CHAPTER 7
Retail
Locations
McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.
CHAPTER 07
Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Questions
• What types of locations are available to retailers?
• What are the relative advantages of each location type?
• Why are some locations particularly well suited to specific
retail strategies?
• Which types of locations are growing in popularity with
retailers?
7-2
What Are the Three Most Important
Things in Retailing?
Location! Location! Location!
7-3
Eddie Tan/Life File/Getty Images
Facts on Retail Space
• Currently the U. S. has 20 square feet of retail space in
shopping centers for every person.
• The highest country in the world
• The second-highest country:
• Sweden – 3.1 square feet per person
7-4
Why is Store Location
Important for a Retailer?
• Location is typically prime
consideration in customer’s
store choice.
• Location decisions have
strategic importance
because they can help to
develop sustainable
competitive advantage.
• Location decisions are risky:
invest or lease? F. Schussler/PhotoLink/Getty Images
7-5
Types of Retail Locations
Types
• Unplanned locations- do not
have centralized management
that determines what stores will
be in a development.
• Planned locations-the shopping
center and/or manager makes
and enforces policies that
govern store operations.
• Gross leasable area- Total floor
area designed for the retailer’s
occupancy.
7-6
Types of Retail Locations
• Free Standing Sites
• City or Town
Locations
• Inner City
• Main Street
• Shopping Centers
• Strip Shopping
Centers
• Shopping Malls
• Other Location
Opportunities
7-7
Selecting a particular location type
• Involves evaluating a series of trade-offs between
• The size of the trade area (geographic area encompassing most of
the customers who would patronize a specific retail site)
• the occupancy cost of the location
• The pedestrian and vehicle customer traffic
• The restrictions placed on store operations by the property
manager
• The convenience of the location for customers
7-8
Tradeoff Between Locations
There are relative advantages
and disadvantages to consider
with each location.
Rent
Traffic
7-9
Types of Locations
7-10
Unplanned Retail Locations
• Freestanding Sites – location for individual store
unconnected to other retailer
• Advantages:
• Convenience
• High traffic and visibility
• Modest occupancy cost
• Separation from competition
• Few restrictions
• Disadvantages:
• No foot traffic
• No drawing power The McGraw-Hill Companies, Inc./Andrew Resek, photographer
7-11
City or Town Locations
• Gentrification is bringing
population back to the cities.
• Advantage to Retailers:
• Affluence returned
• Young professionals
• Returned empty-nesters The McGraw-Hill Companies, Inc./Andrew Resek, photographer
• Incentives to move provided by cities
• Jobs!
• Low occupancy costs
• High pedestrian traffic
7-12
Central Business District (CBD)
Advantages
• Draws people into areas during business hours
• Hub for public transportation
• Pedestrian traffic
• Residents
• High security required
Disadvantages
• Shoplifting
• Parking is poor
• Evenings and weekends are slow
Spike Mafford/Getty Images
7-13
Main Streets vs. CBDs
• Occupancy costs lower than
CBDs
• Traditional downtown shopping
area
• They don’t attract as many
people
• There are not as many stores
• Smaller selections offered
• Some planners restrict store
operations
7-14
Inner City
• Inner city retailers
achieve high sales
volume, higher
margins and higher
profits
• Unmet demand tops
25% in many inner
city markets
7-15
Shopping Centers
• A shopping center is a group
of retail and other commercial
establishments that is planned,
developed, owned, and
managed as a single property.
• Shopping center management
controls:
• Parking
• Security
• Parking lot lighting
• Outdoor signage
• Advertising
• Special events for customers
The McGraw-Hill Companies, Inc./Andrew Resek, photographer
7-16
Types of Shopping Centers
• Neighborhood and Community Centers (Strip Centers)
• Power Centers
• Enclosed Malls
• Lifestyle Centers
• Mixed-Use Developments
• Outlet Centers
• Theme/Festival Centers
• Omnicenters
7-17
Neighborhood and Community Centers
Managed as a unit
Advantages
The McGraw-Hill Companies, Inc./Andrew Resek, photographer
Convenient locations
Easy parking
Low occupancy costs
Disadvantages
Limited trade area
Lack of entertainment
No protection from weather
Attached row of stores
Onsite parking
7-18
Power Centers
• Shopping centers that consist primarily of collections of big-box retail
stores such as discount stores (Target), off-price stores (Marshall’s),
warehouse clubs (Costco), and category specialists (Lowe’s, Best
Buy, Bed Bath & Beyond, Dick’s Sporting Goods)
• Open air set up
• Free-standing anchors
• Limited small specialty stores
• Many located near enclosed malls
• Low occupancy costs
• Convenient
• Modest vehicular and pedestrian traffic
• Convenient
• Large trade areas
7-19
Shopping Malls
• Regional shopping
malls (less than 1
million square feet)
• Super regional malls
(more than 1 million
square feet)
The South China Mall in Dongguan, China
7-20
Advantages and Disadvantages
of Shopping Malls
Advantages:
• Many different types of stores
• Many different assortments available
• Attracts many shoppers
• Main Street for today’s shoppers
• Never worry about the weather
• Comfortable surrounding to shop
• Uniform hours of operation
PhotoLink/Getty Images
7-21
Advantages and Disadvantages
of Shopping Malls
Disadvantages:
• Occupancy costs are high
• Tenants may not like mall
management control of operations
• Competition can be intense
• Customers may not have time to
stroll through a mall
PhotoLink/Getty Images
7-22
Lifestyle Centers
• Usually located in affluent residential neighborhoods
• Includes 50K sq. ft. of upscale chain specialty stores
• Open-air configuration
• Design ambience and
amenities
• Upscale stores
• Restaurants and often
a cinema or other
entertainment
• Small department store
format
7-23
Mixed Use Developments (MXDs)
• Combine several different
uses into one complex,
including shopping centers,
offices, hotels, residential
complexes, civic centers,
and convention centers.
• Offer an all-inclusive
environment so that
consumers can work, live,
and play in a proximal area
7-24
Outlet Centers
These shopping centers contain mostly manufacturers and retail outlet stores
Courtesy of Beall’s, Inc.
7-25
Theme/Festival Centers
• Located in places of historic interests or for tourists
• Anchored by restaurants and entertainment facilities
7-26
Larger, Multi-format
Developments: Omnicenters
• Combines enclosed malls, lifestyle center, and power
centers
• Larger developments are targeted
• to generate more pedestrian traffic and longer shopping trips
• To capture cross-shopping consumers
7-27
Other Location Opportunities
• Airports
• Resorts
• Store within a Store
• Temporary or pop-up stores
7-28
Alternative Locations
Pop-Up Stores and Other Temporary Locations
• Temporary locations that focus on new products or a
limited group of products.
• Create buzz, test new concepts, or even evaluate a
new neighborhood or city.
• Temporary stores to take advantage of the holiday
season in December
• Visibility and additional sales at
festivals or concerts, weekend
crafts fairs, or farmers’ markets.
7-29
Alternative Locations
Store within a Store
• Located within other, larger stores
• Examples:
• Grocery store with service providers (coffee bars, banks, clinics,
video outlets)
• Sephora in JCPenney
7-30
Alternative Locations
Merchandise Kiosks
• Merchandise Kiosks
– small temporary
selling stations
located in walkways
of enclosed malls,
airports, train
stations or office
building lobbies.
Kent Knudson/PhotoLink/Getty Images
7-31
Alternative Locations
Airports
Airports: Why wait with nothing to do?
Rents are 20% higher than malls
Sales/square ft are 3-4 times higher than malls
Best airports are ones with many connecting flights
Kim Steele/Getty Images
7-32
Matching Location to Retail Strategy
• The selection of a location type must reinforce the
retailer’s strategy be consistent with
• the shopping behavior
• size of the target market
• The retailer’s position in its target market
• Department Stores Regional Mall
• Specialty Apparel Central Business District, Regional
malls
• Category Specialists Power Centers, Free Standing
• Grocery Stores Strip Shopping Centers
• Drug Stores Stand Alone
7-33
Shopping Behavior of Consumers
in Retailer’s Target Market
• Factors affecting the location choice
• Consumer Shopping Situations
• Convenience shopping
• Comparison shopping
• Specialty shopping
• Density of Target Market
• Ex. Convenience stores in CBD; comparison shopping stores next to
Wal-Mart
• Uniqueness of Retailing Offering
• Convenience of locations is less important
• Ex. Bass Pro Shop
7-34
Convenience Shopping
• Minimize the
customer’s effort to
get the product or
service by locating
The McGraw-Hill Companies, Inc./Andrew Resek, photographer
store close to where
customers are
located
7-35
Comparison Shopping
• Customers have a
good idea of what
type of product they
want, but don’t have
a strong preference
for brand, model or
retailer. Typical for furniture,
• Competing retailers appliances, apparel,
consumer electronics, hand
locate tools and cameras.
• Near one another Ryan McVay/Getty Images
7-36
Specialty Shopping
• Customers know
what they want
• Designer labels
• Convenient location
matters less
7-37
LEGAL CONSIDERATIONS
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’ remedies to protect themselves from hazards.
• Stipulate in the lease that the lessor is responsible for
removal and disposal of this material if it’s found.
• Buy insurance that specifically protects it from these
risks.
7-38
LEGAL CONSIDERATIONS
Other Legal Issues
• Zoning and Building Codes
• 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
7-39
