Location refers to the general position of a shop — a city district, a neighborhood area, along a major road or secondary Street, or a shopping mall. Site refers to a shop’s specific spot. Choosing a shop location is a strategic exercise because it is a decision which has long-term implications on the retailer’s image, positioning, sales and cost.
For example, a store selling mid-price women apparel and located in a mall close to a departmental store enhances the image of the apparel store. Usually, the departmental store are major anchor tenants and they generate traffic for the stores which are located nearby. However, if the same apparel store’s specific site is next to a fast food restaurant rather than a department store, the effect will be different. Being near to a fast food restaurant may provide the crowd, but it will be the wrong type of customers. Thus, a retailer needs to evaluate the suitability of both the general location and the specific site when deciding retail location. At the same time, retailers need to know that a location suitable for one retailer may not be appropriate for another type of retailer.
Channelplay adheres to the following steps to evaluate a location:
- Distinguish the Types of Products: The types of products sold by a retailer determine the choice of location for the shop. Typically, there are three major categories of products:
- Convenience goods
- Shopping goods
- Specialty goods
Convenience products usually refer to goods that are low-priced and bought frequently and habitually by consumers. These types of products are sold in many outlets and little sales effort is required. Examples are FMCG products, Sweets, Fruit Juice, Cigarettes etc. It is important for stores selling convenience goods to be located in places with many people, that is ‘quantity’ of people is important.
Shopping products usually refer to mid-priced to high priced goods that are sold in selective outlets. In addition, consumers tend to compare features and prices, and purchase these goods less frequently. More sales efforts are required by the sale associates. Examples are apparels, fashion accessories and furniture. For stores selling such products, the ‘quality’ of people (the right type of people) passing by the location is important.
Specialty products refer to goods that are more expensive and are bought very infrequently. Substitutes are not considered and these goods are sold at limited outlets. Examples are specific brands or designer fashion labels and fine jewelry. These shops are best located in exclusive malls or high streets with compatible brands and labels catering to high-end customers.
- Identify Consumers
The categories of products sold by a retailer influence the types of customers patronizing the shop. A retailer needs to have a clear understanding of its customers and their profile as they form the basis for the factors used in the assessment of the type and address of the location chosen. The following questions may help retailers to have a better understanding of their customer segments.
- How many are they?
- What is their age range?
- Where do they stay?
- What are their income levels and propensity to spend?
- Which type of products they consume?
- What are their purchase considerations for the target products?
- How far are they willing to travel to the store?
- Identify Competition & Complementary category stores
It is integral to identify relevant competition as well as complementary stores within proximity of the shortlisted location. Competition intensity will define the marketing strategy & efforts while Complementary stores will help generate pedestrian traffic for the store. For Example: Ladies’ apparel stores and footwear store will generate footfall for one another.
- Evaluate Location
The evaluation of following factors must be considered while selecting a suitable location:
a. Number and types of pedestrians: This refers to the number and types of people passing by the location. However, not everyone who passes by a location is a potential customer. An accurate pedestrian count includes the following four details:
- Age and gender
- Time – Weekday/weekend; peak/non-peak hours
- Interviews with pedestrians to find out if there are a sufficient number of potential shoppers
- Revisiting the location on another day to verify the information collected earlier
It is important to note that when all the other factors of two locations are equally good, the one with the highest number of potential pedestrians is considered the most suitable.
b. Number and types of vehicles: Similar to pedestrian count, retailers analyze the type and quantity of vehicles that pass by the location. Another aspect of vehicular flow is traffic congestion.
c. Accessibility: A shopping location has to be accessible so that shoppers are encouraged to visit the place. Availability of mass transportation is also considered under this factor.
d. Parking availability: Customers patronize shopping locations that have ample and cheap parking facilities. This is especially important for retailers who mainly target customers who drive. Availability of parking brings convenience to customers. Customers who buy groceries from a supermarket will want to be able to load their purchases into their cars at nearby parking lots.
e. Regulations: A Retailer interested in a location has to find out if there are any regulations pertaining to the operations of the shops in the place or mall. Some of these regulations are as follows:
- Business hours are usually fixed
- Usage of common areas outside the shop is restricted
- Scope of renovation permitted in the shop has to be adhered to
- Types of signs used must be within established rules
In my next article, I shall talk about the evaluation of the shop site. In the meantime, if you want us to help you out in retail location analysis, please leave a message in the form at the end of this page.
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