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Chapter 7

Retail Locations

McGraw-Hill/Irwin
Retailing Management, 6/e Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved.
7-2

Retailing Strategy

Retail Market and Human Resource


Financial Strategy Management
Chapter 5, 6 Chapter 9

Retail Locations
Chapter 7
Site Locations
Chapter 8

Information and Customer


Distribution Relationship
Systems Management
Chapter 10 Chapter 11
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Elements in Retail Mix

Location Strategy

Customer Service

Store Display
And Design Merchandise
Assortment

Communication Mix
Pricing
What Are the Three Most Important 7-4

Things in Retailing?

Location! Location! Location!


Eddie Tan/Life File/Getty Images
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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
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Types of Retail Locations

• Free Standing Sites


• City or Town Locations
– Inner City
– Main Street
• Shopping Centers
– Strip Shopping Centers
– Shopping Malls
• Other Location Opportunities
PhotoLink/Getty Images
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Types of Locations
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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


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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


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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
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Central Business District

• Draws people into areas during business hours


Advantages

• Hub for public transportation


• Pedestrian traffic
• Residents
Disadvantages

• High security required


• Shoplifting
• Parking is poor

Spike Mafford/Getty Images
Evenings and weekends are slow
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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
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The Most Expensive Shopping


Streets in the World
Street Location Cost / sq foot / year

Fifth Avenue (48th to New York City $580


58th St.)

57th Street (5th Ave. New York City $500


to Madison Ave.)

Oxford Street London $400

Madison Avenue (57th New York City $375


to 72nd St.)

Ave. des Champs Paris $360


Elysee
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Inner City

Unmet demand tops


Inner city customer
25% in many inner city
wants branded
markets

(c) Brand X Pictures/PunchStock


merchandise

Inner city retailers achieve high sales


volume, higher margins and higher profits
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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


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Types of Shopping Centers

• Neighborhood and Community Centers


(Strip Centers)
• Power Centers
• Enclosed Malls
• Lifestyle Centers
• Fashion Specialty Centers
• Outlet Centers
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Neighborhood and Community Centers

Managed as a unit

The McGraw-Hill Companies, Inc./Andrew Resek, photographer


Attached row of stores

Onsite parking
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Power Centers

Big box stores Open air set up

Available parking Many located near


enclosed malls

Free-standing stores
Large trade areas

PhotoLink/Getty Images
Low occupancy costs Convenient

Limited small Desirable


specialty stores Modest vehicular and shopping
pedestrian traffic experience
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The Largest North American Shopping Malls


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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


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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
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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
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Lifestyle Centers

Photo provided by ICSC and used with permission of Aspen Grove Lifestyle Center

Courtesy of General Growth Properties


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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
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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
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Fashion Specialty Centers

Upscale apparel shops

The McGraw-Hill Companies, Inc./Lars A. Niki, photographer


Need to be anchored
Décor is elegant
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Outlet Centers

These shopping centers contain mostly manufacturers and retail outlet stores

Courtesy of Beall’s, Inc.


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Tradeoff Between Locations

There are relative advantages


and disadvantages to consider
with each location.

Rent

Traffic
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Relative Advantages
of Major Retail Locations

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
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Relative Advantages
of Major Retail Locations

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)
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Relative Advantages
of Major Retail Locations

Location City Strip Shopping Free


Issues Center Mall Standing

Pedestrian + - + -
traffic

Landlord + + - +
control
Strong + + - +
competition
Tax ? ? ? ?
incentives
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Other Retail Location Opportunities

Mixed Use
Developments
Airports
Resorts
Hospitals
Store within a Store

Royalty-Free/CORBIS
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Alternative Locations
Mixed Use Developments MXDs

Hotels
Rob Melnychuk/Getty Images

Office
Buildings

Civic Centers

D. Falconer/PhotoLink/Getty Images
Skip Nall/Getty Images
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Alternative Locations
Airports

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


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Alternative Locations
Resorts

Captive audience
Well-to-do customer
Customers have time to shop

Royalty-Free/CORBIS
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Alternative Locations
Hospitals

Patients cannot leave


Gifts are available

Royalty-Free/CORBIS
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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
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Shopping Situations
Convenience Shopping

Minimize the customer’s effort

The McGraw-Hill Companies, Inc./Andrew Resek, photographer


to get the product or service by
locating store close to where
customers are located
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Shopping Situations
Comparison Shopping

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

Ryan McVay/Getty Images


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Category Specialists

Consumers can see almost all brands and models in one store

The McGraw-Hill Companies, Inc./Andrew Resek, photographer


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Shopping Situations
Specialty Shopping

Customers know what they want


Designer labels
Convenient location matters less
The McGraw-Hill Companies, Inc./Andrew Resek, photographer
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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.

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.
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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