store location.ppt

Store location Trading area analysis Site analysis

Objectives

Importance of store location for a retailer and to outline the process of choosing a store location

Concept of a trading-area and its related components

Types of locations available to a retailer: isolated stores, unplanned business districts, and planned shopping centers

Decisions necessary in choosing a general retail location

Location, Location, Location

Little flexibility once a site is chosen

Involves a sizeable investment

Store fixtures at an old site cannot be

transferred to a new site

Requires extensive decision making….

Location, Location, Location

Criteria to consider include:Criteria to consider include: population size and traits

competition

transportation access

parking availability

nature of nearby stores

property costs

length of agreement

legal restrictions

Choosing a Store Location

Step 1: Evaluate alternate geographic (trading) areas in terms of residents and existing retailers

Step 2: Determine whether to locate as an isolated store or in a planned shopping center

Step 3: Select the location

Step 4: Analyze alternate sites contained in the specific retail location type

Trading-Area Analysis

A trading-area is a geographic area

containing the customers of a particular

firm or group of firms for specific goods

or services

Benefits of Trading-Area Analysis

Discovery of consumer demographics and socioeconomic

characteristics

Opportunity to determine focus of promotional activities

Opportunity to view media coverage patterns

Assessment of effects of trading area overlap

Ascertain whether chain’s competitors will open nearby

Discovery of ideal number of outlets, geographic weaknesses

Review of other issues (e.g. labour availability, supplier

location, transportation)

Trading-Areas of Current and Proposed Outlets

Net increase in sales = Revised sales of existing stores + Sales of new store – Previous sales of existing store

GIS Software in T-A analysis

Geographic Information Systems

Combine digitized mapping with key location-specific

data to graphically depict trading-area characteristics such

as:

population demographics

data on customer purchases

listings of current, proposed, and competitor locations

GIS Software in T-A analysis

Till GIS:

Retailers placed different colour pins on paper maps to show

current and proposed locales, competitors’ sites and had to

collect and analyse data

With GIS:

Firms can access computer-generated maps and quickly

research the attractiveness of different locations

GIS Software in ActionThe analysis examines the relationship between total purchase behaviour and the distance each customer travels to patronize the store

GIS Software in ActionImpact on existing customers if the location of a store/site is changed

Red and yellow polygons represent a 9-minute drive around each location – 80% of customer base

GIS Software in ActionThe correlation between purchase behavior of customers and lifestyle segment of the neighborhood in which they live

GIS Software in ActionNo. of customers and their spending for one retail site – customer database is “geocoded”

Technology in Retailing

ShopperTrak (www.shoppertrak.com) has 70,000 shopper traffic-

counting devices that have been installed in 70 countries around

the world.

ShopperTrak devices count shopper visits and can refine the

counts to exclude children and retail employees from its overall

count. Their traffic counts are between 96 percent and 98

percent accurate.

ShopperTrak’s new FlashTraffic system conveys traffic data on

an hourly basis to retailers’ point-of-sale systems to enable retail

managers to adjust and optimize store staffing levels.

ExampleGFK GeoMarketing offers GIS software services that assist

international retailers wanting to expand into such countries as China.

The firm recently did a location analysis in Peking to determine

customer buying power for a German clothing firm seeking to do

business in China: “Using the GIS software RegioGraph, population

data were prepared, analysed and differentiated according to region.

With the help of these data, consumer potential was determined.

This served as a foundation for the company to gain insight into the

proposed location’s full market potential. Further calculations on

location-related factors were carried out, including site location

characteristics, accessibility, nearby competition, and the nature and

structure of existing businesses in the immediate vicinity. The results

yielded detailed information regarding the most suitable locations,

as well as regions to be avoided.”

The Segments of a Trading-Area

The Size and Shape of Trading-Areas Primary trading-area (50-80% of a store’s customers)

It is the area closest to the store and possesses the highest density of

customers to population and the highest per capita sales. There

is little overlap with other trading areas.

Secondary trading-area (15-25% of a store’s customers)

It is located outside the primary area, and customers are more widely

dispersed.

Fringe trading-area (all remaining customers)

includes all the remaining customers, and they are the most widely

dispersed. The fringe trading area typically includes some out-

shoppers who travel greater distances to patronize certain

stores.

Delineating Trading-Area SegmentsThe GIS map clearly depicts primary, secondary and fringe trading areas of a store

Size and shape of Trading Areas

Trading areas do not usually follow such circular patterns. They

adjust to the physical environment.

The size and shape of a trading area are influenced by store

type, store size, the location of competitors, housing patterns,

travel time and traffic barriers and media availability.

Destination Versus Parasite Stores

Destination storesDestination stores

Have a better assortment, promotion, and image

Generate trading-areas much larger than competitors

Parasite storesParasite stores

Do not create their own traffic and have no real trading-area of their own

These stores depend on people who are drawn to area for other reasons

Two stores can have different trading areas even if they are in the same shopping district or shopping center

Trading Areas and Store Types

Largest

TRADINGTRADINGAREASAREAS

Smallest

Supermarkets

Department stores

Apparel stores

Convenience stores

As a store or center gets larger, its trading area usually increases, because store or center size generally reflects the assortment of goods and services.

Trading-Area of a New Store

A trading area with less-defined shopping and traffic patterns

must be evaluated in terms of opportunities rather than current

patronage and traffic patterns. Tools are:

Trend analysis - by examining government and other data for

predictions about population, location, auto registrations, new

housing, public transport, etc.

Consumer surveys – information is gathered about the time and

distance people would be willing to travel to various possible retail

locations, the factors attracting people to a new store, the

addresses of those most apt to visit a new store, etc.

Computerized trading-area analysis models

Computerized Trading-Area Analysis Models

Analog ModelPotential sales for a new store are estimated on the basis of revenues for similar stores in existing areas, competition at a prospective location, new store’sexpected market share at that location, size and density of the location’s primary trading area.

Regression ModelSeries of mathematical equations showing the association betweenpotential store sales and several independent variables at each location, such as population size, average income, number of households, nearby competitors, transportation barriers and traffic patterns.

Gravity ModelPeople are drawn to stores that are closer and more attractive than competitors’ stores. The distance between consumers and competitors, the distance between consumers and a given site, and store image are included in this model.

Reilly’s Law of retail gravitation

Reilly’s lawReilly’s law establishes a point of indifference between two cities or

communities so that the trading-area of each can be determined

Point of indifference is the geographic breaking point between two cities

(communities) at which consumers are indifferent to shopping at either.

Assumptions:

1. Two competing areas are equally accessible from a major road

2. Retailers in the two areas are equally effective.

3. Other factors (such as population dispersion) are held constant or

ignored.

Computation

Limitations of Reilly’s Law

Distance is only measured by major thoroughfares; some people will travel shorter distances along cross streets

Distance traveled does not reflect travel time. Many people are more concerned with time traveled than with distance

Chief Factors to Consider in Evaluating Retail Trading-Areas

Population Size and Characteristics

Availability of Labor

Closeness to Sources of Supply

Economic Base

Competitive Situation

Availability of Store Locations

Regulations


Total size and density Age distribution Average educational level Percentage of residents owning homes

Total disposable income

Occupation distribution

Trends

Population Size and Characteristics


Management

Management trainees

Clerical

Availability of Labor


Delivery costs

Timelines

Number of manufacturers

Number of wholesalers

Availability of product lines

Reliability of product lines

Closeness to Sources of Supply


Dominant industry

Extent of diversification

Growth projections

Economic and seasonal fluctuations

Availability of credit and financial facilities

Economic Base


Number and size of existing competition

Evaluation of competitor strengths and weaknesses

Short and long-run outlook

Level of saturation

Competitive Situation


Number and type of store locations

Access to transportation

Owning versus leasing opportunities

Costs

Availability of Store Locations


Taxes

Licensing

Operations

Minimum wages

Regulations

Site analysis

Overview

Step 1: Determine what type of location is desirable

Step 2: Select the general location

Step 3: Evaluate alternative specific store sites

Three Types of Locations

IsolatedStore

PlannedShopping

Center

UnplannedBusinessDistrict

Unplanned Business Districts and Isolated Locations

Isolated Stores

AdvantagesAdvantages* No competition

* Low rental costs

* Flexibility

* Good for convenience stores

* Better visibility

* Adaptable facilities

* Easy parking

DisadvantagesDisadvantages

* Difficulty attracting customers

* Travel distance

* Lack of variety for customers

* High advertising expenses

* No cost sharing

* Restrictive zoning laws

A freestanding retail outlet located on either a street or a highway. There are no adjacent retailers with which this type of store shares traffic.

Large-store formats (e.g. Big Bazaar) and convenience-oriented retailers (Spencer’s Super) are usually the retailers best suited to isolated locations because of the challenge of attracting a target market.

Unplanned Business Districts

Central BusinessDistrict

SecondaryBusinessDistrict

NeighborhoodBusinessDistrict

String

Two or more stores situate together (or in close proximity) in such a way that the total arrangement or mix of stores is not due to prior long-range planning.

Central Business District

CBD is the hub of retailing in a city.

It exists where there is the greatest density of office buildings and

stores.

Both vehicular and pedestrian traffic are very high.

Shoppers are drawn from the whole urban area and include all classes

of people.

The arrangement of stores follows no pre-set format; it depends on

history (first come, first located), retail trends, and luck.

Secondary Business District

This format is now more important because cities have “sprawled” over

larger geographic areas.

SBD is an unplanned shopping area in a city or town that is usually

bounded by the intersection of two major streets.

The kinds of goods and services sold in an SBD mirror those in the CBD.

An SBD has smaller stores, less width and depth of

merchandise assortment, and a smaller trading area

(consumers will not travel as far), and it sells a higher

proportion of convenience-oriented items.

Parking problems, travel time, and congestion are less for the SBD

Neighbourhood Business District

NBD is an unplanned shopping area that appeals to the convenience

shopping and service needs of a single residential area.

An NBD contains several small stores, such as a stationery store, a

barber shop and/or a beauty salon, a dry cleaner and a restaurant.

The leading retailer is typically a supermarket or a large drugstore.

This type of business district is situated on the major street(s) of its

residential area.

An NBD offers a good location, long store hours, good parking, and a

less hectic atmosphere than a CBD or SBD.

But there is a limited selection of goods and services, prices tend to

be higher because competition is less than in a CBD or SBD.

String

A string is an unplanned shopping area comprising a group of retail

stores, with similar or compatible product lines, located along a

street. There is little extension of shopping onto perpendicular

streets.

May start with an isolated store, success then breeding competitors.

Car dealers, apparel retailers often situate in strings.

Unlike an isolated store, a string store has competition at its location.

This draws more people to the area. It means less control over prices

and less loyalty toward each outlet.

An individual store’s increased traffic flow, due to being in a

string rather than an isolated site, may be greater than the

customers lost to competitors.

Planned Shopping Centers

AdvantagesAdvantages

* Well-rounded assortments

* Strong suburban population

* One-stop, family shopping

* Cost sharing

* Transportation access

* Pedestrian traffic

DisadvantagesDisadvantages* Limited flexibility* Higher rent* Restricted offerings* Competition* Requirements for

association memberships* Too many malls* Domination by anchor

stores

Consists of a group of architecturally unified commercial establishments on a site that is centrally owned or managed, based on balanced tenancy, and accompanied by parking facilities. Its location, size, and mix of stores are related to the trading area served.

Characteristics of Centers

Location/Site Evaluation Checklist

The

Optimum

Site

for a

Particular

store

Pedestrian Traffic

The most crucial measures of a location/site’s value are

the number and type of people passing by

Proper pedestrian traffic count should include:

age and gender (exclude very young children)

count by time of day

pedestrian interviews

spot analysis of shopping trips

Vehicular Traffic

Different for:

convenience stores

outlets in shopping centers

petrol pumps

suburban areas with limited pedestrian traffic

Some retailers count only homeward-bound traffic, some exclude vehicles on the other side of a divided road

Retailer should study the extent and timing of congestion (from traffic, detours, and poor roads). People normally avoid congested areas and shop where driving time and driving difficulties are minimized.

Parking Considerations

Number and quality of spots

Distance of spots from stores

Price to charge customers for parking

Employee parking

Transportation

Closeness to public transport is important for people who do

not own cars, who commute to work, or who would not

otherwise shop in an area with traffic congestion.

The availability of buses, taxis, subways, trains, and other

kinds of public transport is a must for such areas.

Store composition

If the stores at a given location (be it an unplanned district or

a planned center) complement, blend and cooperate with one

another, affinity exists. When affinity is strong, the sales of

each store are greater due to the high customer traffic than if

the stores are apart.

Proper retail balance occurs when the number of store

facilities for each merchandise or service classification is

equal to the location’s market potential, there is an adequate

assortment within any category, and there is a proper mix of

store types (balanced tenancy).

Specific site

Visibility is a site’s ability to be seen by pedestrian or

vehicular traffic. High visibility aids store awareness.

Placement in the location is a site’s relative position in the

district or center. A corner location may be desirable because

it is situated at the intersection of two streets and has “corner

influence.”

When a retailer buys or rents an existing building, its size

and shape should be noted. The condition and age of the

building should be studied.

Terms of Occupancy Considerations

Ownership versus leasing (ownership is more common in small stores or at inexpensive locations)

Operations and maintenance costs

Taxes

Voluntary regulations (prevalent in planned shopping centers; include required membership in merchant groups, uniform hours, cooperative security forces)

Ownership vs. leasing

Ownership Advantages:

There is no chance that a property owner will not renew a lease or double the rent when a lease expires.

Operations are flexible; a retailer can break down walls.

Property value will appreciate over time resulting in a financial gain if the business is sold.

Ownership Disadvantages:

High initial costs, the long-term commitment, inability to readily change sites.

Leasing advantages:

Minimizes the initial investment, reduces risk, allows access to prime sites that cannot hold more stores, leads to immediate occupancy and traffic, and reduces the long-term commitment.

Retailers feel they can open more stores or spend more on other aspects of their strategies by leasing.

Leasing disadvantages:

Firms that lease accept limits on operating flexibility, restrictions on subletting and selling the business, possible nonrenewal problems, rent increases, and not gaining from rising real-estate values.

Overall rating

(1) Each location under consideration is given an overall

rating based on the criteria.

(2) The overall ratings of alternative locations are

compared, and the best location is chosen.

(3) The same procedure is used to evaluate the

alternative sites within the location.

Conclusion

It is often difficult to compile and compare composite

evaluations because some attributes may be positive while

others are negative.

The general location may be a good shopping center, but the

site in the center may be poor, or an area may have excellent

potential but take two years to build a store.

The attributes should be weighted according to their

importance.

store location.ppt

Documents