1. Chapter 7 Marketing Selection and Retail Location Analysis

2. Selecting a Target Market
The Internet is becoming a major force in retailing, with sales expected to reach a little more than 5 percent of total retail sales over the next decade.
Reaching the target market can be achieved through a:
store-based location in which the consumer travels to the store or
through a nonstore retailing format in which products and services are offered to the consumer at a more convenient or accessible location.
LO 1

3. Selecting a Target Market
Home page - Introductory or first material viewers see when they access a retailer’s Internet site. It is the equivalent of a retailer’s storefront in the physical world.
Virtual store - Collection of all the pages of information on the retailer’s Internet site.
Ease of access - Consumer’s ability to easily and quickly find a retailer’s Web site in cyberspace.
LO 1

4. Selecting a Target Market
Market segmentation
Target market - Group of customers that the retailer is seeking to serve.
It is not easy to reach every target market, because each target market is different from the other.
LO 1

5. Selecting a Target Market
Criteria to reach target market
Seek a measurable market segment.
Accessibility or the degree to which the retailer can target its promotional or distribution efforts to a particular market segment.
Segment should be substantial or large enough to be profitable for the retailer.
LO 1

6. Exhibit 7.2 - Retail Formats for Accessing Your Target Market
LO 2

7. Location of Store-Based Retailers
Central business
district (CBD)
Advantages
Disadvantages
An unplanned shopping
area around the
geographic point where all
public transportation
systems converge; it is
usually in the center of the
city and often where the
city originated historically.
Easy access to public transportation.
Wide product assortment.
Variety in images, prices, and services.
Proximity to commercial activities.
Inadequate and usually expensive parking.
Older stores.
High rents and taxes.
Traffic and delivery congestion.
Potentially high crime rate.
Decaying conditions of inner cities.
LO 2

8. Location of Store-Based Retailers
Secondary business district (SBD)
Shopping area that is smaller than the CBD and that revolves around at least one department or variety store at a major street intersection.
Neighborhood business district (NBD)
Shopping area that evolves to satisfy the convenience-oriented shopping needs of a neighborhood; generally contains several small stores (with the major retailer being a supermarket or a variety store), and is located on a major artery of a residential area.
LO 2

9. Location of Store-Based Retailers
Shopping center or
mall
Centrally owned or managed shopping district that is planned, has balanced tenancy (the stores complement each other in merchandise offerings), and is surrounded by parking facilities.
Anchor stores
Stores in a shopping center that are the most dominant and are expected to draw customers to the shopping center.
LO 2

10. Location of Store-Based Retailers
Advantages of shopping centres
Disadvantages of shopping centres
Heavy traffic resulting from the wide range of product offerings
Cooperative planning and sharing of common costs
Access to highways and available parking
Lower crime rate
Clean and neat environment
Inflexible store hours
High rents
Restrictions as to what merchandise or services the retailer may sell
Inflexible operations and required membership in the center’s merchant
organization
Potentially too much competition and much of the traffic is not interested in a particular product offering
An anchor tenant’s dominance of the smaller stores
LO 2

11. Location of Store-Based Retailers
Freestanding retailer
Advantages
Disadvantages
Locates along major traffic arteries and does not have any adjacent retailers to share traffic.
Lack of direct competition
Lower rents
Freedom in operations and hours
Facilities that can be adapted to individual needs
Inexpensive parking
Lack of drawing power from complementary stores
Difficulties in attracting customers for the initial visit
Higher advertising and promotional costs
Operating costs cannot be shared with others
Stores may have to be built rather than rented
Zoning laws may restrict some activities
LO 2

12. Exhibit 7.5 - Selecting a Retail Location

13. Market Identification
Retail location theories
Market demand potential
Market supply factors
LO 4

14. Retail Location Theories
Retail store saturation
There are just enough store facilities for a given type of store to efficiently and satisfactorily serve the population and yield a fair profit to the owners.
Understored
The number of stores in relation to households is relatively low so that engaging in retailing is an attractive economic endeavor.
Overstored
Where the number of stores in relation to households is so large that to engage in retailing is usually unprofitable or marginally profitable.
LO 4

15. Market Demand Potential
Major components are:
Population characteristics
Buyer behavior characteristics
Household income
Household age profile
Household composition
Community life cycle
Population density
Mobility
LO 4

16. Market Supply Factors Square feet per store Square feet per employee
Growth in stores
Quality of competition
LO 4

17. Site Analysis
An evaluation of the density of demand and supply within each market with the goal of identifying the best retail site(s).
Description of trading area
Retailers can access, at a relatively low cost, information concerning the trading area for various retail locations and the buyer behavior of the trading area.
LO 5

18. Site Analysis
Demand density - The extent to which the potential demand for the retailer’s goods and services is concentrated in certain census tracts, ZIP code areas, or parts of the community.
Supply density - The extent to which retailers are concentrated in different areas of the market under question.
LO 5

19. Exhibit 7.10 - Demand Density Map
LO 5

20. Exhibit 7.11- Store Density and Site Availability Map
LO 5

21. Exhibit 7.12 - Checklist for Site Evaluations
LO 5

22. Exhibit 7.12 - Checklist for Site Evaluations
LO 5

23. Exhibit 7.12 - Checklist for Site Evaluations
LO 5

24. Site Selection
100 percent location - When there is no better use for a site than the retail store that is being planned for that site.
The traffic that passes a site, whether it is vehicular or pedestrian, can be an important determinant of the potential sales at that site.
LO 6

25. Nature of Site
Two traffic-related aspects of the site should be evaluated.
Availability of sufficient parking, either at the site or nearby.
Whether direction of traffic is relative to the shopping area.
LO 6

26. Nature of Site Type of neighbors
Store compatibility - Exists when two similar retail businesses locate next to or nearby each other and they realize a sales volume greater than what they would have achieved if they were located apart from each other.
Retail clusters - Groups of stores closely located that share similar characteristics.
Once potential customers identify a need for a line of merchandise or service, they don’t need to decide on the specific store to visit; they just need to decide to travel to the retail cluster.
It allows customers to walk from store to store, comparing prices, products, and service.
LO 6

27. Terms of Purchase or Lease
The retailer should review:
Length of lease
Exclusivity clause
Guaranteed traffic rate
Anchor clause
LO 6

28. Expected Profitability
The final step in site-selection analysis is construction of a pro forma (expected) return-on-asset model for each possible site.
The return-on-asset model comprises of net profit margin, asset turnover, and return on assets.
LO 6