Retail Location

Meeting 17

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 Sub-CPMK
Mahasiswa dapat mengidentifikasi jenis lokasi
yang cocok untuk pelaku bisnis ritel beserta
karakteristiknya (C3,A3)
Materi
1. Types of Retail Locations.
2. Unplanned Locations.
3. Shopping Centers and Planned Retail
Locations.
4. Nontraditional Locations.
5. Trading Area Analysis.
6. Characteristics of Trading Areas.
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 Outline 1:
Types of Retail Location
Elements in
Retail Mix
Location Strategy

Customer
Service

Store Display
Merchandise
And Design
Assortment

Communication
Pricing
Mix

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 What Are the
Three Most Important Things in Retailing?

Location! Location! Location!

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 Retail Locations
Shopping Centers:
– Strip Shopping Centers.
– Shopping Malls.
City or Town Locations :
– Inner City.
– Main Street.
Free Standing Sites.

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 Types Retail Locations
There are two basic types of location are :
– Unplanned Location : do not have centralized
management that the determines what store will be in
a development, where the specific store will be
located, and how they will be operated

– Planned Location : the shopping center developer

and manager makes and enforces policies that
govern store operation, such as the hours that a store
must be opened
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 Outline 2:
Unplanned Location
Types of Unplanned retail Location
Free standing Sites
retail location for an individual, isolated store
unconnected to other stores, however, they
might be near other freestanding stores or
near a shopping center
Urban Location
Urban areas in large city offer three of location:
- Central Bussines District (CBD).
- Inner City.
- Gentrified Residental Areas.

Mainstreet Location : Traditional downtown shopping area

in smaller towns and secondary shopping areas in large cities and
their suburbs. 9
 Strengths and Weaknesses of
Freestanding location
Strengths : • Weaknesses :
– Lack of direct – Lack of drawing power of
competition. complementary stores.
– Generally lower rents. – Difficulties in attracting
– Freedom in operations customers for the initial visit.
and hours. – Higher advertising and
– Facilities that can be promotional costs.
adapted to individual – Operating costs that cannot
needs. be shared with others.
– Inexpensive parking. – Stores that may have to be
built rather than rented. 10
 Strengths and Weaknesses of
CBD location
Strengths : • Weaknesses :
– Easy access to public – Parking.
transportation. – Older stores
– Wide product – High rents and taxes,
assortment. traffic and delivery
– Variety in images, congestion.
prices, and services. – Potentially high crime
– Proximity to rate.
commercial activities. – Often-decaying
conditions of many
inner cities. 11
 Outline 3:
Shopping Centers and Planned
Retail Location
Convenience, neighborhood, and
community shopping centers
• Convenience, neighborhood and community
shopping centers alse called strip shopping
center are attached row of open-air-stores with
onsite parking usually located in front of the
stores.

• The most common layouts are linear, L shaped,

and inverted U shaped.

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 Convenience, neighborhood, and
community shopping centers (Cont’d)
• Smaller centers (convenience, neighborhood) are
10,000 to 60,000 square feeat are typically anchored
by a supermarket, they are designed for convenience
shopping.

• Larger centers (community centers) are typically

25,00 to 50,000 square feet and are anchored by at
least one big – box store such as a discount
department store, off price retailer, or a category
specialist.
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 Power Centers
• Power Centers are shopping center that
consist primarily of collections of big box retail
stores.

• Power centers offer low occupancy cost and

modest level of consumer convenience,
vehicular and pedestrian traffic.

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 Enclosed Shopping Malls
• Shopping malls are enclosed, climate-
controlled, delighted shipping centers with
retail stores on one or both sides of an
enclosed walkway.

• Shopping malls have several advantages :

larger area, consumer don’t have to worry
about the weather, mall management ensures
level of consistency benefit all tenant.
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 Enclosed Shopping Malls
(Cont’d)
• Shopping malls have disadvantage : mall
occupancy cost are higher than those of strip
centers, freestanding sites, and most central
business districts.

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 Types of Shopping Malls
• Lifestyle Centers.
• Outlet Centers.
• Theme/Festival Centers.

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Problems Facing Regional Malls
• Competition from alternative, more
convenient locations.
• Focus on apparel – weak apparel sales
• Aging.
• Demographic shifts.

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Advantages a shopping center
offers over a CBD location
1. Heavy traffic resulting from the wide
range of product offerings.
2. Cooperative planning and sharing of
common cost.
3. Access to highways and availability of
parking.
4. Lower crime rate.
5. Clean, neat environment.
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Disadvantages a shopping center
offers over a CBD location
1. Inflexible store hours (the retailer must stay open
during mall hours and cannot be open at other times)
2. High rents.
3. Restrictions as to what merchandise the retailer may
sell.
4. Inflexible operations and required membership in the
center’s merchant organization.
5. Possibility of too much competition.
6. An anchor tenant’s dominance of the smaller stores.

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 Outline 4:
Nontraditional Location
 Nontraditional Locations
1. Pop-up stores and other temporary locations.
2. Store within a store.
3. Merchandise Kiosk.
4. Airports.

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 Pop-up Stores and Other
Temporary Locations
• Pop up stores are stores in temporary
locations that focus in new products or limited
group of products.

• Retailers and manufactures are opening pop-

up stores in these vacant location.

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 Store-Within-a-Store
• Store-within-a-store locations involve an
agreement in which a retailer rents a part of
the retail space in a store operated by another
independent retailer.

• Store-within-a-store can mutually benefical to

the store wothin and the host retailer

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 Merchandise Kiosk
• Merchandise Kiosk are small selling
spaces, typically located in the walkways of
enclosed malls, airports, college campises, or
office building lobbies.

• Some are staffed and resemble a miniature

store or chart that could be easily moved.

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 Airports
• A high pedestrian area that has become
popular with national retail chain is airports.

• Passangers arrive earlier for their flights than

they did in the past, leaving them more time
to shop.

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 Outline 5:
Trading Area Analysis
 Trade Area Issues
• Which trade areas are most attractive for locating
retail outlets?

• How many outlets to locate in a trade area?

• More stores increases economies of scale and
reduces costs.
• More stores also results in more cannibalization
and less sales per store

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 Considertations in evaluating store
locations
• The best areas for locating stores are those that
generate the highest long-term profits for a retailer

• Some factor affecting the long term profit

generated by :
1. Economics
2. Competition
3. Strategic fit for area population
4. Cost of operating stores
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 1. Economics
• Retail location analysis need to determine how
long such growth will continue and how it will
affect demand for merchandise sold in stores.

• For instance, if growth is not diversified in various

industries, the area may be unattractive because
of extreame cyclical trends.

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 2. Competition
• The level competition in an area affects the
demand for a retailer’s merchandise.

• Ex : walmart early sucess was based on location

strategy of opening stores in small towns with little
competition. It offered consumers in small towns
quality merchandise at low price.

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 Strategic Fit for Area Population
• The area needs to have consumers who are in the
retailer’s target market who are attracted to the
retailer’s offerings and interested in patronizing its
stores.

• The area must have the right demographic and

lifestyle profile, the size and composition of
household in an area can be an important
determinant of success
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 Operating Costs
• Operating cost affected bt the proximity of the area
being considered to other area in which the
retailer operates stores.

• Example : if store is located near other stores and

the retailer’s distribution centers, the cost of
shipping merchandise to the store is lower.
•
• Local state and regulatory environment can have
siginicant effect on operating costs.
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 Factors Affecting the
Attractiveness of a Site
How attractive is the site to the retailer’s target market?

• Match between trade area demographics and retailer’s

target market
• Likelihood of customers coming to location
- Convenience
- Other attractive retailers at location

Principle of cumulative attraction - a cluster of similar and

complementary retailing activities will have greater drawing
power.

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 Convenience of Going to Site
Accessibility
• Road pattern and condition.
• Natural and artificial barriers.
• Visibility.
• Traffic flow.
• Parking.
• Congestion.

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 Sources of Information
• Customer spotting
• Census data
• Geodemographic information systems
• Information on competition

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 Customer Spotting
Purpose: to spot, or locate, the
residences of customers for a store or
shopping center.
How to obtain data:
• credit card or checks.
• customer loyalty programs.
• manually as part of the checkout
process.
• automobile license plates.
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Geodemographic Information Systems
Demographic data vendors specialize in
repackaging and updating census-type data.

Geographic Information System (GIS) is a

computer system that enables analysts to
visualize information about their customers
demographics, buying behavior, and other data in
a map format.
• GIS is a spatial database that stores the location
and shape of information.
• Analysts can identify the boundaries of a trade area
and isolate target customer groups.
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Geodemographic Information Systems
(Cont’d)
Market Potential Index (MPI)Number of
• Households Purchasing a Product or Service
in a Trade Area.

Spending Potential Index (SPI)

• Average Amount Spent on a Product or
Service by a Household in a Trade Area.

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 Sources for Measuring Competition
The Internet - lists current locations and future
sites.
Yellow Pages.

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 Outline 6:
Characteristics of Trading Area
 Trade Area Characteristics
• Trade area is contiguous geographic area that
accounts for the majority of a store’s sales an
customers, there are three kinds
characteristics:
• The primary trading area is geographic area from
which the shopping center or store site derives 50%
to 70% consumers.
• The secondary trading area is geographic area of
secondary importance derives 20% to 30%
consumers derives 50% to 70% consumers.
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 Trade Area Characteristics
• Teritary trading area includes remaining customers
who shop at site but come from widely dispersed
areas.

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 Negotiating a Lease
Types of Leases
• Percentage leases – lease based on a % of
sales.
• Retailers also typically pay a maintenance fee
based on a percentage of their square footage
of leased space.
• Most malls use some form of percentage
lease.

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 Variations of Percentage Leases
Percentage lease with specified maximum -
percentage of sales up to a maximum amount.
Rewards retailer performance by allowing retailer to hold
rent constant above a certain level of sales

Percentage lease with specified minimum - retailer

must pay a minimum rent no matter how low sales are.

Sliding scale - percentage of sales as rent decreases

as sales go up.

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 Fixed Rate Leases
• Fixed Rate Leases - used by community and
neighborhood centers
• Retailer pays a fixed amount per month over the
life of the lease.
• Not as popular as percentage leases

• Graduated Lease - a variation of the fixed rate

lease
• Rent increases by a fixed amount over a specified
period of time.
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 Percentage or Fixed Rate Leases
• Maintenance-increase-recoupment lease -
used with either a percentage or fixed
rate lease.
• Rent increases if insurance, property taxes, or
utility bills increase beyond a certain point.
• Net lease - retailer is responsible for all
maintenance and utilities.

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 Prohibited Use Clause
Limits the landlord from leasing to certain
tenants.

Some tenants take up parking spaces and don’t

bring in shoppers: bowling alley, skating rink,
meeting hall, dentist, or real estate office.

Some tenants could harm the shopping center’s

wholesome image: bars, pool halls, game
parlors, off-track betting establishments,
massage parlors and pornography retailers.
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 Exclusive Use Clause
• Prohibits the landlord from leasing to retailers
selling competing merchandise
• Specify no outparcels
• Specify if certain retailer leaves center, they can
• terminate lease.

• Escape Clause
Allows the retailer to terminate its lease if sales don’t
reach a certain level after a specified number of years, or
if a specific co-tenant in the center terminates its lease.
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 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.

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 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
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 SUMMARY
1. Store location decisions are important
decisions for a retailer because location is
typically one of the most influental
considerations in a customer’s store-chioce
decision.

2. Two basic types of location are unplanned

(freestanding and urban sites) and planned
(shoppind centers).
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 SUMMARY

3. Selection of a localtion type reinforces the

retailer’s strategy. Thus, the location type
decision is consistent wiith the shopping
behaviour and size of target market.

4. Trade area are typically divided into primary,

secondary and teritary zones.

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 EXERCISE & DISCUSSION
1. Why is store location such an important
decision for retailers?

2. Pick your favourite store, describe the

advantage and disadvantages of its going
location, given its store type and target
market!

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