Q.

Retail Store location & Layout.

Introduction After learning the basics of retailing, in this unit you will learn about the importance of store location. A store may have good merchandise, good customer service and good sales promotion, but if the location where retailing has to take place is not proper, the retailer will face several day-to-day selling problems. Location decision is strategic and long term and hence involves a large investment that is irreversible in nature. If a retailer after setting up his store realizes that the location is not proper, he has either to go on suffering losses or close down. In this unit, you will learn why a retailer while making a store location decision has to weigh in not only financial aspects but also technical, commercial, social and political aspects. Poor location results in increase distribution cost, poor marketing response and dissatisfaction among employees, suppliers and customers. Location decisions ultimately decide the future and overall profitability of the organization. A good location may not always success, but undoubtedly it is a must for smooth flow of goods and day-to-day operations, such as loading and unloading of goods. Types of Retail Stores Location Retailers have many store location factors to consider when choosing a place for their business. Here are a few of the more common types of retail locations. Mall space: A mall has many retailers competing with each other under one roof. It hosts a variety of stores and retail formats, from anchor stores to kiosks. There are generally 3 to 5 anchor stores, or large chain stores, and then dozens of smaller retail shops. Typically the rent in a mall location is much higher than other retail locations. This is due to the high amount of customer traffic a mall generates Free standing locations: This type of retail location is basically any stand-alone building. It can be located in a neighborhood or right off a busy highway. Depending on the landlord, there are generally no restrictions on how a retailer should operate his business. It will probably have ample parking and the cost per square foot will be reasonable. Downtown area: This type of store location may be another premium choice, just like malls. However, there may be fewer rules and more freedom for the business owner. Many communities are hard at work to revitalize their downtown areas and retailers can greatly benefit from this effort. However, the lack of parking is generally a big issue for downtown retailers. Shopping center: Strip malls and other attached, adjoining retail locations also have some guidelines or rules for their tenants directing their conduct of business. These rules are probably more lenient than a mall, but make sure you can live with them before signing a lease.

Home-based: Home based businesses or stores are an inexpensive option but in such a business, growth may be restricted. It, may a times, becomes really hard to separate business and personal life in this setup and the retailer may run into problems if there isnt a separate address and/or phone number for the business. Office building: The business park or office building may be another option for a retailer, especially when they cater to other businesses. Tenants share maintenance costs and the image of the building is usually upscale and professional. Factors affecting Retail Location Decisions Some important factors affecting location decisions are: Population demographics: A thorough research, of the area, is required before selecting a city or state to set up your retail store. You must read local papers, journals and speak to other small businesses in the area. Obtain location demographics from the local library, chamber of commerce or the Census Bureau. Any of these sources should have information on the areas population, income and age. You know who your customers are, so make sure you find a location where your customers live, work and shop. Accessibility, visibility and traffic: A lot of traffic around your store location does not ensure that you will get lot of customers. Retailers want to be located where there are many shoppers but only if that shopper meets the definition of their target market. Small retail stores may benefit from the traffic of nearby larger stores. How many people walk or drive past the location. Is the area served by public transportation? Can customers and delivery trucks easily get in and out of the parking lot? Is there adequate parking? Signage, zoning and planning: You must understand all the rules, policies and procedures related to your retail store location before signing a lease. You can get the information on regulations regarding signage from the local city hall or the zoning commission for information. You can ask them about any restrictions that may affect your retail operation and any future planning that could change traffic, such as highway construction. Competition and neighbors: Other businesses in your area can also have an effect on your business. They can either help your business or hurt it heavily. It all depends on the compatibility of your store with theirs. For example, a high-end fashion boutique may not be successful next door to a discount variety store. Place it next to a nail or hair salon and it may do much more business. Location costs: store location. Besides the base rent, consider all costs involved when choosing a retail

 Who pays for lawn care, building maintenance, utilities and security? Who pays for the upkeep and repair of the heating/air units? If the location is remote, how much additional marketing will it take for customers to find you? How much is the average utility bill? Will you need to make any repairs, do any painting or remodeling to have the location fit your needs? The location you can afford now and what you can afford in the future should vary. It is difficult to create sales projects on a new business, but one way to get help in determining how much rent you can pay is to find out what sales similar retail businesses are making and how much rent theyre paying. Country/Region Analysis Country/Region analysis for constructing a store can be done in the following ways: Home Country vs. Abroad: This decision relates to deciding whether the proposed store should be set up in the country or abroad. Today, in order to avail some low-priced inputs like cheap labour, cheap merchandise, less taxes, etc., Indian companies have started venturing into other countries for retailing, marketing, acquisition and even research and development. There is a long list of Indian retail units abroad, however, most of the stores deal with Indian foods, spices, juices and pickles. Therefore, if the management has taken a decision to set up its retail store abroad, the first step is to decide upon a particular country. This is crucial because due to LPG (Liberalization, Privatization, and Globalization) drive globally, every country is eager to attract foreign capital with a unique set of offering. The following key factors should be considered while deciding upon the name of a country: Political factors like political policies and political stability Trade barriers Synergy Economies of scale Regulations International competition Incentive

Selection of region: Generally, a country is divided into regions on the basis of directions (east, west, north and south) or political boundaries. Therefore, after selecting the country, the second step is to decide on the right region based on comparative cost advantages available out of the possible regions. The factors influencing such selection are: Availability of merchandise Proximity to the market Infrastructural facilities Transport facility Climatic conditions Government policy Subsidies and sales tax exemptions Selection of the locality/community: After selecting the region, the third step in deciding on the store location is to select a particular locality or community within the selected region. It means taking decisions regarding: Urban area Rural area Suburban area The selection of a locality in a particular region is determined by the following factors: Labour and wages Community facilities Community attitudes Banking facilities Existence of supporting stores Local taxes and restrictions Water supply Personal and emotional factors

 Historical issues Traffic flow

Urban area: An urban area is a term used to define a geographical area that is highly populated and constitutes a city or town. Merits of an urban area: Due to proximity to a market the urban location reduces the cost of acquisition and distribution to a considerable extent and leads to competitive advantage over competitors. Availability of all types of modern facilities like water, sewage, fire fighting facilities, transport facilities, storage facilities, promotional facilities, on time. Demerits of urban area: The cost of land being high disturbs the whole investment budget. Various problems like traffic jams, demonstrations by political parties, high labour turnover due to many options, governments restrictions etc. Suburban area: As the name implies, it is a compromise between the urban and rural areas. It is generally located at the outskirts of the city. Suburban areas, being located at the outer rim of the city, provide comparative advantages of both the locations, for instance, Bawana, Nangloi, Mangolpuri, Badarpur, Narela are the suburban areas of National Capital Region of Delhi. Merits of suburban areas Availability of adequate land, infrastructure, labour, ancillary facilities at affordable price. Store expansion like introduced a new product, adopting of new technology and performing multi-storied operations is easier than in the city. Availability of a ready market near the suburban area and good connectivity to cities. Demerits of a suburban area Perhaps the only drawback a suburban area has is that over a period of time suburban areas usually get converted into urban areas, resulting in congestion and overcrowding. Rural area: By definition, a rural area is an area outside cities and towns. Generally no retailer would like to set up a store in a rural area but due to problems of urban area and government restrictions on urban area construction, rural areas have become an attractive place for new retail stores. A rural area is blessed with these merits.

Merits of a rural area Cheaper and sufficient land and labour Low wages for unskilled workers, less labour turnover, lesser taxes, lesser congestion and more incentives from government Demerits of rural area Lack of community facilities, inadequate transport, absence of training schools and skilled workers, absence of supporting industries Lack of banking and credit, postal, warehousing, municipal and insurance facilities Trade Area Analysis A through analysis of trade area is necessary to estimate market potential, understand customer profile, competition, develop merchandising plan, and focus promotional activities. Increasingly, retailers are using Geographic Information System (GIS) software in their trade area delineation and analysis. GIS combine digitized mapping with key locational data to graphically depict such trade area characteristics as the demographic attributes of the population, data on customer purchases, and listing of current, proposed and competitors locations. Market Potential: In estimating the market demand potential, retailers consider factors that are specific to their product line. Hence, often there is a variable in the criterion used by retailers for market estimation. Some of the important indicators of market demand are as follows: Population characteristics and its trends Population characteristics such as geo-demographics, psychographic, and behavioural characteristics are used to segment markets. Considerable information about an areas population characteristics can be acquired from secondary sources. Retailers can access data regarding population size, population density, and number of households, income distribution, sex, education, age, occupation and mobility. Purchase power and its distribution The average household purchasing power and distribution of household income can significantly influence selection of a particular retail area. Thus, as purchasing power rises, the population is likely to exhibit an increased demand for luxury goods and more sophisticated demand for necessities. Business climate Retailers should take into account the employment trends of the market because a high level of employment drives up the purchasing power. It is in the interest of retailers and developers to determine which geographical areas are growing rapidly and why.

Competition The level and nature of competition in an area also influence the selection of a particular retail location. On the basis of levels of competition, trade area can be classified into three types A saturated trade area offers customers a wide variety of merchandise, which also ensures impressive profits for retailers in the market. Customers tend to prefer these areas because of the variety of merchandise offered and competitive pricing. Examples in this context are Nirulas, McDonaldss, Pizza Corner, and Pizza Hut in India. Under-stored trade area is one that has too few stores selling specific merchandise to meet the needs of the segment efficiently. Subhikshas early success was based on its location strategy of opening stores in small towns and residential neighbourhoods in Chennai that were relatively poorly served by the existing retailers. Peer pressure and competition The importance of support of public and the already existing business in adjoining area is evident from the following example. Sonepat-Delhi national highway is one of the busiest highways in the country; therefore, it has immense economic potential for dhabas. An entire stretch of one kilometer on this highway near Delhi has no outlet serving non-vegetarian. Social norms have ensured that non-vegetarian outlets do not set shops on this stretch