Chapter 4 - Location Flashcards
Factors that make the location element inflexible
Long term investment e.g long term lease agreement
Time consuming and expensive shop fixtures and fittings, renovation and stocking
Cost of making a new address known to target market is high
Problems of retailer relocation
Greater distance mean loss of Loyal customers and employees
Shop fixtures and fittings may be incompatible with new location
Retail location principles
Site economics Compatibility Cumulative attraction Adequacy of present market area potential Minimising competitive hazard Business interception Accessibility of site to market area Growth potential
Site economics - final principle of retail location which requires an analysis relationship between cost and productivity eg. Size, shape and topography
Compatibility - requires that there is no interruption in shopper traffic and that customer interchange be maximised. Important in planning shop placement in malls
Cumulative attraction - a given number of shops dealing with the same merchandise will attract and do more business of they are located next/close to each other. Consists of similar shops and complementary shops.
Adequacy of present market area potential -
Established through counting the people in the market area and determining their purchase power and willingness to spend money on p/s offered by that particular shop.
Retail location principles
Minimising competitive hazard
Business interception
Accessibility of site to market area
Growth potential
Minimising of competitive hazard:
- select a location as far away as possible from competitor sites
- selecting a location that makes it difficult for competitive sites to intercept business
- considering the viability of controlling the use of competitive sites for non competitive reasons
Business interception
- a shop being places between the market and the marketplace intercepting the consumer along their route.
Accessibility of site to market area
- important to ensure maximum accessibility to market area. Ensures retailer has as much of the business potential as possible.
3 types of businesses
Generative business - as a result of effective advertising or having a reputation of unique merchandise. Motor show car rooms at an intersection
Shared business
- this business flows from the generative power of a retailers neighbours and is a second source of business from a customers main choice of retailer. Pharmacy in a CBD around clothes shops
Suscipient business: business is generated neither by shop itself or by neighbours. Consumers primary purpose of being near the shop is not buying. Example is fast food outlets at an airport.
Growth potential
- for a business to increase or maintain profits it is important to increase total business volume. A shop should be in a location of a growing population or income. Example townships
Factors influencing location decisions
Look at page 98
Demographic features Competitive features Labour features Economic features Location features Service and supply features Statutory features Promotion features
Demographic features
- There must be a large enough population base for a retailer to attract business.
- it is necessary to measure a population bases past, current and future growth to determine if it’s worth opening a retail outlet and to see if trends in population ensure future growth in
market.
Economic features
The stability and future outlook of the particular area should be examined from an economic point of view. And area with a more diversified economic base tends to be more stable. The number of industries determine the threat level during negative market conditions. Eg. The decline of SA mining towns.
Competitive features
The analysis of competition will identify both the qualitative and quantitative dimensions. The quantitive analysis enables the retailer to determine whether an area is under stored, over stored or saturated.
Levels of saturation of calculated using the number of persons per retail establishment, average sales per retail shop, the shop sales per capita, sales per square metres of selling area.
Demarcation and evaluation of market areas
Market area
- the area which has the majority of consumers visiting a particular shop.
Market area from different standpoints
Consumers standpoint
A market area is the region inside which the consumer may reasonably expect to find g/s at competitive and prevailing prices
Retailers standpoint
A market area is usually determined by its boundaries where it is economical in terms of volume and cost to sell g/s.
Sales volume standpoint
A market area is an area surrounding the commodity where a retailer secures 90% of its sales of a representative group of commodities.
Methods for delineation of market areas
Retail gravitational models
Analogue methods
Geographical info systems
Retail gravitational models
- breakpoint - this is the point where consumers are indifferent relative to retail facilities offered at two centres. The joining together of breakpoint determines market area.
Shortcomings of breakpoint formula:
Consumers have options in respect of shopping centres
Market areas vary from type of good sought.
Huffs model:
Focuses on the consumer and describes the process they use to chose between particular retailers to obtain specific goods using demand gradients.
Analogue methods
Based on the historical sales performance of existing retail outlets.
Utilises quantified experience and subjective judgement using customer origin surveys to determine market areas that include information such as residential address, socio economic data, support of major competitors and shopping behaviour as well as media habits.
Geographical information systems
Gis allows us to integrate hardware, software and data to capture, manage and analyse the integration of various forms of geographical information. It allows us to place data on a map which will determine demographics and distance of customers from store .
Location in shopping centres determined by
Tenant mix - determines the shopping centres ability to attract customers and determines the extent of the market area.
Accepted tenant placing Principles
- magnet stores at opposite sides
- ensure magnet stores and entrances are sufficiently far apart to pull people past
- avoid cul-de-sacs as prevent free flow
- service outlets close to entrances and exits
- keep pet shops and cleaners far away from food stores
- achieve an even distribution of shoppers through strategic placement of mall facilities
Store position factors in a mall
High traffic location or close to exit or entrance
Front and back sides of mall identified
Exposure in a multilevel centre must be identified
Most visible and highly trafficked areas in a mall identified
Anchor tenant that appeals to most types of customers must be identified. A site close to this is preferred.
