5 th Edition PPT 7 1 Chapter 7

5 th Edition PPT 7 -1

Chapter 7 Retail Locations Mc. Graw-Hill/Irwin PPT 7 -2 Retailing Management, 5/e Levy/Weitz: Copyright © 2004 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Retailing Strategy Human Resource Management Chapter 9 Retail Market and Financial Strategy Chapter 5, 6 Retail Locations Chapter 7 Site Locations Chapter 8 Information and Distribution Systems Chapter 10 PPT 7 -3 Customer Relationship Management Chapter 11

What Are the Three Most Important Things in Retailing? Location! PPT 7 -4

Retail Locations Shopping Centers – Strip Shopping Centers – Shopping Malls City or Town Locations – Inner City – Main Street Free Standing Sites Other Location Opportunities PPT 7 -5

Types of Strip Shopping Centers Traditional Mom and Pop Local Merchants, Children’s Place, Gap. Kids, Blockbuster Video Power Centers Target, Home Depot, Office Depot, Pets. Mart, Best Buy, Sports Authority, Toys R Us PPT 7 -6

Elements in Retail Mix Location Strategy Customer Service Store Display And Design Communication Mix PPT 7 -7 Merchandise Assortment Pricing

Strip Shopping Centers PPT 7 -8

Types of Shopping Malls Regional Centers Superregional Centers Lifestyle Centers Fashion/Specialty Centers Outlet Centers Theme/Festival Centers Merchandise Kiosks PPT 7 -9

Shopping Malls PPT 7 -10

The Largest U. S. Shopping Malls PPT 7 -11

Problems Facing Regional Malls • Competition from Alternative, More Convenient Locations • Focus on Apparel – Weak Apparel Sales • Aging • Demographic Shifts PPT 7 -12

The Most Expensive Shopping Streets in the World Street PPT 7 -13 Location Cost / sq foot / year Fifth Avenue (48 th to 58 th St. ) New York City $580 57 th Street (5 th Ave. to Madison Ave. ) New York City $500 Oxford Street London $400 Madison Avenue (57 th New York City to 72 nd St. ) $375 Ave. des Champs Elysee $360 Paris

Tradeoff Between Locations There are relative advantages and disadvantages to consider with each location. Rent Traffic PPT 7 -14

Relative Advantages of Major Retail Locations Location City Issues Strip Center Shopping Free Mall Standing Large size draws people to area + - People working/living in area provided source of customers + + - - Source of entertainment/ recreation ? - + - Protection against weather - - + - PPT 7 -15

Relative Advantages of Major Retail Locations Location CBD Issues Shopping Free Center Mall Standing - + + Planned shopping area/balanced tenant mix - - + - Parking - Occupancy costs (e. g. rent) ? + + - + + Security Long, uniform hours of operation PPT 7 -16 Strip

Relative Advantages of Major Retail Locations Location City Issues Strip Shopping Center Mall Free Standing Pedestrian traffic + - Landlord + + - + Strong competition + + - + Tax incentives ? ? control PPT 7 -17

Other Retail Location Opportunities Mixed Use Developments Airports Resorts Hospitals Store within a Store PPT 7 -18

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 PPT 7 -19

Types of Leases Percentage Fixed - Rate 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. PPT 7 -20

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. PPT 7 -21

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. PPT 7 -22

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. PPT 7 -23

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. PPT 7 -24

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. PPT 7 -25

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. PPT 7 -26

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 PPT 7 -27 Some areas may restrict or require a license for alcoholic beverages