Site Selection

Importance of Site Selection

Retail site selection is a very strategic decision.

Once a location is chosen a retailer has to live with it

for some time.

The difference between a better location and a bad

choice can be the difference between success and
failure.

Factors of Demand for a Region or a Trade Area.

In making location (site selection) decisions a retailer

must go for the following simultaneously

Regional Analysis

Trade Area Analysis

Site Analysis

The best region or a trade area is that generate the highest

demand or sales for a retailers merchandise .

Factors of Demand for a Region or a Trade Area

While doing the regional and trade area analysis a retailer

should keep in mind

Economies of Scale vs. Cannibalization

Population Demographic & Lifestyle Characteristics.

Business Climate

Competition.

Factors of Demand for a Region or a Trade Area

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Economies of Scale vs. Cannibalization

Multiple stores in an area or a region.
Advertisement.
In case of a Franchise an exclusive territory is allotted.

Population & Lifestyle Characteristics

The areas where general population is growing are
preferable.
Life style of the population are important depending on
the target market.
The way people spend is as important as how much they
make.

Factors of Demand for a Region or a Trade Area

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2)

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Business Climate
It is important to examine the employment level as
employment means more purchasing.
Earning means of an area should be kept in mind.

Competition.
Level of competition in an area can be defined as
saturated, over stored or under stored.
A saturated trade area offers customers a good selection
of goods and services while it allows the competitors to
earn good profits. Competition is healthy and there are
then means and ways to compete.

Factors of Demand for a Region or a Trade Area

Under stored Area: That has too few stores selling

specific goods and services. These stores experience high
market shares and draw people from surrounding areas.

Over stored Areas: These are areas where you would

find too many stores selling specific goods or services.
Competition would be such that certain players will have
to close down in longer run.

Factors Affecting Attractiveness of a Site

Accessibility: The first factor that makes a particular

site attractive is accessibility. It is the ease with
which a customer can get in and out of the outlet.

Macro Analysis: Macro analysis of a site considers

primary trade area 2 to 3 miles around the site. It
analysis factors like road patterns, road conditions,
and barriers. Barriers could be natural barriers or
artificial barriers.

Factors Affecting Attractiveness of a Site

Micro Analysis: Micro analysis is about vicinity in which

is that particular site. This analysis is about

Visibility: It is the visual advantage for the store and its

parking area in front. The parking area is critical to a
particular site. Factors like congestion, ingress and
egress can be crucial in different circumstances.

Location Advantage within a Center: Location within a

Center can be crucial and one has to look for cumulative
attraction.

Estimating Demand for a New Location

Trade Area: A trade area is a geographic area from

where the retailer is expecting his sale. Trade areas can be
divided into three zones.
Primary Zone: It is the area from where a retailer expects
60 to 65 % of sale.
Secondary Zone: The area from where a retailer expects
further 20% of sale.
Tertiary Zone: An area that gives the retailer 5 to 15%
sale. Customers come occasionally, either on their way to
work or back home.
Actual boundaries of a trade area are defined by Macro
analysis that is accessibility, physical barriers type of
shopping area and competition.

Trade Area

Trade area size is influenced by type of stores or

shopping area.

The difference is due to nature of merchandise sold

and assortment offered.

Another way to look at it is that either it is a

destination or a parasite store.
Destination store is the one which has merchandise
that attracts customers from all around.
Parasite store is the one that does not create its own
traffic but its area is determined by a dominant
retailer around it.

Estimating Demand

A retailer has to estimate demand in an area before

going into business as that might be a factor when
deciding to select merchandise for sale.

These are analog approach, Regression Analysis and

finally the Huffs model.

The more information available means better your

chances.

For our markets best would be to conduct surveys

and analyze sales of competitors and performance of
a market.

Estimating Demand

All the characteristics of a successful business in an

area can be followed and applied to your business
and your strategy mix can make you successful.

Retailers have three types of information to define a

trade area, customer spotting technique, demographic
data and U.S census.

A few points to remember

Retailers consider several issues when assessing a

region, area or site.

They want to know about people and their lifestyles,

area is growing or declining, does the area have a
favorable business climate and the most important
thing is competition.

A sites accessibility and location are the next matters

a retailer should probe.

Retailers can use several approaches to estimate

demand.