Importance of Store Location for Retailers: Strategic Considerations

1. Chapter 7 Retail Locations

2. Retailing Strategy Human Resource Management Chapter 9 Retail Market and Financial Strategy Chapter 5, 6 Retail Locations Chapter 7 Site LocationsChapter 8 Information and Distribution Systems Chapter 10 Customer Relationship Management Chapter 11

3. Customer Service Store Display And Design Merchandise Assortment Communication Mix Pricing Elements in Retail Mix Location Strategy

4. What Are the Three Most Important Things in Retailing? Location! Location! Location! Eddie Tan/Life File/Getty Images

5. Why is Store Location Important for a Retailer? • Location is typically prime consideration in customer’s store choice. • Location decisions have strategic importance because they can help to develop sustainable competitive advantage. • Location decisions are risky: invest or lease? F. Schussler/PhotoLink/Getty Images

6. Free Standing Sites City or Town Locations Inner City Main Street Shopping Centers Strip Shopping Centers Shopping Malls Other Location Opportunities Types of Retail Locations PhotoLink/Getty Images

7. Types of Locations

8. Unplanned Retail Locations Freestanding Sites – location for individual store unconnected to other retailer Advantages: Convenience High traffic and visibility Modest occupancy cost Separation from competition Few restrictions The McGraw-Hill Companies, Inc./Andrew Resek, photographer JCPenney, Sears, Walgreens are shifting to stand alone locations

9. Unplanned Retail Locations Merchandise Kiosks – small temporary selling stations located in walkways of enclosed malls, airports, train stations or office building lobbies. Kent Knudson/PhotoLink/Getty Images

10. City or Town Locations Gentrification is bringing population back to the cities. • Advantage to Retailers: • Affluence returned • Young professionals • Returned empty-nesters • Incentives to move provided by cities • Jobs! • Low occupancy costs • High pedestrian traffic The McGraw-Hill Companies, Inc./Andrew Resek, photographer

11. Central Business District • Draws people into areas during business hours • Hub for public transportation • Pedestrian traffic • Residents • High security required • Shoplifting • Parking is poor • Evenings and weekends are slow Advantages Disadvantages Spike Mafford/Getty Images

12. Main Streets vs. CBDs • Occupancy costs lower than CBDs • They don’t attract as many people • There are not as many stores • Smaller selections offered • Not as much entertainment • Some planners restrict store operations

13. Street Location Cost / sq foot / year Fifth Avenue (48th to 58th St.) 57th Street (5th Ave. to Madison Ave.) Oxford Street Madison Avenue (57th to 72nd St.) Ave. des Champs Elysee $580 $500 $400 $375 $360 New York City New York City London New York City Paris The Most Expensive Shopping Streets in the World

14. Inner City Inner city retailers achieve high sales volume, higher margins and higher profits Unmet demand tops 25% in many inner city markets Inner city customer wants branded merchandise (c) Brand X Pictures/PunchStock

15. Shopping Centers • Shopping Center Management Controls: • Parking • Security • Parking lot lighting • Outdoor signage • Advertising • Special events for customers The McGraw-Hill Companies, Inc./Andrew Resek, photographer

16. Types of Shopping Centers • Neighborhood and Community Centers (Strip Centers) • Power Centers • Enclosed Malls • Lifestyle Centers • Fashion Specialty Centers • Outlet Centers

17. Neighborhood and Community Centers Managed as a unit The McGraw-Hill Companies, Inc./Andrew Resek, photographer Attached row of stores Onsite parking

18. Power Centers Open air set up Big box stores Many located near enclosed malls Available parking Free-standing stores Large trade areas Low occupancy costs Convenient PhotoLink/Getty Images Desirable shopping experience Limited small specialty stores Modest vehicular and pedestrian traffic

19. The Largest North American Shopping Malls

20. Mall of America • Located near Minneapolis, MN • Largest mall in the US • Enough people to qualify as the third largest city in Minnesota • Has more than 42 million visitors a year • More people visit than Disney World, the Grand canyon and Graceland combined Digital Vision/Getty Images

21. Advantages and Disadvantages of Shopping Malls Advantages: Many different types of stores Many different assortments available Attracts many shoppers Main Street for today’s shoppers Never worry about the weather Comfortable surrounding to shop Uniform hours of operation PhotoLink/Getty Images Disadvantages: Occupancy costs are high Tenants may not like mall management control of operations Competition can be intense

22. Challenge to Malls • Time pressured society makes it impractical to wander malls • Fashion apparel sold in malls experiencing limited growth • Malls are getting old and rundown – unappealing to shop • Anchor tenants are decreasing due to retail consolidation

23. Lifestyle Centers Photo provided by ICSC and used with permission of Aspen Grove Lifestyle Center Courtesy of General Growth Properties

24. Stores and Restaurants at Lifestyle Centers Williams-Sonoma Victoria’s Secret Restoration Hardware Barnes & Noble/Borders Coldwater Creek Pottery Barn The Gap Banana Republic Bed Bath & Beyond Eddie Bauer Panera Bread Ann Taylor Starbucks Dick’s Sporting Goods Hallmark Aeropostale Johnny Rockets

25. Lifestyle Centers Usually located in affluent residential neighborhoods Includes 50K sq. ft. of upscale chain specialty stores Open-air configuration Design ambience and amenities Upscale stores Restaurants and often a cinema or other entertainment Small department store format may be there

26. Fashion Specialty Centers Upscale apparel shops Need to be anchored Décor is elegant The McGraw-Hill Companies, Inc./Lars A. Niki, photographer

27. Outlet Centers These shopping centers contain mostly manufacturers and retail outlet stores Courtesy of Beall’s, Inc.

28. Tradeoff Between Locations There are relative advantages and disadvantages to consider with each location. Rent Traffic

29. Location City Strip Shopping Free Issues Center Mall Standing Large size + - + - draws people to area People + + - - working/living in area provided source of customers Source of ? - + - entertainment/ recreation Protection - - + - against weather Relative Advantages of Major Retail Locations

30. Location CBD Strip Shopping Free Issues Center Mall Standing Security - - + - Long, uniform - + + + hours of operation Planned - - + - shopping area/balanced tenant mix Parking - + - + Occupancy ? + - + costs (e.g. rent) Relative Advantages of Major Retail Locations

31. Location City Strip Shopping Free Issues Center Mall Standing Pedestrian + - + - traffic Landlord + + - + control Strong + + - + competition Tax ? ??? incentives Relative Advantages of Major Retail Locations

32. Other Retail Location Opportunities Mixed Use Developments AirportsResorts HospitalsStore within a Store Royalty-Free/CORBIS

33. Alternative LocationsMixed Use Developments MXDs Hotels Rob Melnychuk/Getty Images Office Buildings Civic Centers Skip Nall/Getty Images D. Falconer/PhotoLink/Getty Images

34. Alternative LocationsAirports • Airports: Why wait with nothing to do? • Rents are 20% higher than malls • Sales/sqft are 3-4 times higher than malls • Best airports are ones with many connecting flights Kim Steele/Getty Images

35. Alternative LocationsResorts Captive audience Well-to-do customer Customers have time to shop Royalty-Free/CORBIS

36. Alternative LocationsHospitals Patients cannot leave Gifts are available Royalty-Free/CORBIS

37. Matching Location to Retail Strategy • Department Stores  Regional Mall • Specialty Apparel Central Business District, Regional Malls • Category Specialists  Power Centers, Free Standing • Grocery Stores  Strip Shopping Centers • Drug Stores  Stand Alone

38. Shopping SituationsConvenience Shopping Minimize the customer’s effort to get the product or service by locating store close to where customers are located The McGraw-Hill Companies, Inc./Andrew Resek, photographer

39. Shopping SituationsComparison Shopping Customers have a good idea of what type of product they want, but don’t have a strong preference for brand, model or retailer. Typical for furniture, appliances, apparel, consumer electronics, hand tools and cameras. Ryan McVay/Getty Images

40. Category Specialists Consumers can see almost all brands and models in one store The McGraw-Hill Companies, Inc./Andrew Resek, photographer

41. Shopping SituationsSpecialty Shopping Customers know what they want Designer labels Convenient location matters less The McGraw-Hill Companies, Inc./Andrew Resek, photographer

42. Environmental Issues “Above-ground” risks - such as asbestos-containing materials or lead pipes used in construction. Hazardous materials - e.g. dry cleaning chemicals, motor oil, that have been stored in the ground. Retailers’ Protection Stipulate in the lease that the lessor is responsible for removal and disposal of this material if it’s found. Retailer can buy insurance that specifically protects it from these risks.

43. Other Legal Issues Zoning and Building Codes Zoning determines how a particular site can be used. Building codes determine the type of building, signs, size, type of parking lot, etc. that can be used Signs Restrictions on the use of signs can also impact a particular site’s desirability Licensing Requirements Some areas may restrict or require a license for alcoholic beverages