5 th Edition PPT 8 1 Chapter 8

5 th Edition PPT 8 -1

Chapter 8 Site Location Mc. Graw-Hill/Irwin PPT 8 -2 Retailing Management, 5/e Levy/Weitz: Copyright © 2004 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Three Levels of Analysis PPT 8 -3

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 PPT 8 -4

Factors Affecting Demand for a Region or Trade Area PPT 8 -5

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. PPT 8 -6

Convenience of Going to Site Accessibility • Road pattern and condition • Natural and artificial barriers • Visibility • Traffic flow • Parking • Congestion • Ingress/egress PPT 8 -7

Location Within a Center • In High Traffic Areas • Near Anchor • Center of Shopping Area • Near Stores Selling Complementary Merchandise • Clustering Specialty Stores Appealing to Teenagers • Better locations cost more PPT 8 -8

Map of Dallas’ North Park Center PPT 8 -9

Estimating Demand for a New Location • Definition of the Trade Area – Primary, Secondary, Tertiary Zones • Approaches for Estimating Demand – Analog Approach – Regression Approach – Huff Gravity Model PPT 8 -10

Trade Area Primary zone - 60 to 65 percent of its customers Secondary zone - 20 percent of a store’s sales Tertiary zone - customers who occasionally shop at the store or shopping center PPT 8 -11

Factors Defining Trade Areas • Accessibility • Natural & Physical Barriers • Type of Shopping Area • Type of Store • Competition • Parasite Stores PPT 8 -12

Oblong Trade Area Caused by Major Highways and Natural Boundaries PPT 8 -13

Sources of Information • Customer Spotting • Census Data • Geodemographic Information Systems – ACORN • Information on Competition – Yellow Pages PPT 8 -14

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 PPT 8 -15

Selecting a Target Market • Home Page Is the introductory or first material viewers see when they access a retailer’s Internet site. It is the equivalent to a retailer’s store-front in the physical world. • Virtual Store Is the collection of all the pages of information on the retailer’s Internet site. • Ease of Access PPT 8 -16

Target Market • The Limited has a welldefined target market: the moderate-income, careeroriented woman who is fashion conscious. – How does this influence location decisions? PPT 8 -17

Identifying a Target Market • Market segment should be measurable. • Market should be accessible. • Market should be substantial enough to be profitable. PPT 8 -18

Location of Store-Based Retailers • Anchor Stores are the stores in a shopping center that are the most dominant and are expected to draw customers to the shopping center. • Free-Standing Retailer generally locates along major traffic arteries and does not have any adjacent retailers to share traffic with. PPT 8 -19

Retail Location Theories • Retail Gravity Theory Suggests that there are underlying consistencies in shopping behavior that yield to mathematical analysis and prediction based on the notion or concept of gravity. PPT 8 -20

Typical Size & Trading Area of Shopping Centers LO 2 Type of Shopping Center Neighborhood Gross Leasable Square Feet 30, 000 to 150, 000 Primary Trade Area 3 Miles PPT 8 -21

Typical Size & Trading Area of Shopping Centers LO 2 Type of Shopping Center Community Gross Leasable Square Feet 100, 000 to 350, 000 Primary Trade Area 3 -6 Miles PPT 8 -22

Typical Size & Trading Area of Shopping Centers LO 2 Type of Shopping Center Regional Gross Leasable Square Feet 400, 000 to 800, 000 Primary Trade Area 5 -15 Miles PPT 8 -23

Typical Size & Trading Area of Shopping Centers LO 2 Type of Shopping Center Super -Regional Gross Leasable Square Feet 800, 000 Primary Trade Area -25 Miles PPT 8 -24 5

ID and Geographic Segments • www. claritas. com – http: //cluster 1. claritas. com/claritas/Default. jsp – Free stuff • Similar people share similar traits – Tend to live together PPT 8 -25

Geographic Information Systems • Geographic Information System (GIS) - a computerized system that combines physical geography with cultural geography. • Thematic maps are generated • Color coded • Culture – a set of shared values and behaviors held in common by an identifiable group of people. • Culture can create barriers. PPT 8 -26

GIS Components Cultural Geography Physical Geography Latitude/Longitude Land/Water Terrain Rainfall/Snow Temperature Data Inputs GIS (Data Aggregation and Analysis via Computer) Output Maps and Other Displays of Information PPT 8 -27 Demographics Manmade Structures Consumption Patterns Work Patterns Leisure Behavior Deviant Behavior

Uses of GIS • Market selection. • Site analysis. • Trade area definition. • New store cannibalization. • Advertising management. • Merchandise management. • Evaluation of store managers. PPT 8 -28

Process for Selecting a Retail Location LO 3: Exhibit 7. 5 Identify the most attractive markets in which to operate Identify the most attractive sites that are available within each market Select the best site(s) available PPT 8 -29

Customer Spotting Map for a Supermarket LO 5: Exhibit 7. 8 City Limits Store 2 miles from store PPT 8 -30 4 miles from store 3 miles from store 1 mile from store

Store Density and Site Availability Map LO 5: Exhibit 7. 11 PPT 8 -31

Checklist for Site Evaluations • Local Demographics • Population and/or household base • Population growth potential • Lifestyles of consumers • Income potential • Age makeup • Population of nearby special markets, that is, daytime workers, students, and tourists, if applicable • Occupation mix PPT 8 -32

Checklist for Site Evaluations • Traffic Flow and Accessibility • Number and type of vehicles passing location • Access of vehicles to location • Number and type of pedestrians passing location • Availability of mass transit, if applicable • Accessibility of major highway artery • Quality of access streets • Level of street congestion • Presence of physical barriers that affect trade area shape PPT 8 -33

Checklist for Site Evaluations • Cost Factors • Terms of lease/rent agreement • Basic rent payments • Length of lease • Local taxes • Operations and maintenance cost • Restrictive clauses in lease • Membership in local merchants association required • Voluntary regulations by local merchants PPT 8 -34

Nature of Site • Store Compatibility Exists when two similar retail businesses locate next to or nearby each other and they realize a sales volume greater than what they would have achieved if they were located apart from each other. PPT 8 -35

Debate Points: • The most important factor in determining where a retailer is located is the place of residence of consumers in the area. • 4 Super Walmarts operate in Hatco, TX, with a trade area of 125, 000 people. 1 Super Target store is also located there. Should a 5 th Super Walmart be added? PPT 8 -36