Lecture Retailing management (6e) Chapter 8 Levy Weitz

Chapter 8
Retail Site Location

McGraw-Hill/Irwin
Retailing Management, 6/e

Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved.


8-2

Retailing Strategy
Human Resource
Management
Chapter 9

Retail Market and
Financial Strategy
Chapter 5, 6
Retail Locations
Chapter 7
Site Locations
Chapter 8
Information and
Distribution
Systems
Chapter 10

Customer
Relationship
Management

Chapter 11


8-3

Location Chapters
• Chapter 7
– General Description of the Location Types
– Advantages and Disadvantages of Different
Location

• Chapter 8
– Considerations in Selecting Area for Locating
Store
– Issues in Evaluating Specific Sites


Factors Affecting the Demand for a
Region or Trade Area

8-4


8-5

Economic Conditions

It is important to examine an area’s level and growth of population and employment

8-6

Competition
Some retailers are going urban:
Lack of competition
High level of disposable income
Large, untapped labor force

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8-7

Strategic Fit
Ann Taylor – High income, dual career families
Hot Topic – teen, pop culture, grunge

Royalty-Free/CORBIS

McDonald’s – families with kids

REI – outdoor enthusiasts
The McGraw-Hill Companies, Inc./John Flournoy,
photographer


8-8

Operating Costs
• Varies across areas

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

Nick Koudis/Getty Images


8-9

How Many Stores to Open in an Area?
Economies of Scale
One promotional costs for all stores
as

vs.

Cannabilization
open stores as long
profits increase

Justifies cost of distribution center
Increases sales per store
Target needs of regional market
Management has control of market


810

Evaluating a Site

When evaluating and selecting a specific site, retailers consider:

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•The characteristic of the site
•The characteristic of the trading area
•The estimated potential sales that can be generated


Site Characteristics

811


Traffic Flow and Accessibility

812

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

PhotoLink/Getty Images


Convenience of Going to Site
Accessibility
• Road pattern and condition

• Natural and artificial barriers
• Visibility
• Traffic flow
• Parking
• Congestion
• Ingress/egress
©McGraw-Hill Companies/Jill Braaten, photographer

813


814

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

The McGraw-Hill Companies, Inc./Andrew Resek, photographer

Adjacent Tenants
• What other retailers would Radio Shack
want to be located near?
– Wal-Mart, Supermarket, Best Buy?

• In an enclosed mall, what retailers would
Abercrombie & Fitch want to be located
near?
– American Eagle Outfitter, Ann Taylor, Body
Shop, Electronic Boutique

• Principle of Cumulative Attractiveness

815


816

Grouping Retailers in an Enclosed Mall


Cost and Restrictions

817

• Costs
– Rent
– Common Area Maintenance Fee/Insurance
– Advertising Fee

• Restrictions
– Signage
– Tenant MIx
– Operating hours


818

Steps in Evaluating Sales Potential of a Site
• Define Trade Area
– Drive Time vs. Geographic Distance
– Primary, Secondary, Tertiary

• Estimate Sales Potential
– Huff Model
– Analog Approach
– Regression Analysis


Zones in a Trade Area

819


Trade Area

820

Primary zone - 60 to 65 percent of its customers
Secondary zone - 20 percent of a store’s sales

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

U.S. Geological Survey, ESIC


Factors Defining Trade Areas
•Accessibility
•Natural & Physical Barriers
•Type of Shopping Area
•Type of Store
•Competition
•Parasite Stores

821


Measuring Trade Areas
Customer Spotting
Use Census Data
Geodemographic Information
Systems
Information on Competition
– Yellow Pages

822


Customer Spotting
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

823


Census Data of the U.S.

824

Only once in 10 years.

Ryan McVay/Getty Images

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


Geographic Information System (GIS)

825

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)
• spacial features (rivers and roads)
• some firms offer services combine GIS with updated
census data, consumer spending patterns and lifestyles