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.
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 perspective 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.
The first step in arriving at a decision on retail location is to identify the markets attractive to a retailer. This is important as he needs to understand the market well, especially in country like India, here every region has its own peculiarities and needs. Similarly, this is also important in case of an international expansion. The Characteristics the markets of Europe are different from those of America and the Far East.
Determining the Market Potential:
In order to determine the market potential the retailer needs to take into consideration various elements. The chief among them is:
Demographic Features the Population:
Understanding the features of the population is integral to developing retail marketing strategy. Data one population of India can be obtained from the Census of India reports. Merely getting an idea of the size of the population is not enough. In India, it is essential o know the break up of rural and urban population as growth of urbanization is again essential or the growth of retail. The retailer also needs to understand the level of literacy and the level of education in the population.
The Characteristics of the Households in the Area:
The retailer needs to have a clear understanding of the average household income and the distribution of this income in the area. This is very essential as the level of income largely determines the kind facilities require. For example in a locality which has households with relatively low incomes, a regular bania is bound to exist however fashion apparel retail store is unlikely to succeed. And understanding of the average age profile of the population in the area is necessary as it aids in aids in decision making. For example, a neighborhood which has a large number of young households, may be more oriented towards fast food and casual clothing. An understanding of the employment levels and the type of employment indicates the kind of preferences that the population may have for certain products or services.
Competition and Compatibility:
While determining the market potential, it is necessary to check the compatibility of the retail store with the other retail outlets in an area. for example, a good location for a gift shop would be near a department tire or a theatre or restaurant, as such a location would allow potential customers to spend time looking at the gift shop’s display windows. Similarly, locating a high fashion boutique next to a bakery or a hardware store may not be a very good idea.
While it is necessary to check the level of compatibility, it is also necessary to do an analysis of the competition in the proposed area. It is necessary to try and evaluate their strengths and weaknesses, to know the square foot area of the various stores in the area and the kind of returns that they are able to obtain per employee per square foot.