Lecture 8A

Retail Location
 Objectives

• To explain why retail locations are an important part of

the retail marketing mix
• To describe the types of locations used by retail firms
• To explore the ways retailers make location decisions
• To explain the chief factors to consider in evaluating
retail trading-areas
 Introduction

• The type of retail location must reinforce retail strategy

• Location type decision- consistent with size of target
market, shopping behavior, retailers positioning in the
market.
• The ultimate goal is maximum customer access.
• Retailers need to understand their current customers,
competitors and potential customers.
 Importance of a good location

• Good location can overcome a Mediocre strategy

• Poor location is difficult to overcome
• Not flexible
• Heavy investment (including fixtures and
renovations which can’t be transferred)
 MONASH
BUSINESS

• A key decision for many retailers is to decide whether to own

or lease their stores.

Owning vs Leasing
 Pros and Cons of Ownership
Versus Leasing
Pros Cons
• Freedom over concern with • Difficulty in securing locations
lease renewal or tough lease in neighborhood, community
renewal negotiations with and regional shopping centers
property owner • Assets tied up in real estate
• Ability to write off depreciation could be used for retail
(a non-cash expense) expansion, inventory, store
• Possible capital appreciation renovation
from increased value of real • Real estate activity can divert
estate
attention away from retail
• Control over property activities
maintenance
• Difficulty in renting adjacent
space or current space (if
location is no longer desirable)
 Locational management options

• Once a retailer has a portfolio of stores the firm has to

manage that and is constantly addressing a range of
locational management options, the 6Rs:
– Roll out
– Relocate
– Refit
– Remerchandise
– Refascia
– Rationalise
• This process is ongoing as retailers seek to make the
most out of each location from which it trades.
6 Rs of Location Management
Roll out – opening of new stores or extensions of an existing one

Relocate- close store in one part of a town or centre and open it in another
elsewhere

Refit – improving the internal fabric of an existing store. May occur as part of a
capital expenditure cycle .

Remerchandise- adding/deleting range and services in response to local needs.

Refascia- altering image of store by changing name or appearance. May also

change trading format or acquire a competitor and bring the new store into its
portfolio

Rationalise- closure of individual units or even sell off a division, due to poor
trading and or a focus on core store
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 Types of locations

• There are many retail location types and originally most retail
outlets would have been located in a village, town or city
centre because that was the point of greatest accessibility for
the majority of the local population.
• Retail location types can be thought of in terms of customers’
needs.
• On the one hand there are staple items such as grocery items
bought on a regular and frequent basis, and on the other hand
there are more discretionary purchases such as clothing and
household goods etc.
 A shopping location model
Bulky Goods Portable items

Comparison Goods Carpets, furniture, Clothing

electrical items, DIY Footwear
products

Typical location Retail park Town/city centre

Regional shopping centre
Enclosed in-town shopping
centre

Convenience goods Weekly grocery shopping Top-up grocery items

Typical location Off-centre superstore Neighbourhood centre or

local parade

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Three Types of Locations

Planned
Isolated
Shopping
Store Center

Unplanned
Business
District
 Isolated Stores
Advantages Disadvantages
• No direct competition • Difficulty attracting
• Low rental costs customers
• Flexibility • Travel distance
• Good for convenience • Lack of cumulative
stores attraction for
• High visibility customers
• Adaptable facilities • High advertising
• Easy parking expenses
• Excellent for store that • No cost sharing for
generates own traffic
promotions
• Possibly restrictive
zoning laws
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Unplanned Business Districts

Secondary
Central Business Business
District District

Neighborhood
Business String
District
 Unplanned Business Districts

• Central business district (CBD):

– Hub of retailing in a city. The CBD has the greatest
density of office buildings and stores.
• Secondary business district (SBD):
– Usually bounded by the intersection of two major
streets. It has at least a junior department store
and/or some larger specialty stores - in addition to
many smaller stores.
 Unplanned Business Districts

• Neighborhood business district (NBD):

– Appeals to the convenience shopping and service
needs of a single residential area. The leading
retailer is typically a supermarket, a large
drugstore, or a variety store and it is situated on
the major street(s) of its residential area.
• String:
– A group of retail stores, often with similar or
compatible product lines, located along a street or
highway.
Unplanned Business Districts and
Isolated Locations
Unplanned Business Districts
Advantages Disadvantages
* Excellent
goods/service * Inadequate parking
assortment
* Traffic and delivery congestion
* Access to public * Travel time for those living in
transportation the suburbs
* Variety of store types * Many aging retail facilities
and positioning * Declining condition of some
strategies within one central cities
area * Poor image of central cities to
* Wide range of prices some consumers
* Variety of customer * High rents and taxes for
services popular sites
* Movement of popular stores to
* High level of suburban shopping centers
pedestrian traffic
* Discontinuity of offerings
* Near commercial and
social facilities

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 Planned Shopping Centers

Advantages Disadvantages
• Well-rounded • Limited flexibility
assortments • Higher rent
• Restricted product
• Strong suburban offerings in lease
population • Competition
• One-stop, family • Requirements for
shopping association
memberships
• Cost sharing of
promotions
• Domination by anchor
stores
• Transportation access • Impact of store closings
• Pedestrian traffic on affinities

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 How do retailers make location
decisions?

• The term ‘catchment’ or ‘trading area’ is one of

the key principles in store-based retailing and
this refers to the area from which a retailer will
draw its trade.
• 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 • Assessment of effects

consumer of trading area overlap
demographics and • Ascertain whether
socioeconomic chain’s competitors will
characteristics open nearby
• Opportunity to • Discovery of ideal
determine focus of number of outlets,
promotional activities geographic
weaknesses
• Opportunity to view
• Review of other issues
media coverage (e.g. transportation)
patterns

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The Trading-Area of a New Store

Different tools must be used when an area

is evaluated in terms of opportunities
rather than current patronage and traffic
patterns:
• Trend analysis
• Consumer surveys
• Computerized trading-area analysis models
 GIS Software

• Geographic Information Systems

• Digitized mapping with key location-specific
data used to graphically depict trading-area
characteristics such as
o population demographics

o data on customer purchases

o listings of current, proposed, and

competitor locations

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GIS Software in Action
GIS Software in Action
The Segments of a Trading-Area
 The Size and Shape of Trading-Areas

• Primary trading-area
• 50-80% of a store’s customers

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

• Fringe trading-area
• all remaining customers
 Location, Location, Location
• Criteria to consider include
• population size and traits
• competition
• transportation access
• parking availability
• nature of nearby stores
• property costs
• length of agreement
• legal restrictions
Chief Factors to Consider in Evaluating Retail Trading-
Areas
Population Size and Characteristics
• Total size and • Total disposable
density income
• Age distribution • Per-capita
• Average disposable income
educational level
• Occupation
• Percentage of distribution
residents owning
homes • Trends
Chief Factors to Consider in Evaluating Retail Trading-
Areas

Availability of Labor

• Management
• Management trainees
• Clerical
Chief Factors to Consider in Evaluating Retail Trading-
Areas

Closeness to Sources of Supply

• Timeliness • Number of
• Delivery costs wholesalers
• Number of • Availability of
manufacturers product lines
• Reliability of
product lines
Chief Factors to Consider in Evaluating Retail Trading-
Areas

Availability of Store Locations

• Number and type • Owning versus
of store locations leasing
• Access to opportunities
transportation • Zoning
restrictions
• Costs
Figure 8.5 Retail location factors checklist
Source: adapted from McGoldrick, P. (2002) Retail Marketing, 2nd edn, © 2002. Reproduced with the kind permission of McGraw-Hill Education. All rights
reserved.
 Summary

• Even in the move to multi-channel retailing it can be seen that

the role of location is still important.
• Location can represent a sizeable investment for a retailer
and the decisions the firm makes vary from the strategic ones
about market coverage and how to roll out stores, through to
more tactical ones about tailoring and editing ranges leading
to remerchandising of stores.
• Increasingly, location decisions are about where to close
stores as major retailers seek to optimise their store estate.
• What makes for a good location varies from one retailer to
another and the way the decisions are made depend on the
size of the firm and the size of the individual investment in a
store.
• Major retailers are powerful enough to influence national and
local planning such that their development plans come to life.