retail location decisions

7/23/2019 Retail Location Decisions

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RETAIL LOCATION

DECISIONSModule III



TYPES OF LOCATION

Free standing/Isolated Store

Part of a Business District

Part of a shopping Center



ISOLATED STORE

Located along a major

traffic artery

Limited competition

Less rentHigh advertising costs

Gas stations and

convenience stores etc



PART OF A BUSINESS DISTRICT

The place of commerce

in the city

No preset format or

structure

Can be central,

secondary or

neighborhood



PART OF A SHOPPING CENTER

Shopping center –

Group of retail and

other commercial

establishments that is

planned, owned andmanaged as a single

property

Neighborhood

Community

Regional

Super regional

Fashion/Specialty

Power Center

Theme Center

Outlet Center



CHOOSING A RETAIL LOCATION

1. Market Identification

2. Determine the market

potential

3. Identify the mostattractive sites

4. Select the best site

available



1. MARKET IDENTIFICATION

Identify the market

attractiveness

Especially important

to identify the region's

peculiarities and

needs



2. DETERMINE THE MARKET

POTENTIAL

Demographic features of the population

Characteristics of the households

Competition and compatibility

Laws and regulationsTrade area analysisTrade area – Geographic area that generates

majority of the customers for the store

Primary, Secondary and Teritiary



3, 4. IDENTIFY ALTERNATE SITES

AND SELECT THE SITE

Traffic

Accessibility of the market

Number and types of store

Amenities availableBuy or Lease?

Product mix offered



HOW TO EVALUATE TRADING AREA?

Herfindahl - Herschman Index (HHI)

Index of retail Saturation (IRS)

Reilly’s Law of Retail Gravitation

Central Place TheoryHuff’s Model of Trading Area Analysis



HERFINDAHL – HERSCHMAN INDEX

A commonly accepted measure of market concentration

Determined by adding the squares of the market

shares of each competitor within the relevant market.

Takes into account the relative size and distribution of

the firms in a market Approaches zero when a market consists of large

number of firms of relatively equal size.

Index Meaning

Above 1800 Concentrated

1000- 1800 Moderately concentrated

Less than 1000 Less Concentrated



INDEX OF RETAIL SATURATION

Based on the assumption that if a market has a

low retail saturation, the likelihood of success is

high

Takes into consideration the number of stores

H = No of households; RE = Annual Retail

expenditure; RF = Total square footage includingthe proposed store

IRS = H*RE/RF



REILLY’S LAW OF RETAIL

GRAVITATION

retail location decisions

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