Quiz 8: Retail Site Location
Store location refers to the physical presence of the retail store at a particular location targeting its customers. There are several factors that affects the retailer's choice for the store location including infrastructure, demographic and economic factors, cultures and subcultures, market and sales potential, demand for the store and its products, etc. The following four factors are considered by the retailers when evaluating an area of the country to locate stores: • Economic conditions : It is evident that to open a store in a particular location, the retailer is required to spend huge amount of money in the store's construction, maintenance, stocking products, etc. Unless the retailer is assured that the economic conditions that is earning of the population residing in that location is high, the retailer will not make a good choice to open the store in that location. Regular income of the population residing in that areas means the population will buy a greater number of goods regularly which will be a good sign for retailers to open stores in that location. • Competition: The type of competition present in the location will also affect the retailer's decision to open a store in the particular place. This is because when the location will carry less competition and huge targeted population, then the store will operate successfully. • Strategic fit : The population residing in the particular area should strategically and demographically fit the kinds of products the retailer wishes to offer to the customers in the nearby areas. The income and lifestyle of the population of that location should match with the targeted customers the retailer decide for its products. • Operating costs : The operating cost of the store in the particular location also affects the retailer's evaluation of that location. When the store is located near to the firm's warehouse and distribution centres, it will reduce the various costs incurred by the firm in shipping and stocking merchandise. Trade area refers to the area from which the business firms expects to generate major sales from the people from that area serving as the firm's customers. The retailers determine the trade area for a store by considering several factors like accessibility of the trade area to the targeted customers, the natural and physical barriers present in the trade area, type of shopping area that exists in the trade area, the type of stores located in that area, and the kind of competition present there. These are the factors that affects the retailers' determination of the trade area.
Store location refers to the physical presence of the retail store at a particular location targeting its customers. There are several factors that affects the retailer's choice for the store location including infrastructure, demographic and economic factors, cultures and subcultures, market and sales potential, demand for the store and its products, etc. Company THH Hardware plans to open a new store, and for this, the firm has options of two sites and both exists in the middle-income neighbourhood. As one neighbourhood is 20 years old and is well maintained, the other is recently built in a newly planned community. Among the two options, the one that would be best suitable for the firm to open its store would be recently built newly planned community. This is because the new community will carry new people as residents and they will be requiring every other services and products of different kinds. As this community is newly built, firms will be hoarding to be a part of this new location to target new customers and increase their business. The new area will carry limited options for initial years and if THH will operate its store in this location, it will help the firm to gain customer confidence and capture huge market owing to the limited options available in the community. With time, when new players will compete with THH in the location, it would not majorly affect the sales of THH owing to the reputation and trust it would have built in the customer minds. On the other hand, if Company THH Hardware will opt for the old neighbourhood, then it would have to face tough competition from the existing brands offering same products and services to the population that THH offers. It would be very difficult for THH to gain customer confidence and trust in the old neighbourhood. This is the reason recently built newly planned community would be the best site location for Company THH Hardware.
Trade area is geographical area from where the store placed is likely to get customers. The trade area is normally divided into three layers. The primary area is the closed places to which the store is located. Nearly 50-70% customers will come and buy products from the area. The secondary is a little far away from the store location and nearly 20-30% may come and purchase. The tertiary zone is the far-away placed and very few customers will come and purchase. The reason why this trade area of concentric circles is being used is as follows. Primarily, it helps the retailer to select the best location or site for the store where they can get a maximum number of customers. Secondly, it helps to understand the population and the economic base of the customers. Thirdly, trade area analysis using the concentric circle method helps to identify the competition in the same field. An alternative for this drive-time analysis model is the consumer focus approach. In these methods, a focus group from different zones is being made. It helps to find the relative preference of the different members in the focus group. It will cover all the aspects and factors that affect the trade area definition constituted of. The facilitator asks the members not to think about their own thought, but also the other people fall in their same community. This way a better definition can be drafted out. A consumer focus group would be the best choice for defining the trade area. The concentric circles are not always the true face of the story. The customers near the store may buy the product if they feel it convenient. But, to be profitable in -, the retailer should make sure that the customers nearby hold certain interest in their product or service; if the retail store and the service they offer is meeting the customer preference. If not, then the concentric circle definition will fail in the long run. Thus, a focus group is always a better option for this. Through the focus group, the fittest area can be identified by the retailer and he can select a sit nearby.