1. Retail Locations

2. The Importance of Store Location
Store location is most often the first consideration in a store choice
Having a good location increases chances of developing a strong sustainable competitive advantage
Location decisions can be risky and should be well-thought out

3. Process of Choosing Particular Locations
Trade area: the geographic area that encompasses most of the customers who would patronize a specific retail site
Size of the trade area
Occupancy cost of the location
Pedestrian and vehicle customer traffic location
Restrictions on operations by property managers
Convenience of location for customers
- Level of competition
- Access to transportation
- Availability of parking
Attributes of nearby stores
Legal restrictions

4. Types of Retail Locations
Freestanding Sites such as outparcels and merchandise kiosks
City or Town Locations such as central business districts, main streets, and inner city locations

5. Advantages and Disadvantages of Freestanding Locations
Convenience for customers
High vehicular traffic and visibility
Modest occupancy costs
Separation from competition
Limited trade area when not around nearby retailers
Higher Occupancy costs that strip centers
Usually located where there is little pedestrian traffic

6. Freestanding Sites Outparcels Merchandise Kiosks
Retail locations for an individual, isolated store unconnected to other retailers
Outparcels
Merchandise Kiosks

7. Merchandise kiosks
Small selling spaces, typically located in the walkways of enclosed malls, airports, train stations, or office building lobbies.

8. City or Town Locations Advantages Disadvantages Lower occupancy costs
Higher pedestrian traffic
Traffic is limited due to congestion
Parking problems reduce consumer convenience

9. Central Business Districts (CBD)
Advantages
Disadvantages
- Draws people during business hours - Heavy public transportation - Pedestrian traffic - Residential area as well
- High security required
- Shoplifting
- Parking is poor
- Evenings and weekends are slow

10. Main Streets vs. CBD’s Occupancy costs are generally lower than CBD’s
Fewer people are employed
Smaller selection due to fewer stores
Range of entertainment is usually smaller
City planning sometimes restrict store operations

11. incomes than surrounding areas
Inner City
High density urban areas with higher unemployment and lower median
incomes than surrounding areas
Retailers here achieve higher sales volume and higher margins, thus producing higher profits
Redevelopments in inner cities can cause increased traffic and parking difficulties, causing them to be controversial

12. Advantages Disadvantages
Convenient locations
Easy parking
Low occupancy costs
Limited trade area
Lack of entertainment
No protection from weather

13. Power Centers Examples
Consist primarily of collections of big box retail stores
Examples
Target
Costco
Lowe’s
Sports Authority
Toys “R” Us

14. Shopping Malls Regional Malls Super Regional Malls
Less than 1 million square feet
More than 1 million square feet

15. Shopping Malls Advantages Disadvantages Wide variety of stores
Wide assortment of merchandise
Shopping and entertainment
No inclement weather
Uniform hours of operation
Attracts many shoppers
Occupancy costs are generally higher
Mall control over business operations
Competition can be intense

16. Enhancing the Mall Experience
Mall managers try to make malls more of an enjoyable experience in an effort to keep people shopping as long as possible
Common areas
Family lounges
Great food
Playgrounds
Entertainment

17. Mall renovations and redevelopment
CORPUS CHRISTI, TX – La Palmera Mall Redevelopment

18. with design ambience and amenities
Lifestyle Centers
Shopping centers with an open-air configuration of specialty stores, entertainment, and restaurants
with design ambience and amenities
Advantages
Disadvantages
Ease of parking
Relaxed open-air environment
Pedestrian traffic tends to be higher
Occupancy costs and operating restrictions are less
Less retail space
Smaller trade areas
Attract fewer customers

19. Fashion/Specialty Centers
Composed mainly of upscale apparel shops, boutiques, and gift shops carrying selected fashions or unique merchandise of high quality and price
Stores in Phipps Plaza
Tiffany
Gucci
Max Mara
Giorgio Armani
Tommy Bahama’s

20. Outlet Centers Las Vegas Outlet Center Strong entertainment component
Shopping centers that contain mostly manufacturers’ outlets
Strong entertainment component
Becoming more popular outside the United States
Tourism is important for outlet centers
Las Vegas Outlet Center

21. Theme/Festival centers
Shopping centers that typically employ a unifying theme reflected in the individual shops, design, and to some extent their merchandise
Located in places of historic interests or for tourists
Anchored by restaurants and entertainment facilities
Generally targeted at tourists, they may also attract local customers
A common element of these centers is entertainment, although some rely solely on the shopping experience

22. Omnicenters St. John’s Town Center, Jacksonville, FL
Combines enclosed malls, lifestyle centers, and power centers
St. John’s Town Center, Jacksonville, FL
Omnicenters are becoming more popular in the U.S. partly from the desire of tenants for lower common- area maintenance charges and the growing tendency of consumers to cross- shop.

23. Mixed Use Developments
Offer an all-inclusive environment so that consumers can work, live, and play in a proximal area
Combine several different uses into one complex, including shopping centers, office towers, hotels, residential complexes, civic centers, and convention centers
Mizner Park, Boca Raton, FL

24. Airports Airport Apple store High pedestrian traffic
Sales per square foot are higher than mall stores
Rent is higher
Hours are longer
Inconvenient location for workers means higher wages
Airport Apple store

25. Temporary Locations (pop-up stores)
Good for businesses trying to create a little hype
Good introduction for new stores or products
Provide visibility for a business
Provide additional sales during holidays and special events
Target pop-up store

26. St. Regis Aspen Resort, CD
Resorts
St. Regis Aspen Resort, CD
Captive audiences
Wealthy customers
People with time on their hands

27. Store within a store
Occurs when a manufacturer has its own store and salespeople inside a retailer store
This concept benefits both companies to attract more customers
Helps fill holes in product offerings

28. Social Networking Game
Farmville
Businesses take advantage of locations where customers are, like the internet and online games, and provide them with alternative ways to spend money
Social Networking Game

29. Location and Retail Strategy
Factors that affect location choice
Shopping behavior of consumers
Size of Target Market
Uniqueness of Retail Offering

30. Shopping Situations 3 Shopping Behaviors Convenience shopping
Comparison shopping
Specialty shopping

31. Convenience Shopping Shopper Mentality
Wants to exert little effort to acquire product or service
Wants convenient location
Less concerned with price
No hassles

32. Comparison Shopping Shopper Mentality
General idea about product or service
No strong brand preference
No strong retailer preference

33. Specialty Shopping Shopper Mentality Knows what they want
Accepts no substitute
Strong loyalty to product or brand

34. Estimates to determine size of target market
For most retailers, the size of the target market and the location of the highest density of their
target market will help determine where their business should be located.
Estimates to determine size of target market
Estimate max # of customers eligible to purchase product or service
Estimate percentage of potential customers
Estimate # times customers could purchase the product or service in a year
Estimate highest density of target market

35. Uniqueness of Retail Offering
Consumer mentality
Location doesn’t matter as much because the product is that important or unique

36. Zoning and Building Codes
Legal Considerations
Environmental Issues
Zoning and Building Codes
Above ground risks
Hazardous materials
Sign restrictions
Licensing requirements

37. Environmental Issues
Above-Ground Waste
Hazardous Materials

38. Environmental Issues
“Above-ground” risks - such as asbestos-containing
materials or lead pipes used in construction.
Hazardous materials - e.g. dry cleaning chemicals,
motor oil, that have been stored in the ground.
Retailers’ Protection
Stipulate in the lease that the lessor is responsible for removal and disposal of this material if it’s found.
Retailer can buy insurance that specifically protects it from these risks.

39. Zoning and Building Codes
Signs
Licensing

40. Other Legal Issues Zoning and Building Codes Signs
Zoning determines how a particular site can be used.
Building codes determine the type of building, signs, size, type of parking lot, etc. that can be used
Signs
Restrictions on the use of signs can also impact a particular site’s desirability
Licensing Requirements
Some areas may restrict or require a license for alcoholic beverages

41. Types of Leases Percentage Fixed - Rate
Percentage leases - rent is based on a percentage of sales.
Retailers also typically pay a maintenance fee based on a percentage of their square footage of leased space.
Most malls use some form of percentage lease.

42. Variations of Percentage Leases
1.Percentage lease with specified maximum - percentage of sales up to a maximum amount.
Rewards retailer performance by allowing retailer to hold rent constant above a certain level of sales
2. Percentage lease with specified minimum - retailer must pay a minimum rent no matter how low sales are.
3.Sliding scale - percentage of sales; as rent decreases as sales go up.

43. Fixed Rate Leases
Fixed rate leases - used by community and neighborhood centers.
Retailer pays a fixed amount per month over the life of the lease.
Not as popular as percentage leases
Graduated lease - a variation of the fixed rate lease
Rent increases by a fixed amount over a specified period of time.

44. Percentage or Fixed Rate Leases
Maintenance-increase-recoupment lease - used with either a percentage or fixed rate lease.
Rent increases if insurance, property taxes, or utility bills increase beyond a certain point.
Net lease - retailer is responsible for all maintenance and utilities.

45. CLAUSES UNDER A LEASE CONTRACT
Prohibited Use Clause
Limits the landlord from leasing to certain tenants
Some tenants take up parking spaces and don’t
bring in shoppers: bowling alley, skating rink, meeting hall, dentist, or real estate office.
Some tenants could harm the shopping center’s
wholesome image: bars, pool halls, game parlors, off-track betting establishments, massage parlors and pornography retailers.

46. Exclusive Use Clause Escape clause selling competing merchandise
Prohibits the landlord from leasing to retailers
selling competing merchandise
Specify no outparcels
Specify if certain retailer leaves center, they can
terminate lease.
Escape clause
Allows the retailer to terminate its lease if sales don’t reach a certain level after a specified number of years, or if a specific co-tenant in the center terminates its lease.

47. Retail Location Theories
1. Retail Gravity Theory 2. Saturation Theory 3. Buying Power Index

48. Retail Location Theories
Retail gravity theory suggests that there are underlying consistencies in shopping behavior that yield to mathematical analysis and prediction based on the notion or concept of gravity.

49. Huff’s Gravity Model
Based on the premise that the probability that a given customer will shop in a particular store or shopping center becomes larger as the size of store or center grows and distance or travel time from customer shrinks

50. Assumptions:
1. The proportion of consumers patronizing a given shopping area varies with the distance from the shopping area.
2. The proportion of consumers patronizing various shopping areas varies with the breadth and depth of merchandise offered by each shopping area
3. The distance that consumers travel to various shopping areas varies for different types of products purchased
3. The “pull” of any given shopping area is influenced by the proximity of competing shopping areas

51. Huff’s Model Formula Exponent distinctions:
b= 2; if travel time has greater effect
b= .5; if store size has greater effect
b= 1; if store size and travel time have same effect

52. University and Shopping Centers: Gravity Model Illustration

53. Huff’s Model: The Solution
Pij =  32
(1000  32) + (500  52) + (100  12)
Probability = .43
.43 x 12,000 students = 5,160 customers
5,160 customers x $150 = $774,000
Repeat steps 1 to 3 for the remaining areas and then sum them.

54. Saturation theory examines how the demand for goods and services of a potential trading area is being served by current retail establishments in comparison with other potential markets.

55. Index of retail saturation (IRS) is the ratio of demand for a product (households in the geographic area multiplied by annual retail expenditures for a particular line of trade per household) divided by available supply (the square footage of retail facilities of a particular line of trade in a geographic area).

56. Index of Retail Saturation (IRS)
where IRS is the index of retail saturation
H is the number of households in the area
RE is the annual retail expenditures for a particular line of trade per household in the area
RF is the square footage of retail facilities of a particular line of trade in the area (including square footage of the proposed store)
IRS = (H X RE)/RF

57. Buying power index (BPI) is an indicator of a market’s overall retail potential and is composed of the weighted measures of effective buying income (personal income, including all nontax payments such as social security, minus all taxes), retail sales, and population size.

58. Buying Power Index (BPI)
Published annually in Demographics USA
Measures a given market’s ability to buy
Is expressed as a percentage of the total U.S. potential
Source: The Census and You, U.S. Department of Commerce, Bureau of the Census.

59. Buying Power Index
BPI = 0.5(the area’s percentage of U.S. effective buying income)
+ 0.3(the area’s percentage of area retail sales)
+ 0.2(the area’s percentage of area population)