Retail Location Strategy Dr. Shilpa Sindhu

Location Decision A retailer has to take the location decision, taking into account three aspects: Selection of a city Selection of an area or type of location within a city Identification of a specific site

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

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

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.

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.

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. Tertiary trading area Secondary trading area Primary trading area Retail store Types of trade areas

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

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.

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.

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

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

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

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

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

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

Types of Retail Location Free Standing Locations Neighbourhood stores Highway stores Unplanned Business District Downtown or central business district Secondary business district Suburban business district Strip Centre Planned shopping centres Regional shopping centres or malls Neighbourhood/community Specialist market Periodic markets/weekly

Free standing location Neighborhood stores Convenience products Away from major markets Inside neighborhood Less competition, low rent, easy parking, better visibility. Difficulty in attracting customer

Free standing location contd… Highway stores Attract customer passing highways - Fast food restaurant, dhaba

Unplanned business districts Downtown or central business district A hub of retailing activity Draws customer from across city and suburbs Metro CBDs attract customers outside city commercial street in Bangalore serve as upmarket for upper and upper middle class customer. Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and lower middle class customers.

Secondary business districts Unplanned cluster of stores located on a major intersection of cities. Attract customers from many parts of cities. Dadar in Mumbai, Karol bagh in Delhi.

Suburban Business Districts Stores located in town’s periphery. Rely on traffic of downtown. Growing market in Gurgaon and Noida.

Planned Shopping Centres Architecturally designed with parking facilities designed and operated as a unit. In Chandigarh various sector markets are planned.

Regional Shopping Centre or Malls Largest planned shopping centres . Major departmental stores, large trading area, high rent . Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan mall-Gurgaon.

Neighborhood/Community Shopping Centres Usually have a balance mix of stores, grocery, chemist, variety store, few other stores combinedly. Sector market complex in Chandigarh.

Specialized market Specialized market for a particular product category. Ahmadabad for plastic material Ludhiana for machinery. Godown street in Chennai for clothes.

Periodic market Peculiar market Meet at particular places on a particular day in a week. Retailers move from place to place. Limited credit transaction. Low overhead Hats, Som bazar.