Chapter 10
Site Selection
Dr. Pointer Notes
Chapter Objectives
To thoroughly examine the types of
locations available to a retailer: isolated
store, unplanned business district, and
planned shopping center
To note the decisions necessary in
choosing a general retail location
To describe the concept of one-hundred
percent location
10-2
Chapter Objectives_2
To discuss several criteria for
evaluating general retail locations and
the specific sites within them
To contrast alternative terms of
occupancy
10-3
Overview
Step 1: investigate alternative trading
areas (Chapter 9)
Step 2: type of location is desirable
determine what
Step 3: select the general location
Step 4: evaluate alternative specific
store sites
Chapter 10 discusses steps 2-4
10-4
3 Types of Locations
Isolated
Store
Planned
Shopping
Center
Unplanned
Business
District
10-5
Isolated Site
• An isolated site is a freestanding retail outlet
located on either a highway or a street. No
adjacent retailers to share traffic
• In the past, the mass merchandisers were
forced to use this type of site.
• Today, diverse retailers elect this site type—
Krispy Kreme Donuts, Target, McDonald’s,
10-6
Isolated Stores
Advantages
Disadvantages
* No competition
* Difficulty attracting
customers
* Low rental costs
* Travel distance
* Flexibility
* Lack of variety for
* Good for
customers
convenience
stores
* High advertising
expenses
* Better visibility
* No cost sharing
* Adaptable
facilities
* Restrictive zoning
laws
* Easy parking
10-7
Unplanned Business District
• Unplanned business district is a type of
retail location where 2 or more stores are
situated together (close proximity) in such a
way that the total arrangement or mix of
stores is not due to prior long-range
planning.
10-8
Unplanned Business Districts
Central Business
District
Neighborhood
Business
District
10-9
Secondary
Business
District
String
District
Secondary Business Districts
• SBD is an unplanned shopping area in a city
or town that is usually bounded by the
interception of 2 major streets.
• Usually the same type of goods and
services are sold as in the central business
district
• Major strengths is good product selection
and access to major thoroughfares and
public transportation.
10-10
Neighborhood Business Districts
• NBD is an unplanned shopping area that
appeals to the convenience shopping and
service needs of a single residential area
• Usually has several small stores, dry
cleaner, stationery store, a
barbershop/beauty salon, liquor store, and
restaurant.
• Advantages are good location, store hours,
parking less hectic atmosphere.
10-11
String Shopping Area
• A string is an unplanned shopping area
comprising a group of retail stores, often
with similar or compatible product lines
located along a major street
• example – group of auto dealers located
side by side
10-12
Central Business District
• A central business district (CBD) is the hub of
retailing in a city, same as downtown.
• Greatest density of office building and no more than
a 1 sq mile, with cultural and entertainment facilities
surrounding it.
• Reasons for popularity- good product assortment,
access to transportation, variety of customers and
stores.
• Weaknesses – poor parking, traffic and delivery
congestion, relatively poor image, high rent and
taxes for most popular cites.
10-13
The Planned Shopping Center
• A planned shopping center consists of a
group of architecturally unified commercial
establishments on a site which is centrally
owned and managed. Galleria, Memorial
City Mall, Willowbrook Mall
• Uses concept of balanced tenancy – stores
complement each other as to quality and
variety of product offerings-
10-14
Planned Shopping Centers
Disadvantages
Advantages
* Limited flexibility
* Well-rounded
* Higher rent
assortments
* Restrictions on offerings
* Strong suburban
* Competitive environment
population
* Requirements for
* One-stop, family
association
shopping
memberships
* Cost sharing
* Too many malls
* Transportation access* Domination by anchor
* Pedestrian traffic
stores
10-15
Types of Planned Shopping
Centers
• Regional shopping Center- mega malls –
Mall of American in Minnesota
• Community Shopping Center including a
power center –is shopping center with up to
6 –12 category killers and mix of smaller
stores most are complementary stores
lifestyle centers open air shopping center
with a upscale specialty stores,
• Neighborhood Shopping Center
10-16
How Important are Planned
Shopping Centers
• 46,000 U.S. Shopping Centers
• 1200 are fully enclosed
• Shopping center revenues exceed $1.2
trillion annually
• Employee 11 million people
• 94% of Americans over 18 yrs of age visit
average of once a month
• Many older shopping centers are being
renovated, expanded or repositioned
10-17
Renovations to Sustain
Growth
The Florida Mall, Orlando, Florida
King of Prussia, Pennsylvania
Park Place, Tucson, Arizona
Roosevelt Field, Long Island, New York
University Towne Center, San Diego,
California
10-18
Table 10.1 A
Characteristics of Centers
Features
Total site area
Total sq. ft. leased
Principal tenant
Number of stores
Minimum # of people in
trading area
Driving time of trading
area
Location
10-19
Regional Center
30-100+
400,001-2,000,000+
1, 2 or more department
stores
50-100
100,000+
Up to 30 minutes
Outside central city on
highway
Table 10.1 B
Characteristics of Centers
Features
Total site area
Total sq. ft. leased
Principal tenant
Number of stores
Minimum # of people in
trading area
Driving time of trading
area
Location
10-20
Community Center
10-30
100,000-400,000
Branch department store
15-25
20,000-100,000
Up to 20 minutes
Close to residential
areas
Table 10.1 C
Characteristics of Centers
Features
Total site area
Total sq. ft. leased
Principal tenant
Number of stores
Minimum # of people in
trading area
Driving time of trading
area
Location
10-21
Neighborhood
Center
3-10
30,000-100,000
Supermarket or
drugstore
5-15
3,000-50,000
Less than 15 minutes
Along major
thoroughfare in single
residential areas
Location and Site Evaluation
One-hundred
Percent
Location
10-22
The
optimum site
for a
particular store
Location and Site Evaluation
• One –hundred percent locations – optimum
site for the particular store type
• The requirements for a one hundred percent
location will vary by retail type
10-23
Location Evaluation Checklist
• Pedestrian Trafficnumber and type of
people
• Vehicular trafficnumber &type of
vehicles, congestion
level
• Parking Facilities
• Transportation
10-24
•
•
•
•
Store composition
Specific Site
Terms of Occupancy
Overall rating
Pedestrian Traffic
The most crucial measures of a location’s
and site’s value are the number and type of
people passing by.
Proper pedestrian traffic count should
include
*
*
*
*
10-25
age and gender (exclude very young children)
count by time of day
pedestrian interviews
spot analysis of shopping trips
Vehicular Traffic
• Important for
– convenience stores
– outlets in regional shopping centers
– car washes
– suburban areas with limited pedestrian
traffic
10-26
Parking Considerations
Number and quality of spots
Distance of spots from stores
Availability of employee parking
Price to charge customers for parking
10-27
How Many Parking Spaces?
• Shopping centers = 4-5 spaces per 1000
square feet of gross floor space
• Supermarkets = 10-15 spaces per 1000
square feet of gross floor space
• Furniture stores = 3-4 spaces per 1000
square feet of gross floor space
10-28
Terms of Occupancy
Considerations
• Ownership versus Leasing- with
adequate funding ownership could be
good option,
• Type of Lease
• Operations and Maintenance Costs
• Taxes
• Zoning Restrictions
• Voluntary regulations
10-29
Advantages of Ownership
•
•
•
•
Lease renewal is not an issue
Monthly mortgage rate is stable
Operations are flexible
May be able to take advantage of site
appreciation
• Other ownership issues – construct new
facility or renovate existing property
10-30
Disadvantage of Ownership
• Might require more upfront capital
• Long term commitment
• Inability to readily change sites
Most facilities are leased
Leasing minimizes initial investment, reduces
risk, reduces long term commitment and
allows access to prime site and occupancy
time may be immediate.
10-31
Types of Leases
Straight Lease
Percentage
Lease
Graduated
Lease
10-32
Maintenanceincrease
recoupment
lease
Net Lease
Types of Leases
• Straight lease – retailer pays a fixed amount per
month over life of lease
• Percentage Lease – rent is related to sales or
profits
• Graduated lease – precise increase in amount over
a stated period of time
• Maintenance-increase-recoupement lease – has a
provision allowing rent to increase if property
owners expenses increases
• Net lease – Calls for all maintenance costs such as
lighting, heating, insurance etc be paid by retailer
10-33
Other Considerations
• Need to calculate the total costs of
operating and maintenance for a site.
• Differences in sales taxes by locations could
be a factor
10-34
Questions
Please read chapter
10-35