Retailing Principles & Practices - Chapter 10: Site Selection

Site Selection

• Identifying the right location at the right price is critical to the success of any retailer.
• Factors to consider:
  • Careful planning and budgeting of space needs and requirements.
  • Characteristics of customer segments shopping at the location.
  • Locale with the highest sales potential.
  • Current state of the retail leasing market.
  • Compatibility with surrounding stores for customer attraction.
  • Long-term commitment requirements.

Steps of Site Selection

1. Investigate alternative trading areas: Research different potential areas for establishing a store.
2. Determine desirable location type: Assess the needs based on the type of retail.
3. Select general location: Narrow down to a broader area that fits the criteria.
4. Evaluate specific store sites: Analyze specific locations within that general area.

Types of Store Locations

• Isolated Store: A freestanding retail store located on a street without adjacent retailers.
• Planned Shopping Center: Retail establishments constructed in a coordinated manner.
• Unplanned Business District: Locations that develop organically without long-term planning.

Isolated Stores

• Definition: Freestanding retail stores located on the street, not sharing traffic with other retailers.

Advantages of Isolated Stores

• No nearby competition, leading to potential market capture.
• Generally lower rental costs ($/sq. foot).
• High visibility; uncluttered by other stores.
• Flexible operation with fewer restrictions, ideal for convenience stores and big box retailers.
• Easier parking access for customers.

Disadvantages of Isolated Stores

• Difficulty attracting customers due to lack of foot traffic.
• Increased travel distance for patrons.
• Limited variety for customers at the isolated location, causing higher advertising costs.
• Higher costs for utilities and maintenance with no shared responsibilities.
• Zoning laws may restrict development options.

Isolated Store Examples

• Large-format retailers like Wal-Mart and Costco.
• Convenience store chains such as 7-Eleven.

Unplanned Business Districts

• Characteristics: Stores located together based on personal choice rather than planning.
  • Types:
  • Central Business District (CBD): The city's retail hub with high density and traffic.
  • Secondary Business District (SBD): Smaller unplanned areas near intersections of major roads.
  • Neighborhood Business District: Local shops serving the immediate residential area.
  • String: Retail stores aligned along a street offering compatible products.

Central Business District (CBD)

• Description: The downtown core with the highest concentration of retail.
• Benefits:
  • Wide assortment of goods and services available.
  • Excellent transportation access and high pedestrian traffic.

Disadvantages of CBD

• Parking inadequacies and high rental costs.
• Travel time issues for suburban customers.
• City congestion and negative perceptions of urban areas.

Secondary Business District (SBD)

• Generally located at crossroads of two main thoroughfares.
• Features a larger store like a branch department store with smaller shops nearby.

Neighborhood Business District

• Focuses on convenience for local residents with essential services such as dry cleaners and restaurants.
• Main anchor store typically a supermarket or drugstore.

String Characteristics

• Composed of similar and compatible product line stores.
• Examples include car dealerships and clusters of restaurants.

Planned Shopping Centers

• Definition: Centrally owned units with unified architecture often designed for balanced tenancy.
• Features:
  • Complementary product offerings among stores.
  • Management defines proportions of space for types of retail.
  • Utilization of anchor stores to drive traffic.

Advantages of Shopping Centers

• A well-rounded assortment of goods and services.
• Designed for family-oriented shopping.
• Shared costs and access to pedestrian traffic.

Disadvantages of Shopping Centers

• Limited operational flexibility due to management regulations.
• Higher rental costs and competition among tenants.

Types of Planned Shopping Centers

1. Regional Shopping Centers: Larger malls with significant retail, typically housing department stores and many smaller retailers.
2. Community Shopping Centers: Smaller than regional malls, focused on a branch department store and several small retailers.
3. Power Centers: Comprise of multiple 'category killer' stores.
4. Lifestyle Centers: Open-air settings with upscale specialty shops and entertainment venues.
5. Neighborhood Shopping Centers: Local strip malls with convenience-oriented stores.

Characteristics of Planned Shopping Centers

Malls

• Notable Mall Owners: Simon Property Group, Brookfield Properties, Westfield.
• Largest Malls by Retail Square Footage: Examples include American Dream and Mall of America, all surpassing 23 million square feet.
• Most Profitable Malls: American Dream and Sawgrass Mills among others.

American Dream

• Opened October 25, 2019, at Meadowlands, NJ.
• Total area: 3 million sq. ft. with a mix of retail (45%) and entertainment (55%).
• Notable attractions: Nickelodeon Universe Theme Park and indoor skiing.

Evaluation Checklist for Location

• Extensive analysis is necessary for assessing general and specific sites.
• Included criteria involve:
  • Pedestrian traffic evaluation (count by age, gender, time).
  • Vehicular traffic analysis for driving-centric retailers.
  • Store composition evaluation to ensure complementarity.

Lease Types

• Straight Lease: Fixed rent.
• Percentage Lease: Rent based on sales or profits; beneficial for new retailers.
• Graduated Lease: Predetermined rent increase schedule, e.g., 3% increase annually.