Chapter Seven: Selecting the Appropriate Market and Location
Location, location, location. William Dillard, founder, Dillard's department stores 7-2
Integrated Retail Management Flow Chart 7-3
Objectives Define target customer group. Describe the processes involved in selecting a retail market and site. Analyze a retail trading area. Discuss the various types of sites available to retailers. Explain the difference between a planned and an unplanned shopping district. Describe the various characteristics that influence a retailer's site selection. 7-4
Market and Location Decisions Many variables to consider Choosing target market Assessing and analyzing the trading area Analyzing and selecting the site Ultimate goal - maximum customer access 7-5
Deciding on the Target Market Target market criteria Information is used to develop customer profile 7-6
E-tailing More difficult in developing customer profile Geographic location decisions important 7-7
Choosing the Right Location Three-step process Regional Analysis Trading Area Analysis Actual Site Analysis and Selection 7-8
Regional Analysis Often use Country City Designated market area (DMA) Metropolitan statistical area (MSA) 7-9
Designated Market Area (DMA) Composed of counties that are nonoverlapping Change slightly year to year Based on television viewing habits Named after the city that defines its center 7-10
Metropolitan Statistical Area (MSA) Area within the U.S. that has at least one urbanized area with a population of at least 50,000 Reviewed every ten years In 2003 (most recent), there were 370 MSAs (362 in U.S.; 8 in Puerto Rico) 7-11
Global Expansion Guide When choosing to expand globally, the retailer must: Make sure the targeted market has adequate spending power Conduct a study of the potential market Gain country-specific or local expertise 7-12
Wal-Mart Expands Globally 7-13
Trading Area Analysis Account for 50 percent or more of the retailers sales and/or customers Size depends on the retailers objectives 7-14
Determining the Trading Area Categories Primary Market Secondary Market Tertiary (fringe) Market Sales from outside the area in which the retailer is located Tourist trade 7-15
Trading Area Considerations Population Availability of a labor force Rules, laws, and regulations Types of schools State of the area's economy Number and size of competitors Communications or promotion network Types of transportation available Proximity of suppliers 7-16
Geographic Information Systems (GIS) Geographic Information System Used in determining trading area Can be combined with other customer characteristics 7-17
GIS Map Source: www.dsslink.com/gallery/htm. 7-18
Geolocation Geolocation technology that uses Web geography to determine where an online buyer is located Personal information is not collected; only city and state is required 7-19
E-tailing Analysis of a Trading Area Helpful Information The size of the market Levels of product or service consumption and usage Customer characteristics Market area trends Customers' e-travels 7-20
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Additional Techniques Other techniques used in trading area analysis Customer spotting License plate number collection Zip code analysis 7-22
Defining the Trading Area Most popular theories Reilly s Law of Retail Gravitation Huff s Gravity Model Index of Retail Saturation 7-23
Reilly s Law of Retail Gravitation Assumes Both cities are accessible from a major thoroughfare Population data represent differences in the amounts of goods and services available from each city When presented with two city choices, customers will pick the city with a larger population Establishes a point of indifference between two cities locations 7-24
Reilly s Law 7-25
Huff s Gravity Model The larger the shopping center relative to competing centers, the higher the probability that a consumer will patronize that center The farther away the shopping center is from the consumer, the smaller the probability that the consumer will shop there 7-26
Huff s Law 7-27
Index of Retail Saturation (IRS) Helps retailers assess the levels of supply and demand in various trading areas Retail saturation Understored Overstored 7-28
Index of Retail Saturation 7-29
Site Types Freestanding Individual stores, aka isolated location Located off a main road, highway or street Limited competition Planned Goal is a balanced tenant mix Includes regional centers, community centers and neighborhood centers Unplanned Includes central business districts, secondary and neighborhood business districts, and strip shopping districts 7-30
Regional Centers (Planned) Attracted customers from 5 to 15 miles away Provides general merchandise Parking typically surrounds the center Has at least one anchor store Has at least 400,000 square feet of gross leasable area (GLA) 7-31
Community Shopping Centers (Planned) Smaller than regional centers Between 100,000 400,000 square feet Anchors are smaller department stores, discount stores or category killers Have a number of smaller stores Diverse tenant mix 7-32
Neighborhood Centers (Planned) Draw clientele from 10 minute radius Contain smaller stores Laid out in a strip configuration Tend to be outdoors and in a straight or curved line Typically contains a strong anchor 7-33
Lifestyle Centers (Planned) A type of souped-up neighborhood center Caters to retail needs and lifestyles of consumer in the trading area Tenants sell nonessential items Parking typically available in front of stores 7-34
Outlet centers Other Types of Planned Shopping Centers Increase drawing power by providing deep discounts on brand name products Cybermalls Airport malls 7-35
Central Business District (Unplanned) Advantages Easy access to public transportation Variety of assortment and price points Close proximity to other businesses, government offices and social activities High levels of traffic Disadvantages Inadequate and expensive parking High crime rates High rent and older buildings Consumer perception of poor shopping Lack of balanced tenancy Long drive times to destination 7-36
Secondary Business District (Unplanned) Usually located around major transportation intersections Less congestion and better service offerings than a CBD Disadvantages High rent and lease costs Inadequate parking Weak tenant mix 7-37
Neighborhood Business Districts (Unplanned) Rely on retailers focused on convenience for product mix Better parking and less traffic congestion than larger centers Prices tend to be higher 7-38
Strip Shopping Districts Advantages Stores visible from the road Lower rents Large choice of retailers offering similar items Parking availability People travel longer distances Disadvantages Lack of pricing flexibility Higher advertising costs Limited location availability Very competitive 7-39
Characteristics of the Available Site Traffic Vehicle Traffic Pedestrian Traffic 7-40
Transportation Site Availability Characteristics of the Available Site (cont d) Is the site available? Conditions for occupation Taxes and operation costs Are potential neighbors acceptable? 7-41