Chapter 7
Retail Locations
McGraw-Hill/Irwin
Retailing Management, 6/e
Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved.
7-2
Retailing Strategy
Human Resource
Management
Chapter 9
Retail Market and
Financial Strategy
Chapter 5, 6
Retail Locations
Chapter 7
Site Locations
Chapter 8
Information and
Distribution
Systems
Chapter 10
Customer
Relationship
Management
Chapter 11
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Elements in Retail Mix
Location Strategy
Customer Service
Store Display
Merchandise
And Design
Assortment
Communication Mix
Pricing
What Are the Three Most Important
Things in Retailing?
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Location! Location! Location!
Eddie Tan/Life File/Getty Images
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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
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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
PhotoLink/Getty Images
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Types of Locations
7-8
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
The McGraw-Hill Companies, Inc./Andrew Resek, photographer
JCPenney, Sears, Walgreens are shifting to stand alone locations
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Unplanned Retail Locations
Merchandise Kiosks – small temporary
selling stations located in walkways of
enclosed malls, airports, train stations or
office building lobbies.
Kent Knudson/PhotoLink/Getty Images
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City or Town Locations
Gentrification is bringing population back to the cities.
Advantage to Retailers:
•Affluence returned
•Young professionals
•Returned empty-nesters
•Incentives to move provided by cities
•Jobs!
•Low occupancy costs
•High pedestrian traffic
The McGraw-Hill Companies, Inc./Andrew Resek, photographer
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Advantages
•
•
•
•
Draws people into areas during business hours
Hub for public transportation
Pedestrian traffic
Residents
Disadvantages
Central Business District
•
•
•
•
High security required
Shoplifting
Parking is poor
Evenings and weekends are slow
Spike Mafford/Getty Images
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Main Streets vs. CBDs
•
•
•
•
•
•
Occupancy costs lower than CBDs
They don’t attract as many people
There are not as many stores
Smaller selections offered
Not as much entertainment
Some planners restrict store operations
The Most Expensive Shopping
Streets in the World
Street
Location
Cost / sq foot / year
Fifth Avenue (48th to
58th St.)
New York City
$580
57th Street (5th Ave.
to Madison Ave.)
New York City
$500
Oxford Street
London
$400
Madison Avenue (57th New York City
to 72nd St.)
$375
Ave. des Champs
Elysee
$360
Paris
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Unmet demand tops
25% in many inner city
markets
(c) Brand X Pictures/PunchStock
Inner City
Inner city customer
wants branded
merchandise
Inner city retailers achieve high sales
volume, higher margins and higher profits
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Shopping Centers
Shopping Center Management Controls:
Parking
•Security
•Parking lot lighting
•Outdoor signage
•Advertising
•Special events for customers
The McGraw-Hill Companies, Inc./Andrew Resek, photographer
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Types of Shopping Centers
• Neighborhood and Community Centers
(Strip Centers)
• Power Centers
• Enclosed Malls
• Lifestyle Centers
• Fashion Specialty Centers
• Outlet Centers
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Neighborhood and Community Centers
Attached row of stores
Onsite parking
The McGraw-Hill Companies, Inc./Andrew Resek, photographer
Managed as a unit
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Power Centers
Open air set up
Big box stores
Many located near
enclosed malls
Available parking
Free-standing stores
Limited small
specialty stores
PhotoLink/Getty Images
Low occupancy costs
Large trade areas
Modest vehicular and
pedestrian traffic
Convenient
Desirable
shopping
experience
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The Largest North American Shopping Malls
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Mall of America
• Located near Minneapolis, MN
• Largest mall in the US
• Enough people to qualify as the
third largest city in Minnesota
• Has more than 42 million
visitors a year
• More people visit than Disney
World, the Grand canyon and
Graceland combined
Digital Vision/Getty Images
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Advantages and Disadvantages of Shopping Malls
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
Advantages:
Disadvantages:
Occupancy costs are high
Tenants may not like mall management control of operations
Competition can be intense
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Challenge to Malls
• Time pressured society makes it impractical to
wander malls
• Fashion apparel sold in malls experiencing
limited growth
• Malls are getting old and rundown – unappealing
to shop
• Anchor tenants are decreasing due to retail
consolidation
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Lifestyle Centers
Photo provided by ICSC and used with permission of Aspen Grove Lifestyle Center
Courtesy of General Growth Properties
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Stores and Restaurants at Lifestyle Centers
Williams-Sonoma
Victoria’s Secret
Restoration Hardware
Barnes & Noble/Borders
Coldwater Creek
Pottery Barn
The Gap
Banana Republic
Bed Bath & Beyond
Eddie Bauer
Panera Bread
Ann Taylor
Starbucks
Aeropostale
Dick’s Sporting Goods
Hallmark
Johnny Rockets
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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 may be there
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Upscale apparel shops
Need to be anchored
Décor is elegant
The McGraw-Hill Companies, Inc./Lars A. Niki, photographer
Fashion Specialty Centers
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Outlet Centers
These shopping centers contain mostly manufacturers and retail outlet stores
Courtesy of Beall’s, Inc.
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Tradeoff Between Locations
There are relative advantages
and disadvantages to consider
with each location.
Rent
Traffic
Relative Advantages
of Major Retail Locations
Location
City
Issues
Strip
Shopping
Center
Mall
Free
Standing
Large size
draws people
to area
+
-
+
-
People
working/living
in area
provided source
of customers
+
+
-
-
Source of
entertainment/
recreation
?
-
+
-
Protection
against weather
-
+
-
-
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Relative Advantages
of Major Retail Locations
Location
CBD
Issues
Strip
Shopping
Free
Center
Mall
Standing
-
+
+
+
+
Planned
shopping
area/balanced
tenant mix
-
-
+
-
Parking
-
Occupancy
costs
(e.g. rent)
?
+
+
-
Security
Long, uniform
hours of
operation
+
+
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Relative Advantages
of Major Retail Locations
Location
City
Issues
Strip
Shopping
Center
Mall
Free
Standing
Pedestrian
traffic
+
-
+
-
Landlord
+
+
-
+
Strong
competition
+
+
-
+
Tax
incentives
?
?
?
?
control
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Other Retail Location Opportunities
Mixed Use
Developments
Airports
Resorts
Hospitals
Store within a Store
Royalty-Free/CORBIS
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Alternative Locations
Mixed Use Developments MXDs
Rob Melnychuk/Getty Images
Hotels
Office
Buildings
D. Falconer/PhotoLink/Getty Images
Civic Centers
Skip Nall/Getty Images
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Alternative Locations
Airports
Airports: Why wait with nothing to do?
Kim Steele/Getty Images
Rents are 20% higher than malls
Sales/sqft are 3-4 times higher than malls
Best airports are ones with many connecting flights
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Alternative Locations
Resorts
Captive audience
Well-to-do customer
Customers have time to shop
Royalty-Free/CORBIS
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Alternative Locations
Hospitals
Patients cannot leave
Gifts are available
Royalty-Free/CORBIS
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Matching Location to Retail Strategy
• 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
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Shopping Situations
Minimize the customer’s effort
to get the product or service by
locating store close to where
customers are located
The McGraw-Hill Companies, Inc./Andrew Resek, photographer
Convenience Shopping
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Shopping Situations
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,
appliances, apparel,
consumer electronics,
hand tools and
cameras.
Ryan McVay/Getty Images
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Category Specialists
Consumers can see almost all brands and models in one store
The McGraw-Hill Companies, Inc./Andrew Resek, photographer
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Shopping Situations
Specialty Shopping
Customers know what they want
Designer labels
Convenient location matters less
The McGraw-Hill Companies, Inc./Andrew Resek, photographer
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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’ Protection
Stipulate in the lease that the lessor is responsible
for removal and disposal of this material if it’s
found.
Retailer can buy insurance that specifically
protects it from these risks.
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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