Chapter 10 Site Selection Dr. Pointer Notes

Chapter Objectives To thoroughly examine the types of locations available to a retailer: isolated store, unplanned business district, and planned shopping center To note the decisions necessary in choosing a general retail location To describe the concept of one-hundred percent location

Chapter Objectives_2 To discuss several criteria for evaluating general retail locations and the specific sites within them To contrast alternative terms of occupancy

Overview Step 1: investigate alternative trading areas (Chapter 9) Step 2: type of location is desirable determine what Step 3: select the general location Step 4: evaluate alternative specific store sites Chapter 10 discusses steps 2-4

3 Types of Locations Planned Isolated Shopping Store Center Unplanned Business District

Isolated Site An isolated site is a freestanding retail outlet located on either a highway or a street. No adjacent retailers to share traffic In the past, the mass merchandisers were forced to use this type of site. Today, diverse retailers elect this site type—Krispy Kreme Donuts, Target, McDonald’s,

Isolated Stores Advantages No competition Low rental costs Flexibility Good for convenience stores Better visibility Adaptable facilities Easy parking Disadvantages Difficulty attracting customers Travel distance Lack of variety for customers High advertising expenses No cost sharing Restrictive zoning laws

Unplanned Business District Unplanned business district is a type of retail location where 2 or more stores are situated together (close proximity) in such a way that the total arrangement or mix of stores is not due to prior long-range planning.

Unplanned Business Districts Secondary Business District Central Business District Neighborhood Business District String District

Secondary Business Districts SBD is an unplanned shopping area in a city or town that is usually bounded by the interception of 2 major streets. Usually the same type of goods and services are sold as in the central business district Major strengths is good product selection and access to major thoroughfares and public transportation.

Neighborhood Business Districts NBD is an unplanned shopping area that appeals to the convenience shopping and service needs of a single residential area Usually has several small stores, dry cleaner, stationery store, a barbershop/beauty salon, liquor store, and restaurant. Advantages are good location, store hours, parking less hectic atmosphere.

String Shopping Area A string is an unplanned shopping area comprising a group of retail stores, often with similar or compatible product lines located along a major street example – group of auto dealers located side by side

Central Business District A central business district (CBD) is the hub of retailing in a city, same as downtown. Greatest density of office building and no more than a 1 sq mile, with cultural and entertainment facilities surrounding it. Reasons for popularity- good product assortment, access to transportation, variety of customers and stores. Weaknesses – poor parking, traffic and delivery congestion, relatively poor image, high rent and taxes for most popular cites.

The Planned Shopping Center A planned shopping center consists of a group of architecturally unified commercial establishments on a site which is centrally owned and managed. Galleria, Memorial City Mall, Willowbrook Mall Uses concept of balanced tenancy – stores complement each other as to quality and variety of product offerings-

Planned Shopping Centers Advantages Well-rounded assortments Strong suburban population One-stop, family shopping Cost sharing Transportation access Pedestrian traffic Disadvantages Limited flexibility Higher rent Restrictions on offerings Competitive environment Requirements for association memberships Too many malls Domination by anchor stores

Types of Planned Shopping Centers Regional shopping Center- mega malls – Mall of American in Minnesota Community Shopping Center including a power center –is shopping center with up to 6 –12 category killers and mix of smaller stores most are complementary stores lifestyle centers open air shopping center with a upscale specialty stores, Neighborhood Shopping Center

How Important are Planned Shopping Centers 46,000 U.S. Shopping Centers 1200 are fully enclosed Shopping center revenues exceed $1.2 trillion annually Employee 11 million people 94% of Americans over 18 yrs of age visit average of once a month Many older shopping centers are being renovated, expanded or repositioned

Renovations to Sustain Growth The Florida Mall, Orlando, Florida King of Prussia, Pennsylvania Park Place, Tucson, Arizona Roosevelt Field, Long Island, New York University Towne Center, San Diego, California

Table 10.1 A Characteristics of Centers

Table 10.1 B Characteristics of Centers

Table 10.1 C Characteristics of Centers

Location and Site Evaluation One-hundred Percent Location The optimum site for a particular store

Location and Site Evaluation One –hundred percent locations – optimum site for the particular store type The requirements for a one hundred percent location will vary by retail type

Location Evaluation Checklist Pedestrian Traffic- number and type of people Vehicular traffic- number &type of vehicles, congestion level Parking Facilities Transportation Store composition Specific Site Terms of Occupancy Overall rating

Pedestrian Traffic The most crucial measures of a location’s and 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 Important for convenience stores outlets in regional shopping centers car washes suburban areas with limited pedestrian traffic

Parking Considerations Number and quality of spots Distance of spots from stores Availability of employee parking Price to charge customers for parking

How Many Parking Spaces? Shopping centers = 4-5 spaces per 1000 square feet of gross floor space Supermarkets = 10-15 spaces per 1000 square feet of gross floor space Furniture stores = 3-4 spaces per 1000 square feet of gross floor space

Terms of Occupancy Considerations Ownership versus Leasing- with adequate funding ownership could be good option, Type of Lease Operations and Maintenance Costs Taxes Zoning Restrictions Voluntary regulations

Advantages of Ownership Lease renewal is not an issue Monthly mortgage rate is stable Operations are flexible May be able to take advantage of site appreciation Other ownership issues – construct new facility or renovate existing property

Disadvantage of Ownership Might require more upfront capital Long term commitment Inability to readily change sites Most facilities are leased Leasing minimizes initial investment, reduces risk, reduces long term commitment and allows access to prime site and occupancy time may be immediate.

Types of Leases Straight Lease Percentage Lease Graduated Net Lease Maintenance- increase recoupment lease Percentage Lease Graduated Lease Net Lease

Types of Leases Straight lease – retailer pays a fixed amount per month over life of lease Percentage Lease – rent is related to sales or profits Graduated lease – precise increase in amount over a stated period of time Maintenance-increase-recoupement lease – has a provision allowing rent to increase if property owners expenses increases Net lease – Calls for all maintenance costs such as lighting, heating, insurance etc be paid by retailer

Other Considerations Need to calculate the total costs of operating and maintenance for a site. Differences in sales taxes by locations could be a factor

Questions Please read chapter