Retail Store Site Selection

One of the most important decisions that a retailer has to make is on the location of the retail outlet. While a retailer can change his merchandise mix, adjust prices, improve communication with consumers and offer better service once a store comes into existence it is fairly difficult to change the another. Moving from one location to another may result in the loss of customers and employees. Moreover, the new location may not always have the benefits of the earlier one. The significance of this decision can be gauged from the fact that location is very often an integral element of the retail strategy.

Despite the growth of non store retailing, a rapidly changing retail environment, and consumer has made the location of the store even more significant. The issue becomes even more complex when a retailer operates multiple formats, catering to a diverse section of target customers.

This article discusses the key factors, which affect the decision of the location of the store. Various types of locations are examined and the processes by which a retailer can arrive at the decision on where to locate his store are studied. Finally, the peculiarities of retail property development in India are examined.

Types of Retail locations:

Various options are available to the retailer for choosing the location of his store. The choice of the location of the store again depends on the target audience and the kind of merchandise to be sold. For example, the location of a convenience store would not be suitable or that of an expensive jewelry / fashion boutique. Typically store location may be classified as:

1) Freestanding / isolated district
2) Part of a business district
3) Part of a shopping center

The Isolated Store or a freestanding location:

A freestanding location is a store located a major traffic artery, without any other competitive retailers around. The biggest advantage of such a location is that there is no competition around. Due to this, rents are usually low and facilities like ample parking are available. When taking a decision to locate a store as an isolated store, a retailer needs to bear in mind that the advertising costs or such a location are usually high, as the retailer needs to draw out customers to visit the location. Gas stations, convenience stores, hotels and fast food restaurants on highways, many a times operate as freestanding locations.

Discount retailers in the West were the first ones to opt for such locations. However, in a place like Mumbai, where travel from one point in the city to the other takes up a fair amount of time, customers may not really be willing to travel large distances to visit just one store. The retailer also needs to keep in mind the increasing cost of petrol and diesel which, is also a factor taken into consideration by the customers. It is necessary that the location of the store and the catchment area for the store be defined keeping in mind the distance that the customer would be willing to travel for a particular product or service.

The distance that the target consumer is willing to travel to buy particular product is a key factor that the retailer needs to take into considerations to ensure that the eventual location that he chooses for the store is successful.

A retail store can also be located as a part of a business district. A business district is a place of commerce in the city, which developed historically as the center of trade and commerce in the city or town and most probably, would have no pre set format or structure. A business district can be classified as a Central, Secondary or a Neighborhood Business district.