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Chapter 7 Marketing Selection and Retail Location Analysis

Chapter 7 Marketing Selection and Retail Location Analysis. Selecting a Target Market. The Internet is becoming a major force in retailing, with sales expected to reach a little more than 5 percent of total retail sales over the next decade.

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Chapter 7 Marketing Selection and Retail Location Analysis

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  1. Chapter 7 Marketing Selection and Retail Location Analysis

  2. Selecting a Target Market • The Internet is becoming a major force in retailing, with sales expected to reach a little more than 5 percent of total retail sales over the next decade. • Reaching the target market can be achieved through a: • store-based location in which the consumer travels to the store or • through a nonstore retailing format in which products and services are offered to the consumer at a more convenient or accessible location. LO 1

  3. Selecting a Target Market • Home page - Introductory or first material viewers see when they access a retailer’s Internet site. It is the equivalent of a retailer’s storefront in the physical world. • Virtual store - Collection of all the pages of information on the retailer’s Internet site. • Ease of access - Consumer’s ability to easily and quickly find a retailer’s Web site in cyberspace. LO 1

  4. Selecting a Target Market • Market segmentation • Target market - Group of customers that the retailer is seeking to serve. • It is not easy to reach every target market, because each target market is different from the other. LO 1

  5. Selecting a Target Market • Criteria to reach target market • Seek a measurable market segment. • Accessibility or the degree to which the retailer can target its promotional or distribution efforts to a particular market segment. • Segment should be substantial or large enough to be profitable for the retailer. LO 1

  6. Exhibit 7.2 - Retail Formats for Accessing Your Target Market LO 2

  7. Location of Store-Based Retailers LO 2

  8. Location of Store-Based Retailers LO 2

  9. Location of Store-Based Retailers LO 2

  10. Location of Store-Based Retailers LO 2

  11. Location of Store-Based Retailers LO 2

  12. Exhibit 7.5 - Selecting a Retail Location LO 4

  13. Market Identification • Retail location theories • Market demand potential • Market supply factors LO 4

  14. Retail Location Theories LO 4

  15. Market Demand Potential • Major components are: • Population characteristics • Buyer behavior characteristics • Household income • Household age profile • Household composition • Community life cycle • Population density • Mobility LO 4

  16. Market Supply Factors • Square feet per store • Square feet per employee • Growth in stores • Quality of competition LO 4

  17. Site Analysis • An evaluation of the density of demand and supply within each market with the goal of identifying the best retail site(s). • Description of trading area • Retailers can access, at a relatively low cost, information concerning the trading area for various retail locations and the buyer behavior of the trading area. LO 5

  18. Site Analysis • Demand density- The extent to which the potential demand for the retailer’s goods and services is concentrated in certain census tracts, ZIP code areas, or parts of the community. • Supply density- The extent to which retailers are concentrated in different areas of the market under question. LO 5

  19. Exhibit 7.10 - Demand Density Map LO 5

  20. Exhibit 7.11- Store Density and SiteAvailability Map LO 5

  21. Exhibit 7.12 - Checklist for SiteEvaluations LO 5

  22. Exhibit 7.12 - Checklist for SiteEvaluations LO 5

  23. Exhibit 7.12 - Checklist for SiteEvaluations LO 5

  24. Site Selection • 100 percent location - When there is no better use for a site than the retail store that is being planned for that site. • The traffic that passes a site, whether it is vehicular or pedestrian, can be an important determinant of the potential sales at that site. LO 6

  25. Nature of Site • Two traffic-related aspects of the site should be evaluated. • Availability of sufficient parking, either at the site or nearby. • Whether direction of traffic is relative to the shopping area. LO 6

  26. Nature of Site • Type of neighbors • Store compatibility - Exists when two similar retail businesses locate next to or nearby each other and they realize a sales volume greater than what they would have achieved if they were located apart from each other. • Retail clusters - Groups of stores closely located that share similar characteristics. • Once potential customers identify a need for a line of merchandise or service, they don’t need to decide on the specific store to visit; they just need to decide to travel to the retail cluster. • It allows customers to walk from store to store, comparing prices, products, and service. LO 6

  27. Terms of Purchase or Lease • The retailer should review: • Length of lease • Exclusivity clause • Guaranteed traffic rate • Anchor clause LO 6

  28. Expected Profitability • The final step in site-selection analysis is construction of a pro forma (expected) return-on-asset model for each possible site. • The return-on-asset model comprises of net profit margin, asset turnover, and return on assets. LO 6

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