Retail location


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Retail location

  1. 1. Unit 3 Retail Store & Location Types of Retail Location, Importance of location decision, Types of Locations, Factors affecting location, Step involved in choosing a Retail Location, Selection of shopping center, Retail location theories, location assessment procedure
  2. 2. Introduction Define Store: “A store is place , real or virtual , where the shoppers comes to buy goods & services. The sales transaction occurs at this junction.” • The location of retail store has for along time been considered the most important ‘P’ in retailing. • Locating the retail store in the right place was considered to be adequate for success.
  3. 3. Importance of retail Location Decisions  Location becomes a critical decision for a retailer for several reasons. As like;  Location is generally one of the most important factors customers consider while choosing a store.  A bad location may cause a retailer to fail even if its strategic mix is excellent.. On the other hand , a good location may help a retailer succeed even if its strategic mix is mediocre.  Store location is least flexible element of retailer’s strategic mix due to its fixed nature, the amount of investment, and the length of lease agreements
  4. 4. • Change in location gives three potential problems – Loss of loyal customers and employers – New location may not have the same characteristics of old location – Store fixtures cannot be moved to new location • Location affects a store’s long run strategies • In short run, it affects specific elements of retail mix
  5. 5. Factors affecting location • • • • • • • • • • Size and characteristics of market (population) Level of competition Access to transportation Parking space availability Attributes of nearby stores Property costs Length of agreement Population trends Legal restrictions Other factors
  6. 6. Types of Retail Location • Various option are available to the retailer for choosing the location of store. • The choice of the location of the store depends on the target audience and the kind of merchandise to be sold. • A retailer has to choosing among alternate types of retail locations available . It may locate in an isolated place and pull the customer to the store on its own strength, such as a small grocery store or paan shop in a colony which attracts the customers staying close by
  7. 7. Typically a store location may be: 1. Freestanding /Isolated store. 2. Part of Business District/Centers (unplanned Business Districts). 3. Part of a Shopping Center (Planned Shopping Centers)
  8. 8. 1. Freestanding /Isolated store • Where there are no other outlets in the vicinity of the store and therefore store depends on its own pulling power and promotion to attracts customers. • A biggest advantages for freestanding stores is that there is no competition around. • This type of location has several advantages including no competition, low rent, often better visibility from the road, easy parking and lower property . • Neighborhood Stores; colony shops serves small locality. • Highway Stores :Ebony store in Ludhiana .
  9. 9. How far the customer is willing to travel? Apparel 2.5Km Cosmetics – 4.05 km Music – 2.54 km Books – 2.74km 1km 2km 3km 4km 5km Jwellery – 1.5 km Source : KSA – Technopack consumer outlook, 2004 Grocery – 4 km
  10. 10. Business Associated Location: These are location where a group of retail outlets offering a variety of merchandise work together to attract customers to their retail area, but also compete against each other for the same customers.two types includes in ; 1. Part of Business District/Centers (unplanned Business Districts). 2. Part of a Shopping Center (Planned Shopping Centers)
  11. 11. 2. Part of Business District/Centers (unplanned Business Districts). • A retail store can also be located as a part of a business district. Or we can refer this as unplanned business centers • A business district is place of commerce in a city which developed historically as the center of trade and commerce in the city or town. • A business districts can be a central, secondary or a Neighborhood business district. • A Central business District CBD is the main center of commerce and trade in the city. (high land rates , intense development)
  12. 12. • A CBD is the hub of retailing activity in a city. • CBD served different sections of population for Examples of Cannaught place in Delhi, Colaba in Mumbai, Commercial Street and in Bangalore are up market CBD’s. • CBD’s serving the upper and upper middle class customers across these cities like, chandani chowk in Delhi, KalbadeviBhuleswar in Mumbai, Chickpet in Bangalore. • Secondary Business District are composed of unplanned cluster of store often located on a major intersection of city they a customers from a large part of the city
  13. 13. 3. Part of a Shopping Center (Planned Shopping Centers) • A shopping center has been defined as “ a group of retail and other commercial establishments that is planned , developed, owned and managed as a single property” • The basic configuration of a shopping centre is a “Mall ” or Strip centre. • A mall is typically enclosed and climate controlled. A walkway is provided in front of the stores. • A strip centre is a row of stores with parking provided in the front of the stores.
  14. 14. • In India we can planned shopping centre can categorize in two category Regional shopping centers or Mall: Regional shopping centers or mall are the largest planned shopping centers.. • Often they are anchored by two or more major department stores have enclosed mall serve a large trading area and have high rents. (ansal plaza,spencers plaza crossroads, DLF city in Gurgaon) • Neighborhood/community/shopping centers: Neighborhood /community centers usually have a balanced mix of stores including a few grocery stores , a chemist, a verity store and a few other stores selling convenience goods to the residents of the neighborhood.
  15. 15. India to have mother of all malls • Gurgaon is set to get the mother of all malls — a humungous 40-lakh sq ft sprawling property that is being touted by its developer DLF Universal as the biggest mall of the world. The average size of malls here is 2.5 lakh sq ft; this will be 16 times bigger. The mall —- christened Mall of India -— will be spread over 32 acres and will have parking space for 10,000 cars. These ambitious plans have been drawn up at a time when footfalls are down at Gurgaon malls and rental rates have virtually halved. But DLF is unfazed. It says Gurgaon with so many malls will soon develop as a mega shopping district in the NCR region. What's the basis of the claim that this will be the biggest in the world? DLF spokerperson Kajal Aijaz said the biggest now is Mall of America in Minneapolis which has a covered area of 38 lakh sq ft, followed by a mall in Shanghai which is 30 lakh sq ft. Mall of India would be bigger than these, she said. The DLF mall — located on the Delhi-Jaipur highway — has been designed by Jerde Partnership which also designed the mega malls in Minneapolis and Shanghai. The costs are not known but property consultants said it could be in the region of Rs 1,500 crore.
  16. 16. Selection of Shopping centre / market • Shopping centers are distinctly different from the other two major locations -- that is, downtown and local business strips. The shopping center building is pre-planned as a merchandising unit for interplay among tenants. Its site is deliberately selected by the developer for easy access to pull customers from a trade area. It has on-site parking as a common feature of the layout. The amount of parking space is directly related to the retail area. • Customers like the shopping center's convenience. They drive in, park, and walk to their destination in relative safety and speed. Some shopping centers also provide weather protection and most provide an atmosphere created for shopping comfort. For the customer, the shopping center has great appeal.
  17. 17. What Are your Chances • Developers and owners of shopping centers look for successful retailers. • Then, the developer selects other types of stores that will complement each other. • To finance a center, the developer needs major leases from companies with strong credit ratings. • Your problem is to convince the developer that the new store has a reasonable chance of success and will help the "tenant mix."
  18. 18. What a shopping centre can offer ? • Neighbor hood shopping centre – 3 to 10acres, minimum trading population – 2500 to 40000 • Community shopping centre -10 -30 acres, minimum trading population 40,000 to 1,50,000 • Regional shopping centre – 30 to 50 acres, minimum trading population 1,50,000 and more
  19. 19. Selecting a shopping centre • • • • • • • • • • Trade area and its growth General income level of the trade area No of households Demographics of trade area Market analysis Location of store in the centre Space Rent & lease Fittings Other services by developers
  20. 20. Types of shopping centers • Neighborhood shopping centers • Community shopping centers • Regional shopping centers – Enclosed malls • Specialty theme shopping centers
  21. 21. Regional Shopping Centre
  22. 22. Secondary business centers
  23. 23. Neighborhood shopping centre Isolated Location Secondary Business District Central Business District
  24. 24. Factors to be considered in selecting a shopping center • Traffic Count : the qualitative information gathered about the passing traffic should include counting the individuals who seem to possess the characteristics appropriate to the desired clientele, judging their reasons for using that route, and calculating their ability to buy. • Pedestrian Traffic Count : In making a pedestrian count you must decide: who is to be counted; where the count should take place; and when the count should be made. In considering who is to be counted, determine what types of people should be included.
  25. 25. • Estimate Of Store Sales :Data from a pedestrian traffic survey can give you information on whether or not the site would generate a profitable volume for your store. • Automobile Traffic Count ;A growing number of retail firms depend on drive-in traffic for their sales. Both the quantity and quality of automotive traffic can be analyzed in the same way as pedestrian traffic.
  26. 26. Free standing / isolated location • Advantages – No competition – Low costs – Flexibility • No group rules • Larger space • Location by choice – Better road and visibility – Customization – easy parking
  27. 27. • Disadvantages – Initial Difficulty in attracting costumers – Most people like variety in shopping – Travel time – Advertising costs – Operating cost are not shared – Built than renting – Unplanned and planned business centers are preferred by costumers
  28. 28. Unplanned Business Districts • Advantages – – – – – – Excellent goods/service assortment Variety of store types Wide range of prices Variety of customer services High level of pedestrian traffic Nearness to commercial or social facilities
  29. 29. • Disadvantages – – – – – – – – Inadequate parking Traffic congestion Travel time for sub urban customers Aging retail facilities Decline condition of central cities High rent and taxes Movement of popular stores to suburbs Discontinuity of offering
  30. 30. Planned Business districts • Advantages – – – – – – – – – – – – Excellent goods/service assortment for long term plan strong sub urban population One stop shopping preferred by customers Co-operative planning and sharing of common costs Creation of unified, distinctive shopping center image Maximization of pedestrian traffic Access to high ways and parking spaces More appealing than city shopping centers Reasonable rent ( excluding enclosed malls) Lower theft rates Popularity of malls Growth of new types of malls
  31. 31. • Disadvantages – Reduced operating flexibility – Higher rents – Restriction on goods and services sold by stores – Competitive environment within malls – Membership in associations – which may of little use – Too many malls in an area – Domination by large anchor stores
  32. 32. Step involved in choosing a Retail Location / site selection • • 1. In order to arrive at the decision on where to locate the retail store a retailer needs to first on the region that he wants to locate the store. After identifying the region the following steps Have to be followed . Identifying the market in which to locate the store. 2. Evaluate the demand and supply within that market. i.e. determine the market potential. 3. Identify the most attractive sites 4. Select the best site available
  33. 33. 1. • • 2. • • • • • Market Identification: The first step in arriving at a decision on retail location is to identify the market attractiveness to a retailer. This is important that retail needs to understand the market well. Determining the market Potential:: The retailer need to take into consideration various elements as shown in format. (features of population) Demographic features of the population The characteristics of the household in the area (average household income) Competition and compatibility (Need to know compatibility & competition in market) Laws & regulations:( good understanding of the laws
  34. 34. Determining the market Potential Demographics of population & area Trade area analysis Competition Laws & Regulation
  35. 35. • Trade area analysis: • A trade area is the geographic area that generates the majority of the customers for the store. • Primary trade area: primary trading covers between 50-80% of the store’s customers. • Secondary Trading Area: this area contains the additional 15to 25% of the store’s customers. • Tertiary trading area covers the balance customers • These trading areas are dependent on distance and do not always have to be concentric in nature
  36. 36. Types of Trades areas.
  37. 37. 2 miles 2 miles 2 miles 1 mile 1 mile 2 miles 2 miles Store location A 2 miles 1 mile Proposed store location
  38. 38. Trade Area Analysis
  39. 39. 3& 4 Identify Alternate sites and select the site: After taking decision on the location and market potential the retailer has to select the site to locate the store based on these • Traffic • Accessibility of the market is also a key factor • The total number of stores and the type of store that exist in the area • Amenities • To buy or to lease • The product mix to be offered by the retailer
  40. 40. Retail Location Theories • Central place theory • Retail Gravity Theory – Huff ’s Gravity Model – Reilly’s Law of Retail Gravitation • Saturation theory • Herfindahl – Herschman Index
  41. 41. Central Place Theory • Theory proposed by Walter Christaller in 1933 Christaller made a number of assumptions such as: • All areas have an isotropic (all flat) surface • an evenly distributed population • evenly distributed resources • similar purchasing power of all consumers and consumers will patronize nearest market • transportation costs equal in all directions and proportional to distance • no excess profits (Perfect competition)
  42. 42. Terms in Central Place theory • • • • • A Central Place is a settlement which provides one or more services for the population living around it. Simple basic services (e.g. grocery stores) are said to be of low order while specialized services (e.g. universities) are said to be of high order. Having a high order service implies there are low order services around it, but not vice versa. Settlements which provide low order services are said to be low order settlements, Settlements that provide high order services are said to be high order settlements. The sphere of influence is the area under influence of the Central Place.
  43. 43. Details of the theory • The theory consists of two basic concepts: • threshold-- the minimum population that is required to bring about the provision of certain good or services • range of good or services-- the average maximum distance people will travel to purchase goods and services Technically the range should be greater than threshold for a store to be economically viable
  44. 44. 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.
  45. 45. 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
  46. 46. Huff’s Law • Assumptions: • The proportion of consumers patronizing a given shopping area varies with the distance from the shopping area • The proportion of consumers patronizing various shopping areas varies with the breadth and depth of merchandise offered by each shopping area • The distance that consumers travel to various shopping areas varies for different types of products purchased • The “pull” of any given shopping area is influenced by the proximity of competing shopping areas
  47. 47. S j ÷ Tij b Pij = n ∑ S j ÷ Tij b j =1 Where Pij = Probability of a customer at a given point of origin i traveling to a particular shopping center j S j = Size of shopping center j Tij = Travel time or distance from customer's starting point to shopping center b = An exponent to Tij that reflects the effect of travel time on different kinds of shopping trips n = number of stores including j
  48. 48. Reilly’s Law of Retail Gravitation • When two cities compete for retail trade area from the immediate suburban area, the breaking point for the attraction of such trade will be more or less in direct proportion to the population of the two cities and in inverse proportion to the square of the distance from the immediate area of the city
  49. 49. Mathematical Formula • (Ba/Bb) = (Pa/Pb) (Da / Db)2 • • • • • • Ba – business drawn by city a from immediate place Bb - business drawn by city b from immediate place Pa – population of city a Pb – population of city b Da – distance of city a from immediate place Db - distance of city b from immediate place
  50. 50. 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.
  51. 51. Index of retail saturation (IRS) 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).
  52. 52. Index of Retail Saturation (IRS) IRS = (H X RE)/RF 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)
  53. 53. Implications • It is calculated based on existing retail facilities and their use • Low level saturation is indicated by higher IRS – which means the likelihood of success is higher • If the market is having too few stores and unable to satisfy the demands of the customers, the market is under stored • If there is too many stores the market is over stored, unable to give fair return on investments to the retailer
  54. 54. Herfindahl – Herschman Index • It is a measure of market concentration • The Herfindahl index (HI) is a measure of industry concentration equal to the sum of the squared market shares of the firms in the industry • N • HHI = • i =1 Σ Si 2
  55. 55. • • • • • • • Example For instance, two cases in which the six largest firms sells 90 % of the sales: Case 1: All six firms sell 15% each, and Case 2: One firm sell 80 % while the five others sell 2 % each. We will assume that the remaining 10% of sales is divided among 10 equally sized firms. The six-firm concentration ratio would equal 90 % for both case 1 and case 2. But the first case would promote significant competition, where the second case approaches monopoly. The Herfindahl index for these two situations makes the lack of competition in the second case strikingly clear: Case 1: Herfindahl index = 6 * 0.152 + 10 * 0.012 = 0.136 (13.6%) Case 2: Herfindahl index = 0.802 + 5 * 0.022 + 10 * 0.012 = 0.643 (64.3%)
  56. 56. • The maximum in this case is 1002 = 10,000. • A HHI index below 0.1 (or 1,000) indicates an unconcentrated index. A HHI index between 0.1 to 0.18 (or 1,000 to 1,800) indicates moderate concentration. A HHI index above 0.18 (above 1,800) indicates high concentration. • A small index indicates a competitive industry with no dominant players. If all firms have an equal share the reciprocal of the index shows the number of firms in the industry. When firms have unequal shares, the reciprocal of the index indicates the "equivalent" number of firms in the industry.
  57. 57. Buying power index (BPI) • It 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. 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
  59. 59. BPI • BPI = 0.5(the area’s percentage of a country’s effective buying income) + 0.3(the area’s percentage of a country’s retail sales) + 0.2(the area’s percentage of a Country’s population)
  60. 60. CBSA Ratings • CBSA Current Year Estimate: Buying Power Index (BPI) 200 • CBSA • New York et al, NY-NJ-PA Los Angeles-Long Beach-Santa Ana, CA Chicago-Naperville-Joliet, IL-IN-WI Metro Washington-Arlington-Alexandria, DC-VA-MD-WV Metro Philadelphia-Camden-Wilmington, PA-NJ-DE-MD Metro Total of all Areas 94.9 Percent Of US 94.9353 BPI Rank 6.7043 1 4.3638 2 3.2737 3 2.2371 4 2.0811 5
  61. 61. CBSA Current Year Estimate: Total Effective Buying Income (EBI) 2009 CBSA $ New York et al, NY-NJ-PA Metro Los Angeles-Long Beach-Santa Ana, CA Metro Chicago-Naperville-Joliet, IL-IN-WI Metro Washington-Arlington-Alexandria, DC-VA-MD-WV Metro Dallas-Fort Worth-Arlington, TX Metro Total of all Areas Percent Of US US Total Rank 473,144,995,000 1 284,475,132,500 2 216,277,750,000 3 168,382,225,000 4 143,181,142,500 5 6,131,601,985,000 95.1522 6,443,994,426,250
  62. 62. CBSA Current Year Estimate: Total Population 2009 CBSA POPULATION New York et al, NY-NJ-PA Metro Los Angeles-Long BeachSanta Ana, CA Metro Chicago-Naperville-Joliet, IL-IN-WI Metro Dallas-Fort WorthArlington, TX Metro Philadelphia-CamdenWilmington, PA-NJ-DE-MD Metro Total of all Areas Percent Of US RANK 18,870,038 1 13,223,432 2 9,602,177 3 6,348,826 4 5,852,669 5 287,289,025 93.694
  63. 63. Five Year Estimates • CBSA • New York et al, NY-NJ-PA Metro Los Angeles-Long Beach-Santa Ana, CA Metro Chicago-Naperville-Joliet, IL-IN-WI Metro Washington-Arlington-Alexandria, DC-VA-MD-WV Metro Dallas-Fort Worth-Arlington, TX Metro Total of all Areas 95.1 • Percent Of US 95.0916 • US Total 100 BPI Rank 6.5594 1 4.4271 2 3.1731 3 2.315 4 2.1047 5
  64. 64. Methods / Models • • • • • Check-list method Analogue method Location Allocation Regression modelling Gravity modelling
  65. 65. Check list method
  66. 66. Analog method
  67. 67. Regression models
  68. 68. Location Allocation model
  69. 69. Gravity Model
  70. 70. Merchandising, , Basis of retail merchandising  Product and merchandising management is key activity in the management of retail business.  The primary function of the retailing is to sell Merchandise.  One of the most strategic aspects of the retail business is to decide the merchandise mix and quantity to be purchased .  Merchandising can be termed as the planning, buying and the selling of merchandising .
  71. 71. • Define Merchandising as “The analysis, planning, acquisition, handling and control of merchandise investments of a retail operation.” • Merchandising is the core of retailing. • The function of merchandising is an integral part of retailing and also one of the most challenging functions. • AMA define “The planning involved in marketing the right merchandise at the right place at the right time in the right quantities at the right price.”
  72. 72. • Achieving these five Right is the key to successful merchandising and many a times, this remains an elusive goal for most retailers. • Merchandising management can be termed as “Planning, analysis, acquisition, handling and control of the merchandise”
  73. 73. • Analysis: because retailers must be able to correctly identify their customers before they can ascertain consumer desires and their needs/requirements for making a good buying decision. • Planning is important because merchandise to be sold in the future must be bought now. • Acquisitions because the merchandise needs to be procured from others, either distributors or manufactures. • Handling involves seeing that the merchandise is where it is needed and in the proper condition to be sold. • Control is required since the function of merchandise involves spending money for acquiring products it is necessary to control the amount of money spent on buying
  74. 74. Factors Affecting the Merchandising Function • Merchandising does not function in isolation. • It is affected by various factors like the organization structure, the size of the retail organization and the merchandise to be carried. • Rarely are any two stores organized in the same way. • The function of the merchandising is vary from one organization to another. • Size: The needs of the individual retailers vary from those of large chain store operation.
  75. 75. Merchandising function Merchandise to be carried Types of store Organisation Structure Size of organisation
  76. 76. • The merchandiser to be carried by a retailer largely determines the responsibilities of the merchandiser. • Merchandise to be carried: The buying for basic merchandise is fairly different from buying fashion merchandise. • A merchandisers who I handling fashion products will need to spend more time in the market, and looking for the products which is more suitable for the customers. • Organization structure that the retail organization adopts also affects the merchandising function. Some organization may differentiate the role of the buyer and the role of a merchandisers separately.
  77. 77. The Merchandises Role & Responsibilities • Planning: Thought the merchandising may not be directly involved in the actual purchase of merchandise. • They formulate the policies for the areas in which they are responsible. • Forecasting sale for the forth coming budget period and can estimate the consumer demand and the impact of changes in the retail environment. • Directing: Guiding and training buyers as and when the need arises, is also a function of the merchandiser. • The buyers have to be guided to take additional markdowns for products which may not be doing too well in the stores.
  78. 78. • • Co-ordinating: Merchandise managers supervise the work of more than one buyer. They need to coordinate the buying effort in terms of how well it fits in with the store image and with the other products being bought by other buyers. • Controlling: assessing the buyers performance , is a also part of the merchandise manager’s Job. This includes evaluated on the basis of net sale, maintain mark up percentage, gross margin % and stock turn •
  79. 79. Role of the Buyer • • 1. 2. 3. 4. 5. Buyers plays an important role in the retail industry. they select and order merchandise to be sold. Buyers may be responsible for buying for a department, an entire store, or a chain of stores Developing the merchandising strategies for the product line Planning and selecting merchandise assortments Vendor Selection Pricing of the merchandise Inventory Management
  80. 80. Retail Store Design & Visual Merchandising • Store design and layout tells a customer what the store is all about and it is very strong tool in the hands of the retailer for communicating and creating the image of the store in the mind of the customers. • The design and layout of the store are a means of communicating the image of the retail store. • The environment which is creates in the retail store, is a combination of the exterior look of the store, the store interiors, the atmosphere in the store and the events, promotions and the themes.
  81. 81. • The overall look of a store and the series of mental pictures and feelings it evokes within the beholder. • For the retailer, developing a powerful image provides the opportunity to embody a single message, stand out from the competition and be remembered.
  82. 82. Elements of store design Ext. Frontage & Entrance Parking Display space Building architecture Health & Safety Location Store design Access Store ‘theme’ Target Customers Merchand ise Mix
  83. 83. Exterior Store Design & Interior Design • • • • • • • • • • • • • Exterior Location Parking Ease of access The building architecture Health and safety standards Store windows, lighting Interior Fixtures Flooring & Ceilings Lighting Graphics & Signages Atmospherics
  84. 84. Visual merchandising “Can be termed as the orderly, systematic, logical and intelligent way of putting stock on the floor” • VM is the art of presentation, which puts the merchandise in focus.  It educates the customers, creates desire and finally augments the selling process.
  85. 85. METHODS OF DISPLAYS • • • Color Dominance Co-ordinated Presentation Presentation by price