Before visiting a mall or a shop, the first question that arises in

consumers’ mind is, “How far do I have to walk/drive?”

In populous cities such as Mumbai, Delhi, Tokyo, and Shanghai to name

a few, consumers face rush-hour traffic jams or jams because of road
structure. In such cases, to access a retail outlet to procure day-to-day
needs becomes very difficult. It is very important for the consumers to
have retail stores near where they stay.

Importance of Location in Retail Business

Retail store location is also an important factor for the marketing team to
consider while setting retail marketing strategy. Here are some reasons
−

 Business location is a unique factor which the competitors cannot imitate.

Hence, it can give a strong competitive advantage.

 Selection of retail location is a long-term decision.

 It requires long-term capital investment.

 Good location is the key element for attracting customers to the outlet.

 A well-located store makes supply and distribution easier.

  Locations can help to change customers’ buying habits.

Trade Area: Types of Business Locations

A trade area is an area where the retailer attracts customers. It is also
called catchment area. There are three basic types of trade areas −

Solitary Sites
These are single, free standing shops/outlets, which are isolated from
other retailers. They are positioned on roads or near other retailers or
shopping centers. They are mainly used for food and non-food retailing,
or as convenience shops. For example, kiosks, mom-andpop stores
(similar to kirana stores in India).

Advantages − Less occupancy cost, away from competition, less

operation restrictions.

Disadvantages − No pedestrian traffic, low visibility.

Unplanned Shopping Areas

These are retail locations that have evolved over time and have multiple
outlets in close proximity. They are further divided as −
  Central business districts such as traditional “downtown” areas in
cities/towns.

 Secondary business districts in larger cities and main street or high street
locations.

 Neighborhood districts.

 Locations along a street or motorway (Strip locations).

Advantages − High pedestrian traffic during business hours, high

resident traffic, nearby transport hub.

Disadvantages − High security required, threat of shoplifting, Poor

parking facilities.

Planned Shopping Areas

These are retail locations that are architecturally well-planned to provide
a number of outlets preferably under a theme. These sites have large,
key retail brand stores (also called “anchor stores”) and a few small
stores to add diversity and elevate customers’ interest. There are various
types of planned shopping centers such as neighborhood or
strip/community centers, malls, lifestyle centers, specialty centers, outlet
centers.
Advantages − High visibility, high customer traffic, excellent parking
facilities.

Disadvantages − High security required, high cost of occupancy.

Factors Determining Retail Locations

The marketing team must analyze retail location with respect to the
following issues −

 Size of Catchment Area − Primary (with 60 to 80%

customers), Secondary (15 to 25% customers), and Tertiary (with remaining
customers who shop occasionally).

 Occupancy Costs − Costs of lease/owning are different in different areas,

property taxes, location maintenance costs.

 Customer Traffic − Number of customers visiting the location, number of

private vehicles passing through the location, number of pedestrians visiting
the location.

 Restrictions Placed on Store Operations − Restrictions on working hours,

noise intensity during media promotion events.

 Location Convenience − Proximity to residential areas, proximity to public

transport facility.
Steps to Choose the Right Retail Location
A retail company needs to follow the given steps for choosing the right
location −

Step 1 - Analyze the market in terms of industry, product, and

competitors − How old is the company in this business? How many
similar businesses are there in this location? What the new location is
supposed to provide: new products or new market? How far is the
competitor’s location from the company’s prospective location?

Step 2 – Understand the Demographics − Literacy of customers in

the prospective location, age groups, profession, income groups,
lifestyles, religion.

Step 3 – Evaluate the Market Potential − Density of population in the

prospective location, anticipation of competition impact, estimation of
product demand, knowledge of laws and regulations in operations.

Step 4 - Identify Alternative Locations − Is there any other potential

location? What is its cost of occupancy? Which factors can be
compromised if there is a better location around?

Step 5 – Finalize the best and most suitable Location for the retail
outlet.

Measuring the Success of Location

Once the retail outlet is opened at the selected location, it is important to
keep track of how feasible was the choice of the location. To understand
this, the retail company carries out two types of location assessments −

Macro Location Evaluation

It is conducted at a national level when the company wants to start a
retail business internationally. Under this assessment, the following steps
are carried out −

 Detailed external audit of the market by analyzing locations as macro

environment such as political, social, economic, and technical.
  Most important factors are listed such as customer’s level of spending,
degree of competition, Personal Disposable Income (PDI), availability of
locations, etc., and minimum acceptable level for each factor is defined and
the countries are ranked.

 The same factors listed above are considered for local regions within the
selected countries to find a reliable location.

Micro Location Evaluation

At this level of evaluation, the location is assessed against four factors
namely −

 Population − Desirable number of suitable customers who will shop.

 Infrastructure − The degree to which the store is accessible to the potential

customers.

 Store Outlet − Identifying the level of competing stores (those which the
decrease attractiveness of a location) as well as complementary stores
(which increase attractiveness of a location).

 Cost − Costs of development and operation. High startup and ongoing costs
affect the performance of retail business.
Choosing a location for your retail business is one of the most important startup
decisions you'll make. Location can make or break a store.

This guide will help you find the ideal space for your
retail business.
To help you with your search, work with a Landlord’s leasing representative or
commercial real estate broker. A large shopping center company may have several
available retail spaces in the geographic area that you select. A good broker with
experience may also be helpful. Ask other businesspeople or local professionals for
recommendations.

Also, before searching for a location, complete your business plan to determine the
square footage and layout that best fits your brand. Retail locations come in many
formats, including:

 Enclosed shopping malls

 Open-air shopping centers
 Neighborhood grocer/drug store center
 Pedestrian areas, such as downtown shopping streets
 Freestanding kiosks or carts

As you assess locations, ask yourself these questions:

1. Are there enough potential customers nearby? Choose a location where

many of your target customers live or work. If you're opening a toy store, for
example, locating in a college town full of single twenty-somethings wouldn't
make sense. Your demographic research will help you pinpoint the best
locations. Ask about average foot and vehicle traffic. Your leasing
representative should have car counts for each location, but you should also
“stake out” spots you’re considering and see how many passersby they attract
during the hours you’ll be open.
2. Is the space accessible? Look for a location that’s easy to see and find, with
plenty of customer parking in the front. Consider how easily vendors can
deliver inventory. For example, if you're opening a furniture store, you need
enough space for trucks to park and maneuver furniture through a back
entrance.
3. Is it move-in ready? Many retail spaces will require modifications to suit your
needs. Build-outs or leasehold improvements, such as tearing down or adding
walls or rewiring the electrical system, can significantly add to costs (and to
the time required to get up and running). You can sometimes negotiate with
Landlords to help share some of these costs or get some free rent to offset
your investment.
4. What are the neighbors like? Complementary, but not competing
businesses are ideal neighbors. If you want to sell high-end women's apparel,
locating near other upscale women's apparel, accessories and jewelry stores
is a plus, because apparel shoppers typically visit several stores. On the other
hand, an aquarium supplies store wouldn't want a similar store down the
 street. Locating near restaurants or entertainment venues, or even a big-box
store, can benefit your store if those businesses attract your target customer
base. Don’t assume the current tenant mix will stay the same. Ask the
Landlord about any competing stores moving into the shopping center that
may impact your business.
5. What are the local zoning restrictions? Find out if there are any zoning
laws affecting your store. For instance, there may be restrictions on hours of
operation, the type of signage you can put up or your type of “business use” in
the premises.
6. Is the infrastructure adequate? If you’re considering older buildings, make
sure they have adequate heating, cooling, plumbing and electrical systems,
as well as Internet service. What restroom facilities are available for
employees and customers?
7. What is included in the rent? In addition to utilities, ask about services such
as janitorial, trash removal, security, real estate taxes and maintenance of
common areas, such as parking lots.
8. Is it safe? Find out what type of security the building has, such as alarm or
camera systems and security guards. Make sure the parking area is safe and
well-lit after dark. Ask your insurance agent to estimate insurance costs at
each location you’re considering.
9. What are the lease terms? Signing a longer term lease locks in your rent,
but if your business doesn’t succeed, you’re still on the hook. A shorter term
lease gives you more flexibility but also leaves you vulnerable to a steep rent
increase when the lease is up. Retail leases are complex, so have your
attorney review the lease before you sign. Last, but not least, remember that
there's always room for negotiation.

Devote time, thought and consideration to your choice of location. With careful
research and help from a Landlord leasing representative or qualified commercial
real estate broker, you’ll find the perfect retail space.