What are the key considerations and processes to follow for choosing a physical loca-
tion for such a business if it is to create and own its space in a competitive market?
In modern market conditions, it is necessary to pay special attention to competitiveness.
Competition is one of the main features of the market economy, which ensures the creative freedom
of the individual, creating conditions for its self-realization in the economic sphere by developing
and creating new competitive goods and services.
In a market economy, competitiveness is a crucial factor for commercial success. This is a
multidimensional concept, meaning that the product meets both market conditions and consumer re-
quirements, and various conditions for its implementation, and the level of consumer costs over the
period of operation (Morland et al., 2002).
The ultimate goal of any enterprise is to win the competition. Moreover, this victory is not a
one-time, not accidental, but as a natural result of constant and competent efforts. Competitive ad -
vantage is the position of an object in the market, which allows it to overcome the forces of compe -
tition and attract consumers.
The most important thing for a company working in retail is the choice of the location of the
outlet. On the one hand, the location of the store determines the potential number of customers and
turnover of products. On the other hand, depending on the location, the cost of obtaining rights to
build and lease land may vary significantly (Ariyono, 2021).
Finally, the placement of the store affects its image and the brand image of the entire retail
chain. But if the rent and the cost of obtaining construction rights are known in advance, then the
turnover can only be predicted. Therefore, forecasting turnover is the central and most difficult pro -
cedure when choosing a location.
How to choose the most successful place? Usually, a successful placement of a store implies
choosing a place in an area of high demand potential and with a successful visual exposition. There
are many other important components that influence the success of the location, but no place will be
optimal without taking into account additional factors centered around the store and affecting sales.
Factors of a successful location
The factors determining a good location can be classified as follows: management, infra-
structure, environment (Figure 1).
Figure 1. Factors of attractiveness of a retail store
Source: Jaravaza, and Chitando (2013)
1. Management factors mainly include elements that can be controlled inside a point of sale.
2. Infrastructure factors include elements related to the unique physical layout of the build-
ing and its surrounding facilities.
3. Environmental factors include such elements as population demography, consumer de-
mand, traffic load, enterprises forming traffic (shopping malls, hospitals, airports, stadiums), day-
time and evening population, competitors, complementary business, lifestyle.
Location selection methods
It is often assumed that to solve the problem of choosing a location, it is enough to first de-
termine the maximum distance that a consumer can travel and calculate the population living within
a circle with a given radius, and then use the resulting value as the basis for predicting the turnover
of a new outlet (Gao, Agrawal, and Cui, 2022).
This approach has a number of visible disadvantages. Firstly, it is not only the geographical
factor that determines the demand for the store’s services, since the coverage area is much narrower
in areas with more intense competition. Secondly, even if the boundaries of the plots are sufficiently
flat, the forecast based on the specially estimated size of the trading zone will have very low relia -
bility. The fact is that the area and, accordingly, the population in the circle (with uniform density)
increase in proportion to the square of the radius. The indicator of the time required to reach the
point of sale by car is approximately proportional to the distance. Therefore, if we can estimate the
time with an accuracy of +/–15% with a confidence probability of 0.95, then with the same confi -
dence probability, the accuracy of the turnover forecast will be approximately +/– 30%.
There are the following methods for selecting the location of a retail outlet:
1. Checklist method. It involves evaluating each store placement option according to a fixed
set of parameters. Parameter values for all variants are evaluated by an expert. The scale (but not its
type) is implicitly determined by the expert himself for each parameter.
2. Analog approach. It is based on the use of the values of some characteristics of existing
outlets as the basis of the forecast for new ones. Then the optimal location is selected based on max-
imizing the turnover or expected profit of the point (Litz, and Rajaguru, 2008).
3. Regression analysis. It is based on the construction of a regression of turnover from the
main characteristics of the store placement (Behera, and Mishra, 2017).
4. Models of revealed preferences. The point is to evaluate the parameters of the model for
the forecast of market share based on the actual spatial data on the choice of stores by respondents.
Good conditions for the location of a food store are: the intersection of major highways, the
immediate proximity of metro stations and ground transport stops (Ariyono, 2021, p. 11). Most of-
ten, such outlets are located in “sleeping” areas, or outside the city, actually on a vacant lot, near a
major highway. These differences correspondingly affect the requirements both at the stage of
forming the overall strategy of the store in business planning, design and promotion, and during the
construction and operation of the store.
So, as we found out, the location of the outlet is of no small importance for its attractiveness.
To make the right choice, it is necessary to analyze a set of factors and assess their impact on the
popularity and attendance of the store.
References
1. Ariyono, K. Y. (2021). Purchase decision: is the atmosphere store, location and diversity
of products caused?. Progress Conference, 4(1), pp. 9-15.
2. Behera, M. P., and Mishra, V. (2017). Impact of store location and layout on consumer
purchase behavior in organized retail. Anvesha, 10(1), pp. 10-21.
3. Gao, F., Agrawal, V. V., and Cui, S. (2022). The effect of multichannel and omnichan-
nel retailing on physical stores. Management Science, 68(2), pp. 809-826.
4. Jaravaza, D. C., and Chitando, P. (2013). The role of store location in influencing cus-
tomers' store choice. Journal of Emerging Trends in Economics and Management Sci-
ences, 4(3), pp. 302-307.
5. Litz, R. A., and Rajaguru, G. (2008). Does small store location matter? A test of three
classic theories of retail location. Journal of Small Business & Entrepreneurship, 21(4), pp.
477-492.
6. Morland, K., Wing, S., Roux, A. D., and Poole, C. (2002). Neighborhood characteristics
associated with the location of food stores and food service places. American journal of preven-
tive medicine, 22(1), pp. 23-29.