Module 4

Location Selection and Strategies for Retail

Outlets

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Elements in Retail Mix

Location Strategy

Customer Service

Store Display
And Design Merchandise
Assortment

Communication Mix
Pricing

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 What Are the
Three Most Important Things in Retailing?

Location! Location!
Location!

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Eddie Tan/Life File/Getty Images
Why is Store Location Important for a Retailer?

 Location decisions are complex, costs

can be quite high and there is little
flexibility once a site is chosen.

 A store location necessitates a sizeable

investment and a long term commitment.

 Store location affects the long and short

run planning.

 Location is one of the prime

considerations in customer’s store
choice.

 Location decisions have strategic

importance because they can help to F. Schussler/PhotoLink/Getty Images

develop sustainable competitive

advantage. Nidhi Sharma 7-4
Factors influencing retailer’s choice of location
Pedestrian and Vehicular Traffic

Parking facilities

Transportation access

Demand in particular market area

Purchasing power of potential customers

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Factors influencing retailer’s choice of location
Economies of scale of operating in the area

Competition

Potential target customer’s demographic and

lifestyle characteristics

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Types of Retail Locations
Isolated Store

Unplanned Business
District

Planned Shopping
Centers

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Isolated Store
It is a freestanding retail outlet located on
either a highway or a street. There are no
adjacent retailers with which this type of
store shares traffic.

E.g., Big Bazaar, Walmart, Shopper’s Stop

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Advantages
No competition in close proximity
Rental costs are relatively low
There is flexibility, no group rules to be
followed and larger space may be obtained
Isolation is good for stores involved in one-
stop or convenience shopping
Better road and traffic visibility
Easy parking can be arranged

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Disadvantages
Initial customers may be difficult to attract.
Many people will not travel very far to get
one store on a continuous basis.
Advertising expenses may be high
Costs such as outside lightning, security,
ground maintenance and trash collection are
not shared.

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Unplanned Business District
It is a type of retail location where two or
more stores situate together in such a way
that the total arrangement or mix of stores is
not due to prior long range planning.

Four types Unplanned Business District:

1. Central business district
2. Secondary business district
3. Neighborhood business district
4. String
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Central business district
CBD is the hub of retailing in a city. It is
synonymous with the term downtown. CBD
exists where there is greatest density of office
buildings and stores. Both vehicular and
pedestrian traffic are very high.

The arrangement of stores follows no pre-set

format. It depends on first come, first located;
retail trends and luck.

A good example is Connaught Place in New

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 Advantages Disadvantages

Excellent goods/ service Inadequate parking as well as

assortment traffic congestion

Access to public transport Travel time for those living in

suburbs

Variety of store types High rents and taxes for the most
popular sites.

Wide range of prices and Movement of popular downtown

customer services stores to suburban shopping
centers.
High level of pedestrian traffic

Nearness to commercial facilities

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Secondary business district
SBD is an unplanned shopping area in a city. The
kinds of goods and services sold in SBD mirror those
in CBD. However, an SBD has smaller stores, less
width and depth of merchandise assortment, smaller
trading area and it sells higher proportion of
convenience oriented items.

The strengths include a solid product selection,

access to public transportation, less crowding and
more personal services than CBD. The weaknesses
include traffic congestion, aging facilities, parking
difficulties and fewer chain outlets than CBD.

Examples are Sarojini Nagar in New Delhi.

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Neighborhood business district
NBD appeals to the convenience shopping and services
needs of a single residential area. NBD contains several
small stores such as dry cleaners, a stationary store, a
barber shop, beauty shop etc. This type of business
district is situated on the major street of its residential
area.

An NBD offers a good location, long store hours, good

parking and a less hectic atmosphere. While there is
limited selection of goods and services, prices tend to be
higher because to less competition.

Example is Tilak Nagar in New Delhi.

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Planned shopping center
It consist of a group of architecturally unified
commercial establishments on a site that is
centrally owned and managed, designed and
operated as a unit, based on balanced
tenancy and accompanied by parking
facilities.

Shopping malls are examples of planned

shopping center.

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Advantages
Well rounded assortments of goods and
services on long range planning
Strong suburban population
Interest in one-stop shopping
Sharing of common costs
High pedestrian traffic
Access to highways and parking facilities
Generally lower rent and taxes than CBD
Growth of discount malls and other newer
types of shopping centers.
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Disadvantages
Landlord regulations that reduce each
retailer’s flexibility, such as required hours.
Generally higher rents than isolated store
Restrictions on the goods / services that can
be sold by each store.
A competitive environment within the center
Aging facilities of some older centers.

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Target Market and Store location
Political factors
Trade barriers
Economies of scale
Competition
Incentives if any
Availability of merchandise
Proximity to the market

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Infrastructural facilities
Climate conditions
Subsidies and tax exemptions
Labour and wages
Banking facilities
Community attitudes
Availability of funds
Cost of land
Flexibility potential

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Retail location research
and techniques

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Trading Area Analysis
Trading area is “a geographic area containing
the customers of a particular firm or group of
firms for specific goods or services.” The first
step in the choice of retail store location is to
describe and evaluate alternate trading areas
and then decide the most desirable one.

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 Thorough analysis of trading area provides
several benefits:
Consumers’ demographic and socioeconomic
characteristics are examined

Focus of promotional activities is ascertained and

the retailer can look at media coverage patterns
of proposed or existing locations.

Retailer can learn whether the location of

proposed branch store will service new
customers or take business from existing stores.
(Trading-area overlap).
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Chains anticipate whether competitors want to open
nearby stores if the firm does not do so itself.

The best number of stores for a chain to operate in

a given area is calculated.

Geographic weaknesses are highlighted.

Retailers must examine how customers shopping

behavior is changing due to web.

Financial institution, transportation, labor

availability, supplier location, legal restrictions and
so on can be learned from trading area examination.
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Size and shape of trading area
Each trading area has three parts:

The primary trading area encompasses 50 to 80 percent

of store’s customers. It is the area closest to the store
and possesses the highest density of customers to
population and highest sales.

The secondary trading area contains additional 15 to 25

percent of store’s customers. It is located outside the
primary area and customers are more widely dispersed.

The fringe trading area includes all the remaining

customers that are the most widely dispersed.

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The Trading Area of a New Store
Different tools can be used to evaluate a
particular trading area in terms of
opportunities rather than current
patronage and traffic patterns

Trend analysis
Consumer surveys
Computerized trading area analysis models

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Computerized Trading-Area Analysis Models

Analog Model

Regression Model

Gravity Model

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An analog model is the simplest and most popular
trading area analysis model. Potential sales for a new
store are estimated on the basis of revenue for stores
in existing areas, competition at prospective location
and size and density of primary trading area.

Regression model uses a series of mathematical

equations showing association between potential
store sales and several independent variables at each
location such as population size, average income,
nearby competitors, traffic barriers .

Gravity model is based on the principle that people

are drawn to stores that are closer and more
attractive than competitor’s stores.
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Retail Organization Design and Structures
Organization structure is a formal system wherein the
various activities to be performed by specific employees
are identified and delegated, clearly indicating their
lines of authority and responsibility.

The system of delegation is designed to support the

accomplishment of goals and make decisions to
implement strategies.

The first step while working out the organization

structure is to determine the tasks to be performed by
the retailing firm. These activities can be categorized as
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STRATEGIC MERCHANDIS STORE OPERATIONS
MANAGEMEN E MANAGEMEN MANAGEMEN
T MANAGEMEN T T
T
Develop retail Buying Recruit, select, Carry out
strategy merchandise train and promotion
evaluate store activities
personnel

Identify target Control Maintain stores Distribution of

market merchandise merchandise ,
inventory store and ship
merchandise

Workout retail Pricing Repair and Financial

format merchandise alter control
merchandise technique
Identify Prevent
location site inventory
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