Elements in Retail Mix

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Location Strategy

Customer Service Store Display And Design Merchandise Assortment Communication Mix RMM Pricing Pooja Sehgal Tabeck

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Importance of Location
Marketing opportunities should be BEST at location. Retailer must take the store to where the people are. Every store strives for its competitive advantage.

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RETAIL STRATEGY AND LOCATION

Before deciding where your retail location should be, you first need to decide what business you are actually in.

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Role of location in retail business

Location becomes a very critical decision for a retailer for several reasons

location is generally one of the most important factors customers consider while choosing a store
store location is the least flexible element of a retailers strategy mix due to its fixed nature, the amount of investment and the length of lease agreements

good location may let a retailer succeed even if its strategic mix is mediocre
a store inherits a lot of its character from its location

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CHOSSING A STORE LOCATION

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RETAILER INVESTIGATES ALTERNATIVE TRADING AREA

DETERMINE WHAT TYPE OF LOCATION IS DESIRABLE

SELECTS THE GENERAL LOCATION

EVALUATE ALTERNATIVE SPECIFIC STORE SITES

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A geographical area containing customers of a particular firm or group of firms for specific goods or services.
OR A district size of which is usually determined by boundaries within which it is Economical in terms of volume and cost for marketing unit or group to sell and/or deliver a good or service.
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TYPES OF LOCATIONS

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ISOLATED STORE UNPLANNED BUSINESS DISTRICTS PLANNED SHOPPING CENTER

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Isolated Retail Locations

Freestanding Sites location for individual store unconnected to other retailer
Advantages:
Convenience High traffic and visibility Modest occupancy cost Separation from competition customers

Disadvantages:
Travel Distance No Cost Sharing High advertising expenses Difficulty in attracting

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Unplanned Business District

Is a type of retail location where two or more stores situated together in such a way that the total arrangement or mix is not due to prior long range planning.

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Central Business District

CBD exists where there is greatest density of office building & stores

Advantage to Retailers:
Affluence returned Young professionals Returned empty-nesters Incentives to move provided by cities Jobs! Low occupancy costs High pedestrian traffic

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Central Business District

Draws people into areas during business hours Hub for public transportation Pedestrian traffic Residents
Advantages Disadvantages
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High security required Shoplifting Parking is poor

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Unplanned Business Districts

Secondary Business District (Main Street Location) Neighborhood Business District String

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Inner City
Unmet demand tops 25% in many inner city markets Inner city customer wants branded merchandise

Inner city retailers achieve high sales volume, higher margins and higher profits

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Planned Shopping Centers

Shopping Center Management Controls:
Parking Security Parking lot lighting Outdoor signage Advertising Special events for customers
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Types of Shopping Centers

Regional Shopping Center Power Centers Lifestyle Centers Fashion Specialty Centers Outlet Centers

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Power Centers
Big box stores Available parking

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Open air set up Many located near enclosed malls Large trade areas Convenient Desirable shopping experience

Free-standing stores
Low occupancy costs Limited small specialty stores
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Modest vehicular and pedestrian traffic Pooja Sehgal Tabeck

Lifestyle Centers

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Usually located in affluent residential neighborhoods

Includes 50K sq. ft. of upscale chain specialty stores

Open-air configuration Design ambience and amenities Upscale stores Restaurants and often a cinema or other entertainment Small department store format may be there
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Fashion Specialty Centers

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Upscale apparel shops Need to be anchored Dcor is elegant

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Outlet Centers

These shopping centers contain mostly manufacturers and retail outlet stores

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Tradeoff Between Locations

There are relative advantages and disadvantages to consider with each location.

Rent Traffic

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Relative Advantages of Major Retail Locations

Location
Issues Large size draws people to area

City

Strip
Center

Shopping
Mall

Free
Standing

People working/living in area provided source of customers

Source of entertainment/ recreation Protection against weather

+ +

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Relative Advantages of Major Retail Locations

Location
Issues Security Long, uniform hours of operation Planned shopping area/balanced tenant mix Parking Occupancy costs (e.g. rent)
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CBD

Strip
Center

Shopping
Mall

Free
Standing

+ -

+ + +

+ -

+ +
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+ +

Relative Advantages of Major Retail Locations

Location Issues Pedestrian traffic Landlord City Strip Center Shopping Mall Free

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Standing

+ + +
?

+ +
?

+ ?

+ +
?

control
Strong competition Tax incentives

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Other Retail Location Opportunities

Mixed Use Developments Airports Resorts Hospitals Store within a Store

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Floor area ratio (FAR) or floor space index (FSI) is the ratio of the total floor area of buildings on a certain location to the size of the land of that location, or the limit imposed on such a ratio . As a formula: Floor area ratio = (Total covered area on all floors of all buildings on a certain plot)/(Area of the plot )
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Matching Location to Retail Strategy

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Department Stores Regional Mall Specialty Apparel Central Business District, Regional Malls Category Specialists Power Centers, Free Standing Grocery Stores Strip Shopping Centers Drug Stores Stand Alone

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TERMS OF OCCUPANCY
Ownership Vs Leasing
Sale-leaseback

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

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Terms of the Lease

Prohibited Use Clause Exclusive Use Clause Escape Clause

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Environmental Issues

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Above-ground risks - such as asbestos-containing

materials or lead pipes used in construction.

Hazardous materials - e.g. dry cleaning chemicals,

motor oil, that have been stored in the ground.

Retailers Protection
Stipulate in the lease that the lessor is responsible for removal and disposal of this material if its found. Retailer can buy insurance that specifically protects it from these risks.
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Other Legal Issues

Zoning and Building Codes

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Zoning determines how a particular site can be used. Building codes determine the type of building, signs, size, type of parking lot, etc. that can be used

Signs
Restrictions on the use of signs can also impact a particular sites desirability

Licensing Requirements
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Some areas may restrict or require a license for alcoholic beverages Pooja Sehgal Tabeck

Location and Retail Strategy

Shopping Behavior of Consumers Density of Target Markets Uniqueness of Retail Offering

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Factors Affecting the Demand for a Region or Trade Area

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Competition
Saturated Trade Area
Understored Trade Area Overstored Trade Area

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Operating Costs
Varies across areas Affected by proximity of area considered vs. other areas where retailer operates Local and state legal environment has effect

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How Many Stores to Open in an Area?

Economies of Scale
One promotional costs for all stores

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vs.

Cannabilization
open stores as long as profits increase

Justifies cost of distribution center

Increases sales per store

Target needs of regional market

Management has control of market

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Evaluating a Site
When evaluating and selecting a specific site, retailers consider: The characteristic of the site The characteristic of the trading area The estimated potential sales that can be generated

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Site Characteristics

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Traffic Flow and Accessibility

When traffic is greater, more customers shop Good for convenience retailers Not necessary for destination retailers Too much can impede access to store Accessibility to store is as important as traffic flow
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Convenience of Going to Site Accessibility

Road pattern and condition

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Natural and artificial barriers Visibility

Traffic flow
Parking Congestion Ingress/egress
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What Should Retailers Consider for Parking?

Observe shopping center at various times Employee parking availability Shoppers that use cars Parking by non-shoppers Typical length of a shopping trip

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Adjacent Tenants

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Principle of Cumulative Attractiveness

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Cost and Restrictions

Costs

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Rent Common Area Maintenance Fee/Insurance Advertising Fee

Restrictions
Signage Tenant Mix Operating hours
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Steps in Evaluating Sales Potential of a Site

Define Trade Area
Drive Time vs. Geographic Distance Primary, Secondary, Tertiary

Estimate Sales Potential

Gravity Model Analog Approach Regression Analysis
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Trade Area

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Primary zone - 60 to 65 percent of its customers Secondary zone - 20 percent of a stores sales

Tertiary zone - customers who occasionally shop at the store or shopping center

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Factors Defining Trade Areas

Accessibility

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Natural & Physical Barriers

Type of Shopping Area Type of Store Competition Parasite Stores
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INFORMATION REQUIRED FOR DEFINING TRADE AREA

HOW MANY PEOPLE ARE IN TRADE AREA , WHERE DO THEY LIVE Customer Spotting

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POTENTIAL CUSTOMERS

Use Census Data Geodemographic Information Systems

ASSES COMPETITION
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Information on Competition Yellow Pages

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Customer Spotting

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Purpose: to spot, or locate, the residences of customers for a store or shopping center. How to obtain data:

credit card or checks

customer loyalty programs manually as part of the checkout process automobile license plates
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Census Data of the India

Only once in 10 years. Each household in the country is counted to determine the number of persons per household, household relationships, sex, race, age and marital status.

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Geographic Information System (GIS)

GIS a system of hardware and software used to store, retrieve, map and analyze geographic data along with the operating personnel and the data that goes into the system. coordinate system (latitude and longitude) special features (rivers and roads) some firms offer services combine GIS with updated census data, consumer spending patterns and lifestyles
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GIS Components
Physical Geography
Latitude/Longitude Land/Water Terrain Rainfall/Snow Temperature

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Cultural Geography

Data Inputs

Demographics Manmade Structures Consumption Patterns Work Patterns Leisure Behavior Deviant Behavior

GIS (Data Aggregation and Analysis via Computer) Output Maps and Other Displays of Information
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Indices for Assessing Sales Potential

Market Potential Index (MPI)

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Measures the demand of a Product or Service in a Trade Area MPI compares the demand of a product or service in the trade area with the demand of product or service nationally.

Spending Potential Index (SPI)

Average Amount Spent on a Product or Service by a Household in a Trade Area
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Retail Location Theories

Central Place Theory Spatial Interaction Theory Principle of Minimum Differentiation

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Methods of Delineating the Trading Area of New Store A Gravity Model

Analog Approach
Regression Analysis
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Reillys law of retail gravitation, a traditional means of trading-area delineation, establishes a point of indifference between two cities or communities, so the trading area of each can be determined
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Gives the point of indifference between two cities Point of indifference is the geographic breakpoint between two cities (communities) at which consumers are indifferent to shopping at either.
Limit of city As trading area (measured in miles along the road to city B)

Dab
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d Pb 1 Pa
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Distance in miles along a major roadway between the cities

Population of city b

Population of city a

REILLYS LAW

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It establishes a point of indifference between two cities, so that trading area of each can be determined. Point of indifference is geographic breaking point between two cities, at which consumes are indifferent to shopping from either.

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RMM

Distance is only measured by major thoroughfares; some people will travel shorter distances along cross streets Travel time does not reflect distance traveled. Many people are more concerned with time traveled than with distance Actual distance may not correspond with perceptions of distance
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Huffs Gravity Model

BASIS OF HUFFS LAW

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1. PRODUCT ASSORTMENT CARRIED AT VARIOUS SHOPPING CENTERS 2. TRAVEL TIME FROM SHOPPERS HOME TO ALTERNATIVE LOCATION 3. SENSITIVITY OF THE KIND OF SHOPPING TO TRAVEL TIME.

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Huffs Gravity Model

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P = Probability of consumers traveling from home I to shopping location j S= Square footage of selling space in shopping location j expected to be devoted to particular product category T= travel time from consumers home I to shopping location j =parameter used to estimate the effect of travel time on different kind of shopping trips N= no. of different shopping locations
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ANALOG APPROCH

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ALSO KNOWN AS SIMILAR STORE APPROCH

DIVIDED INTO 3 STEPS

STEP-1 . Define Current Trade Area

STEP -2 Based on density of customers tertiary trade zones are defined

STEP-3 Match characteristics of current store with potential new store location to determine best site
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