Location of Retailing, Types, Strategy, Tips, Importance

The location of retailing refers to the specific geographical spot where a retail store is situated. This choice is crucial as it significantly influences the store’s accessibility to its target customers, visibility, and overall success. Factors affecting retail location decisions include foot traffic, proximity to complementary and competing stores, demographics of the surrounding area, ease of access, and the cost of the premises. An optimal retail location can enhance customer influx, brand visibility, and sales, while a poorly chosen location can limit customer access and negatively impact the business’s profitability and growth.

Types of Retail Store location

The primary three types of retail locations that can be considered depending on the nature of the business.

1. Solitary sites

These are single small outlets of shops which are separated from different writers, and they are positioned near other retailers on the roads on the way to shopping centers. Many of the food and non-food retailers use this type of solitary sites.

The primary advantage of having a solitary site is that it is away from the competition and provides the services to the customers, which help the customer to zero down on the product offered by that particular retailer.

However, the shortcomings of having a solitary site are the pedestrian traffic will always be so as compared to a shopping center or a convenience store and the visibility will also business along with the huge amount of investment since the site will be solitary.

2. Unplanned shopping areas

These are the locations of retail stores which have evolved over a long period of time and have multiple outlets in nearby proximities. These are further divided into:

• Central business district such as the downtown areas in major cities
• Secondary business districts on main or high Street
• District neighborhood
• Location switch on the street or on the motorway which is also known as strip locations.

The advantages of having unplanned shopping areas are that there is very high pedestrian traffic during working hours and also because of my residential areas. This ensures a constant pull of customers.

The disadvantage of having unplanned shopping area is that there is a threat of shoplifting because of which high security is required. Also, it may cause inconvenience to other customers, and there are high chances of traffic blocking because of the unavailability of parking facilities.

3. Planned shopping areas

The retail locations which are well planned according to the architecture and provide multiple out that are under the same roof are called as planned shopping areas. They have huge land spaces and the collection of major retail brands. Malls, Speciality, and Lifestyle centers are classified under planned shopping areas.

High visibility to customers and harmful of customers is a major advantage of planned shopping areas. But the disadvantages are that why security is required, and the cost of occupancy is also high.

Retail Location Strategy

1. Understanding the Target Market

• Demographics and Psychographics: Analyze the characteristics, preferences, and behaviors of the target customers. This includes age, income, lifestyle, and shopping habits.
• Market Size and Potential: Estimate the size of the target market and its purchasing power in different locations.

2. Analyzing Trade Areas

• Primary, Secondary, and Tertiary Markets: Identify the geographic areas from which the majority of the store’s customers will come, including the core market and areas of diminishing returns.
• Competition Analysis: Evaluate the presence, strength, and market share of competitors within these areas to assess market saturation and opportunities.

3. Site Selection Criteria

• Visibility and Accessibility: Choose locations that are easily seen and reached by the target market, considering factors like foot traffic, vehicle traffic, and public transportation access.
• Proximity to Complementary Businesses: Being near businesses that offer complementary products or services can attract additional foot traffic.
• Lease Terms and Costs: Evaluate the affordability and terms of leasing or purchasing property, considering long-term financial sustainability.

4. Evaluating Location Types

• Shopping Centers and Malls: These can offer high foot traffic and the advantage of being a shopping destination.
• High Street Locations: Offer visibility and foot traffic in urban or densely populated areas.
• Out-of-Town Locations: Suitable for larger stores requiring more space, often with better parking and accessibility by car.
• Pop-up Stores and Temporary Locations: Can be used to test markets, products, or to take advantage of seasonal shopping trends.

5. Use of Technology and Data

• Geographic Information Systems (GIS): Utilize GIS for mapping demographics, traffic patterns, and competitor locations to aid in decision-making.
• Customer Data Analysis: Leverage data from online sales, social media, and loyalty programs to understand customer preferences and behaviors in different regions.

6. Legal and Regulatory Considerations

Investigate zoning laws, permits, and other regulatory requirements that could affect the choice of location or the timing of store openings.

7. Flexibility and Scalability

Consider the potential for future expansion, rebranding, or pivoting business models based on market trends and customer feedback.

8. Cost-Benefit Analysis

Perform a comprehensive cost-benefit analysis, comparing the projected revenue and growth potential of a location against the investment and ongoing operational costs.

9. Long-Term Strategic Fit

Ensure the location aligns with the retailer’s long-term strategic goals, brand image, and desired market position.

10. Post-Opening Evaluation

After opening, continuously monitor the performance of the retail location, collecting data on sales, foot traffic, and customer satisfaction to validate the location decision or to inform future expansions or relocations.

Tips to have a good Retail Location

Choosing the right education is crucial in terms of business, as stated above. As such, there are different rules which govern choosing of location for retail store depending on the nature of the business and the target audience.

However, the following are a few of the steps which can be applied by almost all the retailers in order to find the right retail location.

1. Market analysis

The company has to analyze the market in terms of their product and industry along with the nature of competition and the presence of competition. The company also has to consider how old are there in the market and how many some other businesses are there in the current location.

They have to check and analyze the market to know how far is the competition been successful in satisfying the customers. The company also has to analyze how convenient is the location in terms of supply chain management and warehousing in order to make the products available on a daily basis.

2. Demographics of the market

The demographics of locality is essential to be considered in order to choose the retail location. The age group of the customer, profession, Lifestyle, profession, religion income groups, etc.

3. Market potential evaluation

The paying capacity of the population plays an important role in the evaluation of the potential of the market, along with the impact of the competition and the product estimation and demand. The retailer should also have the knowledge of regulations and laws of the country in which the store is being operated.

Other things such as communal festivals which have an impact on the demand should also be considered by the business such as Christmas.

4. Identification of alternatives

Most of the times it so happens that the retailers in hurry of starting the business finalize a location which costs them a fortune within fact a similar location with similar business potential would’ve been available somewhere very close which was neglected or overlooked.

In such cases, the retailer should not carry on finalizing the retail location and should also go out for alternatives and evaluate that location with similar parameters as stated above.

5. Allocation of marketing budget

A retail store should have a marketing budget depending on the cost of the location, which is in the third to build the brick and mortar place. The store which is occupying a prime location and has a good inflow of customers has indeed cost a fortune for the retailer.

In such cases, the marketing budget will be very less since the story is visible to most of the customers and passers-by. On the contrary, a store which is located away from the main street should use more marketing campaigns and spend on marketing collaterals in order to attract more customers to the store.

With the advent of social media marketing, the store has become even cheaper. People can advertise about their Store on Google with a very small budget and can ensure every I reach to potential customers not only across the neighborhood but also across other neighborhoods as well.

How to Measure the Success of Retail Location?

• Sales Revenue

Track the total sales revenue over specific periods (monthly, quarterly, annually) to gauge the store’s performance. An increasing trend indicates a successful location.

• Foot Traffic

Measure the number of people entering the store. Higher foot traffic usually correlates with higher sales potential. Tools like foot traffic counters can provide these insights.

• Conversion Rate

Calculate the percentage of visitors who make a purchase (sales transactions divided by foot traffic). A high conversion rate signifies effective customer engagement and product appeal.

• Profit Margins

Evaluate the store’s profitability by analyzing the profit margins. This considers not just sales but also the costs of goods sold and operational expenses tied to the location.

• Customer Satisfaction and Loyalty

Use customer feedback, surveys, and loyalty program participation to assess customer satisfaction and repeat business. High satisfaction and loyalty levels are indicators of a successful retail location.

• Competitive Position

Assess the store’s performance relative to nearby competitors. A strong competitive position in the local market indicates a successful location strategy.

• Lease and Operating Costs

Compare the cost of leasing and operating the retail space against revenue. Locations where the sales revenue significantly exceeds operational costs contribute positively to the overall success.

• Local Market Penetration

Analyze market share and penetration within the local area. A growing market share signifies a successful expansion and customer base development.

• Inventory Turnover

High inventory turnover rates can indicate strong sales and effective stock management, reflecting positively on the location’s success.

• Digital Engagement

For retailers integrating online and physical sales, assess how the location contributes to digital engagement and online sales pickups, if applicable.

Tools and Techniques for Measurement:

• Sales Data Analysis: Regularly review sales reports and financial statements.
• Customer Feedback Tools: Utilize surveys, feedback forms, and online reviews to gather customer insights.
• Foot Traffic Counting Technologies: Implement sensors or manual counting methods to measure store visits.
• Market Analysis: Conduct market research to understand your position relative to competitors.

Importance of a Good Retail Store Location

• Customer Accessibility

A prime location is easily accessible to a large number of potential customers. Accessibility increases the likelihood of spontaneous visits and can significantly boost foot traffic, leading to higher sales opportunities.

• Brand Visibility

A good location ensures high visibility to passersby, helping to build brand awareness and attract new customers. Being in a prominent spot can serve as free advertising, keeping the brand in the minds of consumers.

• Market Presence

Being situated in a desirable area can enhance a retailer’s presence in the market. It places the store among other successful businesses, contributing to a positive brand image and reputation.

• Sales and Profitability

The right location directly influences the store’s sales volumes and profitability. High-traffic locations can lead to more customers and sales, which, even considering potentially higher rent costs, can significantly improve profit margins.

• Customer Experience

A convenient and appealing location enhances the customer experience. Easy access, ample parking, safety, and proximity to other complementary businesses make shopping more enjoyable and can increase customer satisfaction and loyalty.

• Operational Efficiency

A strategically chosen location can also contribute to operational efficiency. It can facilitate easier logistics and supply chain management, especially if it’s well-connected to transportation networks and close to suppliers or distribution centers.

• Competition

A good location can give a retailer a competitive edge. Being located in a popular shopping area or district can attract more customers than being situated in a less frequented area, especially if competitors are not as well-located.

• Real Estate Value

The location of a retail store can be a valuable asset in itself. Prime real estate not only benefits current business operations but can also be a significant investment, appreciating over time and providing long-term financial benefits.

• Target Market Alignment

The right location aligns with the retailer’s target market demographics. By choosing a location that matches the profile of its desired customers, a retailer can ensure that its product offerings meet the needs and preferences of the local population.

• Adaptability and Growth Potential

Finally, a good location offers room for adaptability and growth. It provides the potential to expand the store or adjust its offerings based on customer demand and market trends, ensuring long-term sustainability and success.