Why is a good location important?
It’s essential for the success of a retail store. It can allow a retailer to succeed, even if the strategy mix is average.
A poor location can hurt even the strongest retailers.
Location can determine customer traffic, sales volume and long-term profitability.
What are the essential factors in selecting a retail location?
retailers consider:
- population and size/demographic traits
- level of competition
- transportation acess
- parking
- nature of nearby stores
- property costs
Factors consumers consider when choosing where to shop
- overall appeal and safety of the area
- distance to the store
- availability of one-stop shopping
- variety of brands and products assortment
- ease of parking
- travel time
What are the 4 steps in choosing a store location?
- evaluate alternative geographic areas
- decide on the type of location (isolated store, shopping center)
- select the general retail location
- analyze specific sites within that location
What is a trading area?
A trading area is the geographic area where a retailer’s customers and potential customers live.
What is a trading area analysis and what are the benefits?
It involves researching a geographic location to determine if it’s suitable for a retail store.
Benefits:
- determines best promotional strategies
- evaluates competition
- reviews transaportation, labor, suppliers, legal issues
- identifies number of outlets
What does Geographic Information Systems mean?
GIS software combines digital mapping with demographic and locational data to analyze trading areas. It shows: population demographics, customer purchase patterns, competitor locations.
Data comes from census and market research studies.
What are the 3 parts of a trading area?
- Primary Trading Area
50%-80% of customers - Secondary Trading Area
15-20% - Fringe Trading Area
remaing
What is a destination store?
A go-to store
strong assortment, image and promotion
large trading area
ex: walmart
What is a parasite store?
does not generate its own traffic
depends on nearby businesses
small or no trading area
ex; gift shop in a hospital
Why does store size affect trading area?
Larger stores offer broader assortments, promote more aggressively, build stronger brand image, which makes it that consumers are willing to travel further
Smaller stores have limited assortments and attract customers only from nearby areas.
What is the meaning and purpose of the Reilly’s Law of Retail Gravitation?
Meaning:
It determines the breaking point (point of indifference) between two cities based on population size and distance between cities.
Purpose:
used to estimate trading area when other data is unavailable
What is the meaning and purpose of Huff’s law of shopper attraction?
Meaning:
Determines trading areas based on 3 factors
1. appeal of product assortment
2. travel time to shopping location
3. sensitivity of shopping trip to travel time
Purpose:
Consumers evaluate and rank shopping locations based on these 3 factors: better assortment, specific desired brands, and higher attractiveness
What are the key factors in evaluating a trading area?
- population size and characteristic
age, income, occupation, lifestyle - availability of labour
skilled and unskilled workforce - closeness to sources of supply
transportation and delivery costs - promotion facilities
media availability - economic base
stability of local economy - competitive situation
number and strength of competitors
What is the meaning of understored area?
too few stores to meet consumer demand
What is the meaning of overstored?
too many stores, some cannot earn adequate profits
What is the meaning of saturated?
proper number of stores, demand and supply are balanced
