1. Retail Site Location
Factors that affect the choice of suitable retail site location:
Economic conditions
Strategic fit
Competition
Operating costs

2. Site Location – 3 Levels of Analysis

3. Trade Area Issues Attractiveness of trade area How many outlets:
More stores increases economies of scale and reduces costs
More stores also result in more cannibalization and less sales per store

4. Trade Area Issues Factors affecting the demand
Demographic and lifestyle characteristics of customers
Business climate
Retailers’ perspective to manage multiple stores
competition

5. Factors Affecting Attractiveness of a Site
Match between trade area demographics and retailer’s target market
Likelihood of customers coming to location
Convenience
Other attractive retailers at location
Principle of Cumulative Attractiveness:
A cluster of similar and complementary retailing activities will have greater drawing power.

6. Location Convenience Factors
Macro perspective:
Road pattern and condition
Natural and artificial barriers
Micro perspective:
Visibility
Traffic flow
Parking
Congestion
Ingress/egress traffic

7. Location Within a Center
In High Traffic Areas
Near Anchor
Center of Shopping Area
Near Stores Selling Complementary Merchandise
Clustering Specialty Stores Appealing to Teenagers
Better locations cost more

8. Demand Estimate for New Location
Definition of the Trade Area
Primary zone: 60 to 65% of customers
Secondary: 20% of customers
Tertiary Zones: Occasional shoppers
Approaches for Estimating Demand
Analog Approach
Regression Approach
Huff Gravity Model

9. Analog Approach
Describe the site and trade area characteristics for its most successful existing/operating stores
Find a site with similar characteristics

10. Regression Approach
Assumes that factors (independent variables) affecting the revenues (dependent variable) of existing stores in a chain will have the same impact on stores located at new sites

11. Huff Gravity Model Estimates sale of a retail store based on:
Size of store (larger store has more pulling power)
Time taken to travel to the store (store that take more time to travel, has less pulling power)

12. Huff Gravity Model
Probability of a customer going to a specific store location:
Pxy=
Where: Pxy= probability that customer x shops at location y
S = size of the store at location y
T = travel time for customer x to get to location y
ᾳ = exponent ᾳ reflects the relative effect of travel time vs store size

13. Huff Gravity Model Existing store Size: 5000sft New Store
Koramangala
Market size: Rs20million
10 minutes
Existing store
Size: 5000sft
5 minutes
5 minutes
15 minutes
Madiwala
Market size: Rs30million
New Store
Size: 10000sft
= 2 for the store locations

14. Factors Defining Trade Areas
Accessibility
Natural & Physical Barriers
Type of Shopping Area
Type of Store
Competition
Parasite Stores

15. Sources of Information
Customer Spotting
Census Data
Geodemographic Information Systems
ACORN
Information on Competition
Yellow Pages

16. Customer Spotting Credit card or checks Customer loyalty programs
Manually as part of the checkout process
Automobile license plates

17. Negotiating a Lease Types of Leases: Terms of the Lease:
Percentage leases: rent based on % of sales
Fixed rate lease
Terms of the Lease:
Prohibited use clause (bars, massage parlors, betting establishments)
Exclusive use clause (type of outlets)
Escape clause: To exit if sales do not meet certain levels