Insights

Essentials of Retail Location Planning - Part 2



Continuing the previous article on retail location planning, we will further look at some of the more tactical location parameters to be kept in mind when choosing the location of a retail store.

A good general location is not enough. A retailer has to ensure that the specific site at the location has to be equally suitable. The following 5 factors will help the retailer to choose the most appropriate site:

1. Visibility

A good site is one that can be seen by pedestrian or vehicular traffic. Shoppers hesitate to go to a quiet side street or an excluded corner in a mall. A shop located at the entrance of a mall or on a major road has high visibility. Some successful malls are designed in such a way that the shops face the central courtyard, and when shoppers enter the malls, they will be able to see the shops on the first and second levels. In some malls, the signs of the shops on the third level can be seen even at the first level.

2. Position in the location

There are three important issues to look into:

  • Which part of the street or mall is the selected site situated?

Shops located at the intersection of two major streets can bring more patronage. A small gift shop located at the end of a mall is not going to attract a lot of people unless it is a destination store such as a major department store or hypermarket.

  • What are the shops next to and/or near the selected site?

A snack kiosk situated near a supermarket can have more business from the people who pass by the kiosk when they go to the supermarket. On the other hand, an apparel store should not be located next to a fast food restaurant. The smell of food is adverse to the image of the apparel store.

  • Which level is the site located in a multi-storey building?

The ground or first level is always the best site. As the levels go higher, the rental of the shop is lower due to the lack of visibility. The basement of malls can be quiet and thus, not an ideal site too. However, there are many malls that have successfully drawn crowds to the basement by clustering food and entertainment-related stores in the basement. In addition, there are many malls that build connecting link ways in the basement to other malls so as to increase pedestrian traffic.

 

3. Size and shape of the unit

The total space needed for a unit is dependent on the type of products sold and the scope of business. In addition, a square-shaped or rectangular-shaped lot facilitates the placement of fixtures and maximizes the usage of space. A shop with curved walls or elongated space is not ideal.

4. Space planning 

The interior of a mall or location must be well organized to facilitate shoppers’ movement. Here, there are basically 2 areas to take note of:

  • Walkways: Walkways that are too narrow obstruct traffic flow whereas walkways that are too wide distance shoppers from the shops.
  • Location of common facilities: Restrooms, escalators, elevators and other facilities should be located at appropriate places and not at secluded corners that bring too much inconvenience to shoppers.

 5. Cost – Rental, operations and maintenance cost

The following terms of occupancy must be evaluated for each prospective site:

  • Ownership: Buying a shop unit requires heavy capital investment. It may be a worthy investment if the real estate value increases. There are malls where all the shops are sold to individual retailers, and in such cases, it is often difficult to upgrade the malls or organize any promotional activities due to insufficient support from all the owners.
  • Leasing: Leasing or rental minimizes the initial investment. Rental is usually short-term and it allows flexibility in choosing another site. The major considerations in leasing are:
    1. The type of lease — fixed rent or pegged to sales volume
    2. The duration of lease
    3. The flexibility of lease — renewal and termination options
  • Operations and maintenance: The important considerations in operations and maintenance are:
    1. Does the rental rate include or exclude additional operations and maintenance cost? It is common practice for mall management to charge retailers a monthly fee for maintenance and promotional expenditures.
    2. Does the agreement include property owner’s responsibilities on repairs, renovations and decorations of the location and site?

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Topics: Market Research