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

Site Location – 3 Levels of Analysis

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

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

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.

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

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

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

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

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

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)

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

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

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

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

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

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