath.

Now Bhat Bhateni has all of its customers in the area and the profit too.

Q. If a retailer area is acknowledged to be “saturated” what does this signify for

existing retailers? For prospective retailers considering this area?

Answer: saturated trading area means the proper amount of store to satisfy the need of its

population for a specific good or service and to enable retailers to prosper.

To the above question, if the existing retail area have saturated area then it’s doing profitable

business of the flow of people is good and it can satisfy the people needs and wants in the

particulars goods and service. For example, a book supplying area that has saturating trading

area then it can supply various books to its customers according to their needs.

For the new comers for the existing saturated area the retailer should take into account that if

I come to this place will my business do well or the profit will be enough to handle my

business. Because an addition of extra store in the place will distribute the profit and some of

the store has to cut it’s and gives it to the entrance one. Other thing that might happen is that

many stores might go into loss and have to leave the business. Or the new one which is going

to start a business in this might not be in stable, they might get into loss.

So before thinking of starting a business in saturated area you will have to take into account

that will I be in profit in long run or not.