STORE

LOCATION
AND LAYOUT

MODULE 3
 1 2 3 4 5
Lesson 1. Lesson 2. Lesson 3. Lesson 4. Lesson 5.
Retail Locations: - Type of Locations:- Site Selection, Store Layout: Concept Permissions from
Concept & Unplanned Retail Trading Area. & Types of Store various departments.
Importance Locations, Planned Layout Licenses and Laws
Retail Locations in store
operations /Retail
Stores,

SESSION OUTLINE

2
 FIRST LESSON

RETAIL LOCATIONS: -
CONCEPT & IMPORTANCE

TEACH A COURSE 3
RETAIL LOCATION - CONCEPT

 Even though non store retailing is growing, most of the retailers are still selling from retail store space.
 Some of these retailers are very small single-store operators, and some are huge superstore discounters.
 Each location selected resulted from an effort to satisfy the needs of the specific market that each store was
designed to serve.
 Whether it was the customer‘s need for convenience, their desire to do comparison shopping, the extent of the
purchasing power in a market area, of the transportation facilities available, many factors together led to the
development of different kinds of retail locations.
 There is an old saying that the value of real estate is determined by three things: location, location, and location.
Nowhere is than Retail stores should be located where market opportunities are best.
 After a country, region city or trade area, and neighbourhood have been identified as satisfactory, a specific site
must be chosen that will best serve the desired target market.t more the case than with stores.
RETAIL LOCATION - CONCEPT

 The primary role of the retail store or center is to attract the shopper to the location.
 Alternatively, retailers must take the store to where the people are, either at home or in crowds. Examples of taking
the store to where the crowds are, include, airport location, theme parks and vending machines.
 Every retail store strives for its competitive advantage. For some stores, it is price. For others, it is promotional
expertise of the special services that are offered.
 Despite any differences among the various stores that may be competing for the shopper‘s rupees,location offers a
unique asset for all stores because once a site is selected, it cannot be occupied by another store. This advantage,
however, points to the importance of location analysis and site selection. Once a facility is built, purchased, or
leased, the ability to relocate may be restricted for a number of years.
 In short, location and site selection is, one of the most important decisions made by a retail owner. We need to look
for ways to optimize this process.
RETAILING STRATEGY AND LOCATION

 A retailer should first begin with a mission statement. This helps retailer, its employees, and its customers
understand the purpose of the business. The core concepts and culture that come from a mission statement flow
from the choice of the strategies selected in an attempt to achieve a competitive advantage.
 Example: Owners or managers who wish to emphasize merchandise quality will require an entirely different
location than managers of a low-margin discount house.
 Just as the strategy and objectives of a retailer are integral to the location decision process, so is the importance of
market research. The use of marketing research criteria in deciding on a location depends on what type of
information or answer is needed from the research e.g., time and cost factors, and the importance of the decision in
the overall strategy.
CHARACTERISTICS USED IN LOCATION ANALYSIS
Many retailers have found success establishing locations in other countries. Because of the high market saturation in
the United States, many U.S. retailers ranging from Walmart and McDonald‘s to JCPenney have expanded overseas
in an effort to improve their bottom line. On the other hand, there are many important market characteristics in the
United States that have attracted overseas retailers like Laura Ashley, Benneton, and the Body shop.
There is a need to recognize that country analysis will be an increasingly important aspect of the location strategy as
merchants look for growth opportunities.
There are several characteristics used in location analysis. The key ones include:
 1) Demographic,
 2) Economic,
 3) Cultural,
 4) Demand,
 5) Competition, and
 6) Infrastructure.
 CHARACTERISTICS USED IN LOCATION ANALYSIS

 Broadly these 6 characteristics can be used to determine the location under 2 categories:
a) Macro areas (country and region analyses).
b) Micro areas (trade area and site evaluation).

Therefore, the layers of location analysis consist of :

a) Country and Regional Area Analysis
b) Trade Area Analysis
c) Site Evaluation

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 COUNTRY AND REGION ANALYSIS
 There is a need to recognize that country analysis will be an increasingly important aspect of the location strategy as
merchants look for growth opportunities.
 After the decision is made as to what country or countries are to be considered, a regional analysis will need to be
done.
 Most countries are not completely homogeneous and need to be broken down into regions in order for a retailer to
better understand the market characteristics.
 The importance of examining countries and regions by their macro characteristics can be illustrated by the importance
of today‘s distribution infrastructure to the concept of flow-through replenishment.
 This concept is based on having information on consumer demand that allows the flow of goods to be regulated by
actual needs in the retail stores.
 Consumer demand is acquired at the point-of-sale terminal when the UPC bar code is scanned for each product sold.
Computers maintain continuous records of product flow. Daily or weekly reorders go directly to the manufactures so
that exact quantity replacement can be shipped to each individual store or routed to the retailer’s central distribution
center. If this is a part of the firm‘s competitive advantage, the country or region must have the transportation,
computer, and warehousing infrastructure necessary to support the strategy.
TEACH A COURSE
 TRADE AREA ANALYSIS

The retail trade is defined as the geographic area within which the retail customers for a particular kind of store live or
work. The customer profile of a segment of the people within the geographic area that the store decides to serve is the
target market.
TRADE AREA SELECTION CONSIDERATIONS:
1. Demography: Factors, such as current population, potential population, population density, age, income, gender,
occupation, race, proportion of home ownership, average home value, and proportion of single versus multifamily
dwellings are important considerations. Where consumers live, their commuting patterns, and whether their numbers
are increasing, or decreasing are but a few of the dynamic characteristics of the trade area population that the retailer
must consider. It may be quite helpful to construct maps that display where certain types of customers reside.
2. Economic: Economic characteristics have a significant impact on country and region selection. The impact on trade
area is even greater. The local unemployment rate will affect the local labour pool and the amount of money that
consumers have to purchase products. The most important economic characteristics for the retailer are per capita
income and employment rates.

TEACH A COURSE
 TRADE AREA ANALYSIS

TRADE AREA SELECTION CONSIDERATIONS:

3. Subculture: Subculture have more of an impact on market and trade area selection than on country or region
selection. One must normally be at the market or trade level in order to accurately gauge the location and
characteristics of a subculture. An ethnic subculture creates market segments for goods ranging from food and
cosmetics to clothing and entertainment. At the same time religion, language, and family structure create both
opportunities and problems.
4. Demand: The economy of an area under consideration for location should provide a general indicator of the long –
range retail opportunities present within an area. The number, type, trends, and stability of industries that might affect
business in the market area need to be considered. Employment rates, total retail sales, segment retail sales, household
income, and household expenditures all provide information from which the economic stability of the area can be
ascertained. The buying power index (BPI) indicates the relative ability of consumers to make purchases. The BPI for
most metropolitan statistical areas (MSAs) is published yearly by sales and marketing management in their survey of
buying power. The BPI combines effective buying income (weighted 50 percent), retail sales (weighted 30 percent),
and population (weighted 20 percent) in a single measure of the purchasing power of consumers. The BPI for
potential markets can be directly compared to help make a choice of market area.
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 TRADE AREA ANALYSIS

TRADE AREA SELECTION CONSIDERATIONS:

5. Defining the Trade Area: Since a market comprises the number of people and their spend able income, estimating
where customers will shop is of critical importance to retailers. Scholars have developed many tools for defining the
size of a trade area. Some of them are:
a) Reilly’s law,
b) Huff’s model,
Which are called gravity models because they attempt to look at the retail customers and where they will be pulled
by the gravity of retail centers.
While the others are;
c) concentric circles and
d) the use of geo demographics.

TEACH A COURSE
 REILLY’S LAW

 According to Reilly’s “law of retail gravitation," customers are willing to travel longer distances to larger retail centers
given the higher attraction they present to customers or Reilly‘s Law states that a customer will travel a distance to
shop based on the population of the shopping area and the distance between areas. In essence, it specifies a break
point the customer will travel to the city on the same side.
 Reilly‘s law is most useful for calculating the trade area boundaries between two cities.
 However, it can also be used to calculate the break point between metro areas and surrounding communities, although
it is less precise.
 Reilly‘s law is based on a simple rule that population centres attract retail shoppers.
 A trade area can be defined by using Reilly‘s law to calculate the break points between a city of interest and
surrounding city. The major disadvantage of Reilly‘s model is that it assumes all retail characteristics are proportional
to the size of the population in an area. It does not explicitly consider such things as differences in retailer types or the
number of stores in an area.
 Video link: [Link]

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 REILLY’S LAW
 Consider an example of using Reilly‘s law to calculate the break point between a city and the surrounding population
centres.

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 REILLY’S LAW
Steps to use in calculating Reilly’s Law:
 1. Draw a line from city center to a city center between the city of interest and all surrounding cities.
 2. Measure these lines with a ruler and convert from inches to miles using the map legend. (e.g., if 15.5 miles = 1 inch, then multiply
the number of inches by 15.5 to get miles)
 3. Find the population of each city that is connected by a line
 4. Use Reilly‘s formula to calculate the break point distances.

 5. Complete Table in previous slide.

 6. Change the break point miles into inches (e.g., if 15.5 miles by 15.5 to get inches).
 7. In Reilly‘s law, all break points are always measured starting from the city with the smaller population. Using a ruler, measure from
the smaller population city the number of inches from step 6 for each line. Mark and label these points.
 8. Connect the points from step 7 to define the trade area.
 HUFF’S GRAVITATION MODEL

 Huff’s model is a mathematical model that recognizes the correlation between patronage and distance from the
location of the store.
 So, in other words, the further a consumer is from a retail store location, the less likely it will be for that person to
shop there. This model does not account for other factors that may affect a customer patronizing your store, such as
having a product or service that is specialized, that they cannot get elsewhere. It simply looks at the distance from the
retail location.
 This model can help to determine areas with high and low sales potential based on several factors including how many
people live within a certain radius of your proposed location and what the disposable income is in this market.
 Incorporating the Huff model along with GIS and census information can give potential new businesses a great deal of
information about several possible sites.
 Video link: [Link]

TEACH A COURSE
 CONCENTRIC ZONES

 One way to analyse a market area is to use maps and census tracts to
construct concentric zone maps. Survey data from existing stores can
determine how far customers will travel to shop. Obviously, this depends
on the type of goods and the pulling impact of the location. Customers will
travel much farther to shop for home entertainment equipment in a regional
mall than to pick up medicine at a pharmacy.
 Assume our data show that 60 percent of our customers come from less
than four miles (primary zone), 25 percent come from four to eight miles
(secondary zone), and 15 percent (tertiary zone) are occasional customers
who come more than eight miles. The firm can now take census tract data
and determine how many potential customers (owner-occupied household
with income over Rs. 5,00,000) live in each zone. The concentric zones
help describe a trade area, but a you will see, the actual market may be
limited by accessibility factors. Notice how the interstate highways could
limit accessibility. The actual sales potential of the store is also going to be
limited by the number and location of competitors.
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 GEODEMOGRAPHICS

 The term geodemographics is derived from the demographics of population coupled with the geographic dimensions
of populations.
 Retail location decisions commit large amounts of capital, and once made, the decision is fixed for a significant
period of time.
 New techniques such as the use of geodemographic information have the potential to be very important.
 Although we may describe a retail in terms of geography, everyone within that geographic area is not a potential
customer.
 To be an effective retailer, you must group together those individuals in your trade area who possess similar needs.
 Within the trade area, with target market defined, a retailer can stock merchandise and provide specific services to
meet the needs of those potential customers.

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 TRADE AREA ANALYSIS

TRADE AREA SELECTION CONSIDERATIONS:

6. Estimating Market Potential: Once the retail trade area has been identified and the relative segmenting variables
applied, certain quantitative factors must be considered to decide if the area is suitable. These factors include the retail
market potential of a retail trade area and the retail sales potential.
Retail market potential is the total dollar sale that can be obtained by all stores selling a particular retail product,
product line, or group of services within the retail trade area if everything was maximized. Therefore, retail sales
potential is a part of retail market potential.
Retail sales forecast is the specific estimate of sales volume that a retailer expects. Because the retailer is new in the
area or because of the entry of a new competitor, the sales forecast may be less than the estimate of retail sales
potential.
There are two major determinants of the market potential for a trade area: the number of potential customers within
the area and the amount of money consumers spend for the product or product line in question. For example, a retailer
can estimate the market potential by multiplying the number of potential consumers in the trade area by the average
amount they spend for the product.
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 TRADE AREA ANALYSIS
TRADE AREA SELECTION CONSIDERATIONS:
7. Estimating Sales Potential: An accurate appraisal of sales is important, because it will dictate the amount of
inventory that will be purchased, the number of employees that will be needed, the dollars that can be spent for
expenses, and the amount to debt capital the business can comfortably afford. To arrive at such a figure, one must
consider.
 The competitive strengths in the market
 The amount of business that can be drawn from substitute products
 Management‘s own expertise
To assess the competitive strengths in the market, the retailer can start with an assessment of the total market
potential. If the retailer assumes that the business will obtain at least average amount of sales being realized by the
competitive business in the trade area, an estimate of the sales potential can be made. If there are five business (the
new retail establishment makes six), each business might be expected to have one-sixth of the business available in
the trade area.
Although this approach may not seem as sound as the one used in measuring market potential, it does provide an
analysis of competitive strength, and the figure derived is usually conservative.
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 TRADE AREA ANALYSIS
TRADE AREA SELECTION CONSIDERATIONS:
8. Index of Retail Saturation: Competition exists when more than one store competes for the same market segment or
target market. In some situations, a firm might like to be only one of its type in a given market area. This is
particularly the case for specialty or convenience goods.
On other occasions, however, good strong competition will enhance the overall business potential of a given area
because it will draw shoppers from a greater distance to compare prices or stores. This is particularly the case with
goods for which people often make shopping comparisons. Maps may be developed to show retail locations of
competitors by relative size and merchandise mix.
One measure of the competitive structure of the market is the index of retail saturation (IRS), which examines the
level of competitions and the retail sales in a given geographical area. There are several ways to formulate this
measure. The typical IRS is calculated as area sales divided by a measure of competitive saturations (usually total
square feet).

TEACH A COURSE
All retail stores in US are classified by different SIC codes. The first 2 of the seven digits define the broad retail group. For example, 53 is the code for automobiles.
 TRADE AREA ANALYSIS

TRADE AREA SELECTION CONSIDERATIONS:

9. Infrastructure: The infrastructure –including roads and highways, distribution warehouses, communications
facilities, and labour pool-must be adequate for a country or region. The same is even more true for trade area
analysis. The legal infrastructure can also impact the trade area selected for your store. State and local laws vary
concerning advertising, zoning, and sign restrictions for retailers.

TEACH A COURSE
 SITE EVALUATION AND SELECTION

TYPES OF LOCATIONS:
There are three major types of location that we will discuss in this section :
(I) the shopping center,
(II) the business district, and
(III) the free-standing location.

TEACH A COURSE
 SITE EVALUATION AND SELECTION

1. PLANNED SHOPPING CENTRES:

 The expansion of suburbia brought with it planned residential developments. These new subdivisions were
connected by many new city streets and through fares along which retail businesses could be established. Thus, the
notion of the planned shopping center was born.
 With the availability of large tracts of relatively cheap undeveloped land located many miles from the inner city,
but close to these new living areas, large centres could be designed that would offer one stop shopping to entire
clusters of residential areas.
 The term shopping center has been evolving since the early 1950s. Given the maturity of the industry, numerous
types of centers currently exist that go beyond the standard definitions. Industry nomenclature originally offered
four basic terms : 1) neighbourhood, 2) community, 3) regional, and 4) super regional.
 However, as the industry has grown and changed, more types of centres have evolved, and these four
classifications are no longer adequate.

TEACH A COURSE
 PLANNED SHOPPING CENTRES:
 The international Council of shopping centers (ICSC) has defined eight principal types.
Type Concept [Link] Acreage Number Type Anchor Primary
including Number Ratio Trade Area
Anchors

Neighbourhood Convenience 30,000- 3-15 1 or more Super market 30-50% 3 miles

center 150,000
Community General, merchandise, convenience 100,000- 10-40 2 or more Discount dept, store, supermarket, drug, home 40-60% 3-6 miles
center 350,000 improvement large specialty/discount apparel

Regional center General, merchandize, fashion 400,000- 40-100 2 or more Full –line dept. store, jr. dept. store, mass 50-70% 5-15 miles
(mall, typically enclosed) 800,000 merchant, disc. dept. store, fashion apparel

Super regional Similar to regional center, but has 800,000 60-120 3 or more Full –line dept. store, jr. dept. store, mass 50-70% 5-25 miles
center more variety and assortment merchant, disc. dept. store, fashion apparel

Fashion Higher end, fashion assortment 80,000- 5-25 N/A Fashion N/A 5-15 miles
/speciality center 250,000

Power center Category dominant anchors, few 250,000- 25-80 3 or more Category killers, home improvement, discount 75-90% 5-10 miles
small tenants 600,000 dept, store, warehouse club, off-price

Theme/festival Leisure, tourist oriented, retail and 80,000- 5-20 N/A Restaurants, entertainment N/A N/A
center service 250,000

Outlet center Manufactures‘ outlet stores 50,000- 10-50 N/A Manufacturers‘ outlet store N/A 25-75 miles
400,000

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 SITE EVALUATION AND SELECTION

2. CENTRAL BUSINESS DISTRICT:

 Central business district ( CBD) is a shopping area located in either the central downtown area or another area in
the city with a concentration of businesses.
 Until the mid – 1970s, the CBD was the core for shopping in most cities. When cities were relatively compact and
much smaller the largest share of retail shopping was done in this downtown area.
 The CBD contained the largest concentration of department stores. Clothing stores, jewelry stores, variety stores,
and specialty stores.
 Ironically, the CBD was an early ―mall‖ concept in that stores where relatively close and comparison could be
made easily. The downtown area also met the needs of out-of-town shoppers, who would frequently be visiting on
business or staying in a downtown hotel.
 Reuse and modernization of commercial buildings also promise to help the return of street level retail activity to
downtown areas.

TEACH A COURSE
 SITE EVALUATION AND SELECTION

2. CENTRAL BUSINESS DISTRICT:

 A retailer must decide whether renovation of downtown building space is commercially feasible. The following
attributes should be considered;
(1) easy access from street,
(2) abundance of foot and vehicular traffic,
(3) space and lighting for appropriate signage,
(4) physical dimensions required to support business use,
(5) a contiguous population that can correlate with the quality of shops and their brand name merchandise and the
expected cost of goods, and
(6) the design enticements to help make the location a unique shopping experience.

TEACH A COURSE
 SITE EVALUATION AND SELECTION
3. FREE STANDING LOCATIONS:
 This type of retail store stands alone, physically separate from other retail stores. It does not enjoy the same benefits
that shopping centres offer from the standpoint that customer of a free-standing store must have made a special trip to
get there.
 Shoppers are not ―just next door and decide to walk in as they could in a mall or strip center.
 Freestanding locations constituted about 22 percent of all retail space, and a recent survey of retailers shows that this
category leads all others for future importance.
 Drive in locations are special cases of freestanding sites that are selected for the purpose of satisfying the needs of
customers who shop in their automobile. In some situations, the drive – in aspect of the retail business is only to
supplement existing in – store sales, but the same requirements of all drive – in location apply. These sites are usually
positioned along or decide heavy traffic arteries in neighbourhoods, city streets, or inner city through fares
 Customers on a shopping trip are more easily stopped if a location is positioned along the right side of a through fare.
Not all shopping is done between home and work. This is particularly true if a drive-in is located between the
customer‘s place of residence and a major shopping area. If there are a number of stores located in the general vicinity,
the drive-in should be on the same side of the street as those stores. To attract recreation or pleasure trip shoppers,
locations along a heavily travelled artery are best. The location should be convenient to enter and leave, adjacent to the
incoming traffic.
 SITE EVALUATION AND SELECTION

ASSESSING SITE EVALUATION CRITERIA

1. Sales potential for the site.

2. Accessibility to the site.
3. Pedestrian accessibility at the site.
4. Synergies from nearby stores.
5. Site economics
6. Legal and political environment
7. Physical features.
 Exterior
Location
Design
Merchandise
STORE DESIGN
AND LAYOUT
Prices

Rapid changes in
Services consumer buying behaviour and
demographics require that today‘s
retailer be extremely flexible and
Layout creative when thinking about the store
Retail Format design, layout, and presentation plans.
Store design and layout are derived
from the retail format, and yet they
Personal area part of that format. Retail format
selling Visual as the total mix of merchandise,
Merchandisin services, advertising and promotion,
g pricing policies and practices, location,
store design, layout, and visual
merchandising used to implement the
sustainable competitive advantage.
Advertising Interior Promotion
design
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 COMPREHENSIVE
STORE PLANNING

Click icon to add picture In this section we will discuss some

overall planning concepts. We will
then turn to more details regarding
exterior design, interior design, layout
management, and interior design
elements.

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 STORE DESIGN

GENERAL REQUIREMENTS IN STORE

CONCEPT DESIGN
 Store design is the architectural character or 1. Customer Focus
decorative style of a store that conveys to the
2. Store Image
customer ― what the store is all about.
 Stores vary so much in kind, size, and geographical
3. Holistic Approach
location that it is difficult to generalize about design. 4. Technology and Planning
 The architecture of the store‘s exterior creates an
initial impression.

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EXTERIOR DESIGN
The exterior design must protect the interior from the elements. Just as important, it also serves to
convey information to potential customers. The exterior is first part of the store that potential customers see. They
will determine from the outside whether or not they wish to enter and shop. It is critical that the outside of the store
gain the attention of customers and entice them to enter. If the outside does not reflect an image appropriate to
customers, they will not enter.
The key points to consider for planning the Exterior Design of a store are:

1. New Building versus Existing Facility 6. The Store Entrance

2. Restrictions 7. Store Name
a) Lease requirements 8. Theft Prevention
b) Building codes 9. Multilevel Stores
c) Theme areas

3. Colour and materials

4. Signage
5. Windows
INTERIOR STORE DESIGN AND LAYOUT
The interior design of the store determines the way the merchandise is stored and offered for sale.
The design should allow easy access to merchandise for customer. There are several layout patterns that enhance the
customer‘s access to goods. The interior also projects an image to the shopper that should be consistent with that
conveyed by the store‘s promotion, price, and merchandise and with the exterior design. The store interior must make
the customer comfortable and encourage shopping.
The objective of layout management is to obtain the maximum benefits from the space available. There are issues
that retail managers should consider when they make layout decision:
3. Storage of Stock
1. Value of space,
a) Direct selling storage
2. Space utilization and allocation, b) Stockrooms
a) Allocation by historical sales. c) Central storage location
b) Allocation by gross margin. d) Open storage
c) Allocation by industry averages. 4. Customer traffic flow,
d) Allocation by strategic objective. a) Grid pattern
b) Free flow pattern (“shop” concept or boutique
pattern)
c) Loop layout
d) Herringbone pattern
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INTERIOR STORE DESIGN AND LAYOUT
h) Plano grams and Shelf Layout Design
5. The types of goods,
i) Other considerations (disable friendly, senior citizen,
a) Impulse goods
etc.
b) Convenience goods
c) Shopping goods
d) Specialty goods
6. Complementary merchandise proximity, (Seasonal
departments) and,
7. The desired store image (interior design elements):
a) Fixtures
b) Displays
 Balance, Dominance, Eye movement,
Gradation, Height of merchandise, Grouping
merchandise, Sales appeal, Keeping it simple
c) Colour
d) Lighting
e) Ceilings
f) Flooring
g) Shelving
THANK YOU!
END OF PRESENTATION