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RETAIL LOCATIONS

Agenda
Shopping Centers, Malls, City or town etc.
Various types of locations and retail strategy,
Site location
Factors affecting the demand for a region &
attractiveness of a site

Shopping Centers
The term Shopping Center has been evolving since the early
1950s
A shopping center is a group of retail and other commercial
establishments that is planned, developed, owned, and
managed as a single property
The two main configurations of shopping centers are :
1.Strip Shopping Centers ,and,
2.Enclosed Shopping Malls

Strip Shopping Centers


Strip Shopping Centers are shopping centers that usually have
parking directly in front of the stores
Open canopies may connect the store fronts, but a Strip Center does
not have enclosed walkways linking the stores
The primary advantages of Strip Shopping Centers are that they offer
customers convenient locations and easy parking and they entail
relatively low rents for retailers
The primary disadvantages are that there is no protection from the
weather, and they offer less assortment and entertainment options for
customers than malls
As a result, Strip Centers do not attract as many customers as larger
shopping centers

Strip Shopping Centers


There are two types of Strip Shopping Centers:
a)Traditional Strip Centers
b)Power Centers

Strip Shopping Centers


Traditional Shopping Center is a shopping center that is designed to
provide convenient shopping for the day- to- day needs of consumers in
their immediate neighborhood
They can offer lower prices, partly because of the lower rents, plus their
customers can drive right up to the door

Strip Shopping Centers


Power

Center is a shopping center that is dominated by several


large anchors, including discount stores
(Target), off- price stores(Marshalls), warehouse clubs (Costco), or
category specialists such as Home Depot, Office Depot etc.

Shopping Malls
Shopping Malls are shopping centers in which customers
park in outlying areas and walk to the stores
Traditional malls are enclosed
Hence, customers are protected from the weather

Advantages of Shopping Malls

Shopping malls have several advantages over alternative locations


First, because of the many different types of stores, the merchandise
assortments available within those stores,
The opportunity to combine shopping with entertainment
shopping malls have become very popular with todays shoppers

Advantages of Shopping Malls


The second major advantage of locating in a shopping mall is that
the tenant mix can be planned.

Shopping mall owners control the number of different types of


retailers so that customers can have a one- stop shopping experience
with a well- balanced assortment of merchandise.

The third advantage of shopping malls is that the retailers and their
customers dont have to worry about their external environment. The
malls management takes care of maintenance of common areas.

Disadvantages of Shopping Malls


Although shopping Malls are an excellent site option for many
retailers, they have some disadvantages.
First, mall rents are higher than those of some strip centers,
freestanding sites, and many central business districts.
Second, some tenants may not like mall managers control of their
operations. Mall managers can, for instance, dictate store hours and
window displays.
Finally, competition within shopping centers can be intense. It may
be hard for small specialty stores to compete with large department
stores. In the past few years, some shopping centers have had a
particularly hard time keeping their space rented.

De- malling
A more extreme approach to revitalizing a mall is known as Demalling
De- malling usually involves demolishing a malls small shops,
scrapping its common space and food courts, enlarging the sites
once occupied by department stores, and adding more entrances
onto the parking lot.
For example, Anaheim Plaza was one of the first enclosed malls in
Orange County, California, near Disneyland. During the 1980s, it
had lost most of its original glamour. Its owner bulldozed most of
the mall and built in its place a string of stores, opening onto a
parking lot. The new tenants include a Wal- Mart, CompUsa, Old
Navy, Radio Shack, Petco, and Payless Shoes

Regional Centers
A regional center is a shopping mall that provides general
merchandise (a large percentage of which is apparel) and services
in full depth and variety.
Its main attractions are its anchors, department and discount
stores, or fashion specialty stores.
A typical regional center is usually enclosed with an inward
orientation of the stores connected by a common walkway, with
parking surrounding the outside perimeter.

Superregional Center
A superregional center is a shopping center that is similar to a
regional center, but because of its larger size, it has more anchors
and a deeper selection of merchandise, and it draws from a larger
population base.

Lifestyle Centers
Lifestyle center is an outdoor traditional streetscape
layout with sit- down restaurants and a conglomeration of
retailers such as Williams- Sonoma, Pottery Barn, and Eddie
Bauer. But there are no self- service discount stores like Best
Buy or Target.
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The lifestyle centers offer shoppers convenience, safety, an


optimum tenant mix, and a pleasant atmosphere.

Fashion/ Specialty Centers


A fashion/ specialty center is a shopping center that is composed
mainly of upscale apparel shops, boutiques, and gift shops carrying
selected fashions or unique merchandise of high quality and
merchandise.
These centers need not be anchored, although sometimes gourmet
restaurants , drinking establishments, and theaters can function as
anchors.
The physical design of these centers is very sophisticated,
emphasizing a rich decor and a high- quality landscaping.

Outlet Centers
Outlet Centers are shopping centers that consist mainly
mostly of manufacturers outlet stores selling their own
brands, supposedly at a discount.
Outlet center tenants view this location option as an
opportunity to get rid of excess or distressed merchandise,
sell more merchandise, and, to a lesser extent, test new
merchandise ideas

Theme/ Festival Centers


Theme/ Festival Centers are shopping centers that typically employ a
unifying theme that is carried out by the individual shops in their
architectural design and, to an extent, in their merchandise. The
biggest appeal of these centers is to tourists.
A Theme/ Festival Center can be located in a place of historical
interest such as Faneuil Hall in Boston or Ghirardelli Square in San
Francisco. Alternatively, they can attempt to replicate a historical
place (such as the Old Mill Center in Mountain View, California) or
create a unique shopping environment (like MCAs City Walk in Los
Angeles).

Merchandise Kiosks
Although not a type of shopping mall, Merchandise Kiosks are found
in shopping malls of all types and are a popular location alternative
for retailers with small space needs.
Merchandise Kiosks are small selling spaces offering a limited
merchandise assortment.
These selling spaces are typically between 40 and 500 square feet and
can be in prime mall locations.
They are relatively inexpensive compared to a regular store.
They usually have short- term leases, shielding tenants from the
liability of having to pay long- term rent in case the business fails.
Some merchandise kiosks operate seasonally, for instance, selling
polar fleece in winter and baseball hats in summer.

City or Town Locations


Central Business Districts (CBD): The Central Business District
(CBD) is the traditional business area in a city or town. Due to its
business activity, it draws many people into the area during business
hours. Also, people must go to the area for work. The CBD is also
the hub for public transportation, and there is a high level of
pedestrian traffic. Finally, the most successful CBDs for retail trade
are those with a large number of residents living in the area.
Inner- City Locations: Another city or town location alternative is
the inner city. The inner city is typically a high- density urban area
consisting of apartment buildings populated primarily by ethnic
groups: African Americans, Hispanics, and Asians. There are about 8
million households in Americas inner- cities.

Main Street Locations


Main Street is the CBD located in the traditional shopping area of
smaller towns, or a secondary business district in a suburb or within
a larger city.
Main Streets share most of the characteristics of the primary CBD.
But their occupancy costs are generally lower than that of the primary
CBD.
They do not draw as many people as the primary CBD because fewer
people work in the area, and fewer stores generally mean a smaller
overall selection.
Finally, Main Streets typically dont offer the entertainment and
recreational activities available in the more successful primary CBDs.

Freestanding Sites

Although most retailers locate in strip centers or planned shopping malls, a


frequent option for large retailers is a freestanding site

A freestanding site is a retail location thats not connected to other retailers,


although many are located adjacent to malls.

Retailers with large space requirements, such as warehouse clubs and


hypermarkets, are often freestanding.

Advantages of freestanding locations are greater visibility, lower rents,


ample parking, no direct competition, greater convenience for customers,
fewer restrictions on signs, hours, or merchandise (which might be imposed
in a merchandise), and ease of expansion.

The most serious disadvantage of freestanding sites is the lack of synergy


with other stores.

Other Retail Location Opportunities

Mixed- Use Developments (MXDs): combine several different uses in one


complex, including shopping centers, office towers, hotels, residential
complexes, civic centers, and convention centers.MXDs are popular with
retailers because they bring additional shoppers to their stores. Developers
like MXDs because they use space productively. For instance, land costs
the same whether a developer builds a shopping mall by itself or builds an
office tower over the mall or parking structure.

Airports: One important high- pedestrian area that has become popular
with national retail chains is airports. After all, what better way to spend
waiting time than to have a Starbucks coffee or stop into Victorias Secret?
Sales per square foot at airport malls are often three to four times as high as
at regular mall stores.

Resorts: Who needs anchor stores to bring in customers when there are
mountains or a beach to attract people? Retailers view resorts as prime
location opportunities. There is a captive audience of well- to- do customers
with lots of time on their hands.

Other Retail Location Opportunities

Hospitals: are an increasingly popular location alternative. Both patients


and their guests often have time to shop. Necessities are important for
patients since they cant readily leave. Gift- giving opportunities abound.
At the University Pointe hospital in West Chester, Ohio, there is 75, 000
square feet of retail space filled with restaurants serving healthy fare and
a host of health- related stores and services, such as a day spa.

Store within a Store: Another non- traditional location for retailers is


within other, larger stores. Retailers, particularly department stores, have
traditionally leased space to other retailers such as sellers of fine jewelry
or furs.

Location and Retail Strategy

Department Stores: are usually located in central business districts and


regional or superregional shopping centers. Departmental stores have
historically been the backbone of CBDs. Since the 1950s, they have
become the anchors for most regional and superregional shopping centers.

Specialty Apparel Stores: thrive in central business districts, Main Street


locations, and most types of malls, including regional and superregional
shopping centers, lifestyle centers, fashion/ specialty centers, and theme/
festival centers. These locations appeal to these specialty stores for the
same reasons that they are popular with department stores: They are all
capable of drawing large numbers of people, and they provide
entertainment and recreational opportunities for their customers. Shopping
centers also provide security, uniform and long hours of operation,
protection against weather, and a balanced tenant mix that is consistent
with their target market.

Location and Retail Strategy

Category Specialists: like Home Depot and Staples are likely to be found
in power centers or in freestanding locations. They choose power centers or
freestanding locations for several reasons. First, such stores typically
compete on price, and these locations cost less than CBDs or malls.
Second, easy access to parking is important to customers of category
specialists since purchasers are often large and difficult to carry. Finally,
category specialists are destination stores. A destination store is one in
which the merchandise, selection, presentation, pricing, or other unique
features act as a magnet for customers.

Grocery Stores: are typically locate din strip centers. Like category
specialists, grocery stores are price competitive, and strip centers have
relatively inexpensive rent. These centers readily accessible parking is also
important to grocery store customers. People generally arent willing to
travel long distances to shop for groceries.

Factors affecting the Demand for a Region or


Trade Area
The best regions and trade areas are those that generate the highest
demand or sales for a retailer
To assess overall demand in a particular region/ market or trade area, the
retail location analyst considers economies of scale versus cannibalization,
the populations demographic and lifestyle characteristics, the business
climate, competition from other retailers in the area, and the retailers
propensity to manage multiple stores
Locating in a trade area outside a retailers home country requires the
analyst to examine all these factors, plus additional issues such as
differences in the legal, political, and cultural environment

Economies of Scale versus


Cannibalization
At first glance, you would expect that a retailer should choose the one best
location in a given trade area
But most chains plan to go into an area with a network of stores
After all, promotion and distribution economies of scale can be achieved with
multiple locations
The total cost is the same to run a newspaper ad for a retailer with 20 stores
in an area as it is if the retailer has only one store
Likewise, chains like Wal-Mart expand into areas only where they have a
distribution center designed to support the stores
The question is, what is the best number of stores to have in an area?
The answer depends on who owns the stores

Economies of Scale versus


Cannibalization
For company- owned stores, the objective is to maximize profits for the
entire chain
In this case, the retailer would continue to open stores as long as the
marginal revenues achieved by opening a new store are greater than the
marginal costs
For franchise operations, however, each individual franchise owner wants
to maximize his or her profits
Some franchisors grant their franchisees an exclusive geographic territory
so that other stores under the same franchise do not compete directly with
them
In other franchise operations, the franchisees have not been afforded this
protection and often have been involved in very antagonistic negotiations
with the franchisors to in a n attempt to protect their investment

Demographic and Lifestyle


Characteristics
In most cases, where the general population is growing are preferable to
those with declining populations
The household income in the trade area should also be relatively high
Size and composition of households in an area can also be important
success determinants
Finally, lifestyle characteristics of the population may be relevant
depending on the target market (s) a particular retailer is pursuing

Business Climate
Its important to examine a markets employment trends because a high
level of employment usually means high purchasing power
Also, its useful to determine which areas are growing quickly and why
For instance, the east side of Seattle, Washington, has become a
desirable retail location because of its proximity to Microsofts corporate
headquarters
Retail location analysts must determine how long such growth will
continue and how it will affect demand for their merchandise

Competition
The level of competition in an area also affects demand for a retailers
merchandise
The level of competition can be defined as saturated, understored, or overstored
A saturated trade area offers customers a good selection of goods and services,
while allowing competing retailers to make good profits
Since customers are drawn to these areas because of the great selections,
retailers who believe they can offer customers a superior retail format in terms of
merchandise, pricing, or service may find these areas attractive
Some restaurants such as Burger King seek locations where their major
competition- McDonalds- has a strong presence
Another strategy is to locate in an understored trade area- an area that has too
few stores selling a specific good or service to satisfy the needs of the population
Wal-Marts early success was based on a location strategy of opening stores in
small towns that were relatively understored
In effect, these areas have gone from being understored before Wal-Mart arrived
to being an overstored trade area- having so many stores selling a specific
good or service that some stores will fail
Unable to compete head- to= head with Wal-Mart on price or breadth of
selection, many family- owned retailers in those towns have had to either
reposition their merchandising or service strategies or else go out of business

Span of Managerial Control


Some retailers focus on certain geographic regions or trade areas
For instance, Davenport, Iowa- based Von Maur (www.vonmaur.com) is a
family- owned regional department store chain with 20 stores
Although it can compete with larger, national chains on several dimensions,
one of its advantages stems from its regional orientation
It can maintain a loyal customer base by remaining a regional chain
It has excellent visibility and is well- known throughout the area
Second, its merchandising, pricing, and promotional strategies specifically
target the needs of a regional market rather than a national market
Finally, the management team can have greater locus of control over a
regional market
Managers can easily visit the stores and assess competitive situations

Global Location Issues


Many of the issues and procedures used for making global location
decisions are the same as we have already discussed
The retailer needs to decide on a region, a trade area within that region,
and a specific site
The retailer still needs to examine competition, the population
characteristics, traffic patterns, and the like
What makes global location decisions more difficult and potentially
interesting is that those in charge of making these decisions are typically
not as familiar with the nuances of foreign locations issues as they are
with the same issues in their home country
Refer Page 248 of Levy and Weitz Text for more info

Factors affecting the attractiveness of a


site
Accessibility

The accessibility of a site is the ease with which a customer may get into and out
of it. The accessibility analysis has two stages: a macro analysis and then a
micro analysis
Macro Analysis: The macro analysis considers the primary trade area, such as
the area two to three miles (1 mile= approximately 1.5 km) around the site in
the case of a supermarket or drugstore. To assess a sites accessibility on a
macro level, the retailer simultaneously evaluates several factors, such as road
patterns, road conditions, and barriers.
In the macro analysis, the analyst should consider the road pattern. The primary
trade area needs
Micro Analysis: The micro analysis concentrates on issues in the immediate
vicinity of the site, such as visibility, traffic flow, parking, congestion, and ingress/
egress (entry/ exit)
Visibility refers to customers ability to see the store and enter the parking lot
safely
The success of a site with a good traffic flow is a question of balance. The site
should have a substantial number of cars per day but not so many that
congestion impedes access to the store.
The amount and quality of parking facilities are critical to a shopping centers
overall accessibility

Factors affecting the attractiveness of a


site
Congestion can refer to the amount of crowding of either cars or people
Theres some optimal range of comfortable congestion for customers
Too much congestion can make shopping slow, irritate customers, and
generally discourage sales
The last factor to consider in the accessibility analysis is ingress/ egressthe ease of entering and exiting the sites parking lot
Locational Advantages within a Center
Once the centers accessibility is evaluated, the analyst must evaluate the
locations within it
Since the better locations cost more, retailers must consider their importanc