Retail Location

Strategy

Presented by: Saptarshi Bagchi

Submitted to: Mr. Tapas Bhattacharya
Roll-05, FMS-1, NIFT, Kolkata
 Objective
• To understand the importance of
Retail Location
• To identify and gauge the
importance of factors influencing
choice of retail location
• To understand the practical
implementation of the theory
Importance of Retail
Retail Site Selection is a very strategic
Location
decision.
•Once a location is chosen, a retailer must live
Once a location is chosen, a retailer must live
with it for many years.
•The difference between moving into a
superior trade area and one that isn’t, can
mean the difference between a successful
store and a failure.
•Furthurmore, even if a retailer finds the right
neighbourhood, the wrong site can spell
disaster.
 Factors affecting the
demand for a region or

•Economies of Scale versus Cannibalization

•Demographic and Lifestyle Characteristics
•Business Climate
•Competition
Economies of Scale vs
Cannibalization
•Promotion and Distribution network
support
•Best Number of stores in an area
Demographic & Lifestyle
Characteristics
•Population growth
•Household income
•Size and composition of household
$ •Education level
•Lifestyle

$ $ $
$ $
$
$ $ $
$ $
Business Climate
•Market’s employment trend
•Economy growth and sustainability
•Diversified growth of industries
Competition
•Saturated trade area
•Understored trade area
Span of Managerial
Control
•Regional geographic orientation
•Regional market orientation
 Global Location issues
•Foreign location issues
•Costs – occupancy cost, rental cost
•Legal restrictions
•Lack of right knowledge

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 Factors affecting the
attractiveness of a site

•Accessibility
•Locational advantage within a centre
 Accessability
•Micro
P analysis
•Visibility
•Parking
P P •Traffic flow
•Congestion
•Ingress/Egress

Macro analysis
•Road patterns
•Road conditions
•Natural & Artifical
barriers

P
Locational advantage within
a centre
•Importance of superior/costly
locations
•Proximity to
supermarket/department store
•Principle of cumulative attraction
 Estimating demand for a
new location

•Trade Area
•Sources of information
•Methods of estimating demand
Trade Area
•A trade area is a contiguous
geographic area that accounts for
the majority of store’s sales and
customers

•Primary zone (60%-65% customers)

•Secondary zone (20% store sales)
•Tertiary zone (Occasional customers)
•Lack adequate retail facilities closer to
home
•Excellent communication system to
reach store
•Drive near store on the way to/from
work
•Store is located near a tourist area
Factors defining trade
areas••Store’s accessibility
Natural and physical
boundaries
•Type of shopping area
•Type of store
•Competition

67
Typical Size & Trading Area of Shopping
Centers
Type of Shopping Center
Neighborhood
Gross Leasable Square Feet
30,000 to 150,000
Primary Trade Area 3
Miles

17
Typical Size & Trading Area of Shopping
Centers
Type of Shopping Center
Community
Gross Leasable Square Feet
100,000 to 350,000
Primary Trade Area 3-6
Miles

18
Typical Size & Trading Area of Shopping
Centers
Type of Shopping Center
Regional
Gross Leasable Square Feet
400,000 to 800,000
Primary Trade Area 5-15
Miles

19
Typical Size & Trading Area of Shopping
Centers
Type of Shopping Center
Super-Regional
Gross Leasable Square Feet
800,000 & more
Primary Trade Area 5-25
Miles

20
Sources of information
•Customer spotting
•National census
•Demographic Data Vendors
•Geographic Information System
(GIS)
•Market Potential Index (MPI)
•Spending Potential Index (SPI)
•Measuring competition
Methods of estimating
demand
The Analog Approach
•The current trade area is determined by
using the customer spotting technique
•Based on the density of the customer
from the store, the primary, secondary and
tertiary trade area zones are defined
•The characteristics of the current store
are matched with the potential new stores’
locations to determine the best site
 Methods of estimating
Regression Analysis
demand
•Primary steps similar to the analogue approach
•Select appropriate measures of performance, such as per capita sales or
market share
•Select a set of variables that may be useful in predicting performance
•Solve the regression equation and use it to project performance for
future sites

Sales = a+b1x1
Sales n
b nx n
j=1
 Methods of estimating
Huff’s Gravity Model demand
•Loosely based on Newton’s law of gravity
•Built on premise that the probability that a given customer will shop in
a particular store or a shopping centre becomes larger as the size of the
store or centre grows and the distance or travel time from customers to
the store or centre shrinks
•Objective is to determine the probability that a customer residing in
particular area will shop at a particular store or shopping centre

Sj+Tijb
Pij
n
Sj +
j =b
Tij
Sales n I Pij
= j=1
 Methods of estimating
The best method demand
•The more information available, the better outcome likely to be
•Analog and Huff’s models are best when number of stores with
obtainable data is small < 30
•Regression approach best when there are multiple variables expected
to explain sales
•Huff gravity model explicitly considers the attractiveness of competition
and customer’s distance or travel time to the store or shopping centre
•Since Huff’s gravity model usually does not utilise demographic
variables, its important to use it in conjunction with the analog or
regression methods
 Methods of estimating
Future methodology demand
•It will be easier to store data on customer in data warehouses
•Advance statistical modeling technique such as CHAID (chi square
automatic interaction detection) and Spatial allocation models will
become popular
•GIS will become more sophisticated and more accessible to users
T h a n k
y o u