Unit 3

Retail Store & Location

Types of Retail Location, Importance of location
decision, Types of Locations, Factors affecting
location, Step involved in choosing a Retail Location,
Selection of shopping center, Retail location
theories, location assessment procedure

Introduction
Define Store:
A store is place , real or virtual , where the shoppers
comes to buy goods & services. The sales transaction
occurs at this junction.
The location of retail store has for along time
been considered the most important P in
retailing.
Locating the retail store in the right place was
considered to be adequate for success.

Importance of retail Location

Decisions

Location becomes a critical decision for a retailer for

several reasons. As like;
Location is generally one of the most important factors
customers consider while choosing a store.
A bad location may cause a retailer to fail even if its
strategic mix is excellent.. On the other hand , a good
location may help a retailer succeed even if its
strategic mix is mediocre.
Store location is least flexible element of retailers
strategic mix due to its fixed nature, the amount of
investment, and the length of lease agreements

 Change in location gives three potential

problems
Loss of loyal customers and employers
New location may not have the same characteristics of old
location
Store fixtures cannot be moved to new location

Location affects a stores long run strategies

In short run, it affects specific elements of retail
mix

Factors affecting location

Size and characteristics of market (population)

Level of competition
Access to transportation
Parking space availability
Attributes of nearby stores
Property costs
Length of agreement
Population trends
Legal restrictions
Other factors

Types of Retail Location

Various option are available to the retailer for
choosing the location of store.
The choice of the location of the store depends on
the target audience and the kind of merchandise to
be sold.
A retailer has to choosing among alternate types of
retail locations available . It may locate in an
isolated place and pull the customer to the store on
its own strength, such as a small grocery store or
paan shop in a colony which attracts the customers
staying close by

Typically a store location may be:

1.

Freestanding /Isolated store.

2.

Part of Business District/Centers (unplanned Business Districts).

3.

Part of a Shopping Center (Planned Shopping Centers)

1.

Freestanding /Isolated store

Where there are no other outlets in the vicinity of the

store and therefore store depends on its own pulling
power and promotion to attracts customers.
A biggest advantages for freestanding stores is that
there is no competition around.
This type of location has several advantages including
no competition, low rent, often better visibility from
the road, easy parking and lower property .
Neighborhood Stores; colony shops serves small
locality.
Highway Stores :Ebony store in Ludhiana .

How far the customer is willing to travel?

Apparel
2.5Km

Music
2.54
km
Jweller
y 1.5
km
Source : KSA
Technopack consumer
outlook, 2004

Cosmetics
4.05 km

Books
2.74km
1km 2km 3km 4km 5km

Grocery 4
km

Business Associated Location: These are location where

a group of retail outlets offering a variety of
merchandise work together to attract customers
to their retail area, but also compete against
each other for the same customers.two types
includes in ;
1.

Part of Business District/Centers (unplanned Business

Districts).

2.

Part of a Shopping Center (Planned Shopping Centers)

2.

Part of Business District/Centers

(unplanned Business Districts).

A retail store can also be located as a part of a business

district. Or we can refer this as unplanned business centers
A business district is place of commerce in a city which
developed historically as the center of trade and commerce
in the city or town.
A business districts can be a central, secondary or a
Neighborhood business district.
A Central business District CBD is the main center of
commerce and trade in the city. (high land rates , intense
development)

 A CBD is the hub of retailing activity in a city.

CBD served different sections of population for
Examples of Cannaught place in Delhi, Colaba in
Mumbai, Commercial Street and in Bangalore are up
market CBDs.
CBDs serving the upper and upper middle class
customers across these cities like, chandani chowk in
Delhi, Kalbadevi-Bhuleswar in Mumbai, Chickpet in
Bangalore.
Secondary Business District are composed of unplanned
cluster of store often located on a major intersection of
city they a customers from a large part of the city

3.

Part of a Shopping Center (Planned

Shopping Centers)

A shopping center has been defined as a group of

retail and other commercial establishments that is
planned , developed, owned and managed as a single
property
The basic configuration of a shopping centre is a
Mall or Strip centre.
A mall is typically enclosed and climate controlled. A
walkway is provided in front of the stores.
A strip centre is a row of stores with parking provided
in the front of the stores.

 In India we can planned shopping centre can

categorize in two category
Regional shopping centers or Mall: Regional
shopping centers or mall are the largest planned
shopping centers..
Often they are anchored by two or more major
department stores have enclosed mall serve a large
trading area and have high rents. (ansal
plaza,spencers plaza crossroads, DLF city in Gurgaon)
Neighborhood/community/shopping centers:
Neighborhood /community centers usually have a
balanced mix of stores including a few grocery
stores , a chemist, a verity store and a few other
stores selling convenience goods to the residents of
the neighborhood.

India to have mother of all malls

Gurgaon is set to get the mother of all malls a humungous 40-lakh sq ft
sprawling property that is being touted by its developer DLF Universal as the
biggest mall of the world.
The average size of malls here is 2.5 lakh sq ft; this will be 16 times bigger.
The mall - christened Mall of India - will be spread over 32 acres and will
have parking space for 10,000 cars.
These ambitious plans have been drawn up at a time when footfalls are down at
Gurgaon malls and rental rates have virtually halved.
But DLF is unfazed. It says Gurgaon with so many malls will soon develop as a
mega shopping district in the NCR region.
What's the basis of the claim that this will be the biggest in the world?
DLF spokerperson Kajal Aijaz said the biggest now is Mall of America in
Minneapolis which has a covered area of 38 lakh sq ft, followed by a mall in
Shanghai which is 30 lakh sq ft.
Mall of India would be bigger than these, she said.
The DLF mall located on the Delhi-Jaipur highway has been designed by
Jerde Partnership which also designed the mega malls in Minneapolis and
Shanghai.
The costs are not known but property consultants said it could be in the region
of Rs 1,500 crore.

Selection of Shopping centre / market

Shopping centers are distinctly different from the other
two major locations -- that is, downtown and local business
strips. The shopping center building is pre-planned as a
merchandising unit for interplay among tenants. Its site is
deliberately selected by the developer for easy access to
pull customers from a trade area. It has on-site parking as
a common feature of the layout. The amount of parking
space is directly related to the retail area.
Customers like the shopping center's convenience. They
drive in, park, and walk to their destination in relative
safety and speed. Some shopping centers also provide
weather protection and most provide an atmosphere
created for shopping comfort. For the customer, the
shopping center has great appeal.

What Are your Chances

Developers and owners of shopping centers look
for successful
retailers.
Then, the developer selects other types of stores
that will complement each other.
To finance a center, the developer needs major
leases from companies with strong credit ratings.
Your problem is to convince the developer that
the new store has a reasonable chance of success
and will help the "tenant mix."

What a shopping centre can offer ?

Neighbor hood shopping centre 3 to 10acres,
minimum trading population 2500 to 40000
Community shopping centre -10 -30 acres,
minimum trading population 40,000 to 1,50,000
Regional shopping centre 30 to 50 acres,
minimum trading population 1,50,000 and more

Selecting a shopping centre

Trade area and its growth

General income level of the trade area
No of households
Demographics of trade area
Market analysis
Location of store in the centre
Space
Rent & lease
Fittings
Other services by developers

Types of shopping centers

Neighborhood shopping centers
Community shopping centers
Regional shopping centers
Enclosed malls

Specialty theme shopping centers

Regional Shopping Centre

Secondary business centers

Neighborhoo
d shopping
centre

Isolated
Location

Secondary
Business
District
Central
Business
District

Factors to be considered in selecting a

shopping center
Traffic Count : the qualitative information
gathered about the passing traffic should include
counting the individuals who seem to possess the
characteristics appropriate to the desired
clientele, judging their reasons for using that
route, and calculating their ability to buy.
Pedestrian Traffic Count : In making a
pedestrian count you must decide: who is to be
counted; where the count should take place; and
when the count should be made. In considering
who is to be counted, determine what types of
people should be included.

 Estimate Of Store Sales :Data from a

pedestrian traffic survey can give you
information on whether or not the site would
generate a profitable volume for your store.
Automobile Traffic Count ;A growing number
of retail firms depend on drive-in traffic for their
sales. Both the quantity and quality of
automotive traffic can be analyzed in the same
way as pedestrian traffic.

Free standing / isolated location

Advantages
No competition
Low costs
Flexibility
No group rules
Larger space
Location by choice
Better road and visibility
Customization
easy parking

 Disadvantages
Initial Difficulty in attracting costumers
Most people like variety in shopping
Travel time
Advertising costs
Operating cost are not shared
Built than renting
Unplanned and planned business centers
are preferred by costumers

Unplanned Business Districts

Advantages

Excellent goods/service assortment

Variety of store types
Wide range of prices
Variety of customer services
High level of pedestrian traffic
Nearness to commercial or social facilities

 Disadvantages

Inadequate parking
Traffic congestion
Travel time for sub urban customers
Aging retail facilities
Decline condition of central cities
High rent and taxes
Movement of popular stores to suburbs
Discontinuity of offering

Planned Business districts

Advantages

Excellent goods/service assortment for long term plan

strong sub urban population
One stop shopping preferred by customers
Co-operative planning and sharing of common costs
Creation of unified, distinctive shopping center image
Maximization of pedestrian traffic
Access to high ways and parking spaces
More appealing than city shopping centers
Reasonable rent ( excluding enclosed malls)
Lower theft rates
Popularity of malls
Growth of new types of malls

 Disadvantages
Reduced operating flexibility
Higher rents
Restriction on goods and services sold by
stores
Competitive environment within malls
Membership in associations which may of
little use
Too many malls in an area
Domination by large anchor stores

Step involved in choosing a Retail

Location / site selection

1.

In order to arrive at the decision on where to

locate the retail store a retailer needs to first on
the region that he wants to locate the store.
After identifying the region the following steps
Have to be followed .
Identifying the market in which to locate the store.

2.

Evaluate the demand and supply within that

market. i.e. determine the market potential.

3.

Identify the most attractive sites

4.

Select the best site available

1. Market Identification:
The first step in arriving at a decision on retail
location is to identify the market attractiveness to a
retailer.
This is important that retail needs to understand the
market well.
2. Determining the market Potential::
The retailer need to take into consideration various
elements as shown in format. (features of population)
Demographic features of the population
The characteristics of the household in the area
(average household income)
Competition and compatibility (Need to know
compatibility & competition in market)
Laws & regulations:( good understanding of the laws

Determining the market Potential

Demographics of
population & area

Trade area
analysis

Competition

Laws & Regulation

 Trade area analysis:

A trade area is the geographic area that generates
the majority of the customers for the store.
Primary trade area: primary trading covers
between 50-80% of the stores customers.
Secondary Trading Area: this area contains the
additional 15- to 25% of the stores customers.
Tertiary trading area covers the balance
customers
These trading areas are dependent on distance and
do not always have to be concentric in nature

Types of Trades areas.

2 miles

2 miles

2 miles
Store
location
A

2 miles

2 miles
2 miles 1 mile 1 mile 1 mile

Propose
d store
location

Trade Area
Analysis

& 4 Identify Alternate sites and select the

site:
After taking decision on the location and market
potential the retailer has to select the site to
locate the store based on these
Traffic
Accessibility of the market is also a key factor
The total number of stores and the type of store
that exist in the area
Amenities
To buy or to lease
The product mix to be offered by the retailer
3

Retail Location Theories

Central place theory
Retail Gravity Theory
Huffs Gravity Model
Reillys Law of Retail Gravitation
Saturation theory
Herfindahl Herschman Index

Central Place Theory

Theory proposed by Walter Christaller in 1933
Christaller made a number of assumptions such as:
All areas have an isotropic (all flat) surface
an evenly distributed population
evenly distributed resources
similar purchasing power of all consumers and
consumers will patronize nearest market
transportation costs equal in all directions and
proportional to distance
no excess profits (Perfect competition)

Terms in Central Place theory

A Central Place is a settlement which provides one or
more services for the population living around it.
Simple basic services (e.g. grocery stores) are said to be
of low order while specialized services (e.g. universities)
are said to be of high order.
Having a high order service implies there are low order
services around it, but not vice versa.
Settlements which provide low order services are said to
be low order settlements, Settlements that provide high
order services are said to be high order settlements.
The sphere of influence is the area under influence of
the Central Place.

Details of the theory

The theory consists of two basic concepts:
threshold-- the minimum population that is required to
bring about the provision of certain good or services
range of good or services-- the average maximum
distance people will travel to purchase goods and
services

Technically the range

should be greater than
threshold for a store to
be economically viable

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.

Huffs Gravity Model

Based on the premise that the
probability that a given customer will
shop in a particular store
or shopping center becomes larger as
the size
of store or center grows and distance
or
travel time from customer shrinks

Huffs Law
Assumptions:
The proportion of consumers patronizing a given
shopping area varies with the distance from the
shopping area
The proportion of consumers patronizing various
shopping areas varies with the breadth and depth
of merchandise offered by each shopping area
The distance that consumers travel to various
shopping areas varies for different types of
products purchased
The pull of any given shopping area is influenced
by the proximity of competing shopping areas

S j Tij b
Pij n
S j Tij b
j 1
Where
Pij Probability of a customer at a given point of origin i traveling to a
particular shopping center j
S j Size of shopping center j
Tij Travel time or distance from customer's starting point to shopping
center
b An exponent to Tij that reflects the effect of travel time on different
kinds of shopping trips

n = number of stores including j

Reillys Law of Retail Gravitation

When two cities compete for retail trade area
from the immediate suburban area, the breaking
point for the attraction of such trade will be more
or less in direct proportion to the population of
the two cities and in inverse proportion to the
square of the distance from the immediate area
of the city

Mathematical Formula
(Ba/Bb) = (Pa/Pb) (Da / Db)2

Ba business drawn by city a from

immediate place
Bb - business drawn by city b from
immediate place
Pa population of city a
Pb population of city b
Da distance of city a from immediate place
Db - distance of city b from immediate place

Saturation theory
Examines how the demand for goods
and services of a potential trading
area is being served by current retail
establishments in comparison with
other potential markets.

Index of retail saturation (IRS)

IRS is the ratio of demand for a product
(households in the geographic area
multiplied by annual retail
expenditures for a particular line of
trade per household) divided by
available supply (the square footage
of retail facilities of a particular line
of trade in a geographic area).

Index of Retail Saturation

(IRS)
IRS = (H X RE)/RF
Where
IRS- is the index of retail saturation
H -is the number of households in the area
RE- is the annual retail expenditures for a
particular line of trade per household in the
area
RF- is the square footage of retail facilities of a
particular line of trade in the area (including
square footage of the proposed store)

Implications
It is calculated based on existing retail
facilities and their use
Low level saturation is indicated by
higher IRS which means the likelihood
of success is higher
If the market is having too few stores
and unable to satisfy the demands of the
customers, the market is under stored
If there is too many stores the market is
over stored, unable to give fair return on
investments to the retailer

Herfindahl Herschman Index

It is a measure of market concentration
The Herfindahl index (HI) is a measure of
industry concentration equal to the sum of
the squared market shares of the firms in
the industry

N
HHI =

S 2i

i =1

Example
For instance, two cases in which the six largest firms
sells 90% of the sales:
Case 1: All six firms sell 15% each, and
Case 2: One firm sell 80% while the five others sell
2% each.
We will assume that the remaining 10% of sales is
divided among 10 equally sized firms.
The six-firm concentration ratio would equal 90% for
both case 1 and case 2. But the first case would
promote significant competition, where the second
case approaches monopoly. The Herfindahl index for
these two situations makes the lack of competition in
the second case strikingly clear:
Case 1: Herfindahl index = 6 * 0.152 + 10 * 0.012 =
0.136 (13.6%)
Case 2: Herfindahl index = 0.802 + 5 * 0.022 + 10 *
0.012 = 0.643 (64.3%)

 The maximum in this case is 1002 = 10,000.

A HHI index below 0.1 (or 1,000) indicates an
unconcentrated index.
A HHI index between 0.1 to 0.18 (or 1,000 to
1,800) indicates moderate concentration.
A HHI index above 0.18 (above 1,800)
indicates high concentration.
A small index indicates a competitive
industry with no dominant players. If all
firms have an equal share the reciprocal of
the index shows the number of firms in the
industry. When firms have unequal shares,
the reciprocal of the index indicates the
"equivalent" number of firms in the industry.

Buying power index (BPI)

It is an indicator of a markets
overall retail potential and is
composed of the weighted
measures of effective buying
income (personal income,
including all nontax payments
such as social security, minus all
taxes), retail sales, and
population size

Buying Power Index (BPI)

Published annually in Demographics USA
Measures a given markets ability to buy
Is expressed as a percentage of the total U.S.
potential

BPI
BPI = 0.5(the areas percentage of a
countrys effective buying income)

+
0.3(the areas percentage of a
countrys retail sales)

+
0.2(the areas percentage of a
Countrys population)

CBSA Ratings
CBSA Current Year Estimate: Buying Power Index (BPI) 200
CBSA
BPI
Rank
New York et al, NY-NJ-PA
6.7043
1
Los Angeles-Long Beach-Santa Ana, CA
4.3638
2
Chicago-Naperville-Joliet, IL-IN-WI Metro
3.2737
3
Washington-Arlington-Alexandria,
DC-VA-MD-WV Metro
2.2371
4 PhiladelphiaCamden-Wilmington,
PA-NJ-DE-MD Metro
2.0811
5
Total of all Areas 94.9
Percent Of US
94.9353
US Total
100

CBSA Current Year Estimate: Total

Effective Buying Income (EBI) 2009
CBSA

New York et al, NY-NJ-PA Metro

Los Angeles-Long Beach-Santa
Ana, CA Metro
Chicago-Naperville-Joliet, IL-IN-WI
Metro
Washington-Arlington-Alexandria,
DC-VA-MD-WV Metro
Dallas-Fort Worth-Arlington, TX
Metro

Rank

473,144,995,000

284,475,132,500

216,277,750,000

168,382,225,000

143,181,142,500

Total of all Areas

6,131,601,985,000
Percent Of US 95.1522

CBSA Current Year Estimate: Total

Population 2009
CBSA
New York et al, NY-NJ-PA
Metro
Los Angeles-Long BeachSanta Ana, CA Metro
Chicago-Naperville-Joliet,
IL-IN-WI Metro
Dallas-Fort WorthArlington, TX Metro
Philadelphia-CamdenWilmington, PA-NJ-DE-MD
Metro

POPULATION

RANK

18,870,038

13,223,432

9,602,177

6,348,826

5,852,669

Total of all Areas

287,289,025
Percent Of US 93.694

Five Year Estimates

CBSA
BPI Rank
New York et al, NY-NJ-PA Metro 6.5594
1
Los Angeles-Long Beach-Santa Ana, CA Metro
4.4271
2 Chicago-Naperville-Joliet, IL-IN-WI Metro
3.1731
3 Washington-Arlington-Alexandria,
DC-VA-MD-WV Metro
2.315
4 Dallas-Fort
Worth-Arlington, TX Metro
2.1047 5
Total of all Areas 95.1
Percent Of US 95.0916
US Total 100

Methods / Models

Check-list method
Analogue method
Location Allocation
Regression modelling
Gravity modelling

Check list method

Analog method

Regression models

Location Allocation model

Gravity Model

Merchandising,

Basis of retail merchandising

Product and merchandising management is key activity

in the management of retail business.
The primary function of the retailing is to sell
Merchandise.
One of the most strategic aspects of the retail business
is to decide the merchandise mix and quantity to be
purchased .
Merchandising can be termed as the planning, buying
and the selling of merchandising .

 Define Merchandising as The analysis, planning,

acquisition, handling and control of merchandise
investments of a retail operation.
Merchandising is the core of retailing.
The function of merchandising is an integral part
of retailing and also one of the most challenging
functions.
AMA define The planning involved in marketing
the right merchandise at the right place at the
right time in the right quantities at the right price.

 Achieving these five Right is the key to successful

merchandising and many a times, this remains an elusive goal for
most retailers.
Merchandising management can be termed as Planning,
analysis, acquisition, handling and control of the
merchandise

 Analysis: because retailers must be able to correctly

identify their customers before they can ascertain
consumer desires and their needs/requirements for
making a good buying decision.
Planning is important because merchandise to be sold in
the future must be bought now.
Acquisitions because the merchandise needs to be
procured from others, either distributors or
manufactures.
Handling involves seeing that the merchandise is where
it is needed and in the proper condition to be sold.
Control is required since the function of merchandise
involves spending money for acquiring products it is
necessary to control the amount of money spent on
buying

Factors Affecting the Merchandising Function

Merchandising does not function in isolation.

It is affected by various factors like the organization
structure, the size of the retail organization and the
merchandise to be carried.
Rarely are any two stores organized in the same way.
The function of the merchandising is vary from one
organization to another.
Size: The needs of the individual retailers vary from
those of large chain store operation.

Merchandising function

Merchandise to be carried

Types of store

Organisation Structure

Size of organisation

 The merchandiser to be carried by a retailer largely

determines the responsibilities of the merchandiser.
Merchandise to be carried: The buying for basic
merchandise is fairly different from buying fashion
merchandise.
A merchandisers who I handling fashion products will
need to spend more time in the market, and looking for
the products which is more suitable for the customers.
Organization structure that the retail organization
adopts also affects the merchandising function. Some
organization may differentiate the role of the buyer
and the role of a merchandisers separately.

The Merchandises Role & Responsibilities

Planning: Thought the merchandising may not be

directly involved in the actual purchase of
merchandise.
They formulate the policies for the areas in which they
are responsible.
Forecasting sale for the forth coming budget period
and can estimate the consumer demand and the
impact of changes in the retail environment.
Directing: Guiding and training buyers as and when
the need arises, is also a function of the merchandiser.
The buyers have to be guided to take additional
markdowns for products which may not be doing too
well in the stores.

 Co-ordinating: Merchandise managers supervise the work of

more than one buyer.
They need to coordinate the buying effort in terms of how well it
fits in with the store image and with the other products being
bought by other buyers.
Controlling: assessing the buyers performance , is a also part of
the merchandise managers Job.
This includes evaluated on the basis of net sale, maintain mark up
percentage, gross margin % and stock turn

Role of the Buyer

1.
2.
3.
4.
5.

Buyers plays an important role in the retail industry.

they select and order merchandise to be sold.
Buyers may be responsible for buying for a
department, an entire store, or a chain of stores

Developing the merchandising strategies for the

product line
Planning and selecting merchandise assortments
Vendor Selection
Pricing of the merchandise
Inventory Management

Retail Store Design & Visual Merchandising

Store design and layout tells a customer what the

store is all about and it is very strong tool in the
hands of the retailer for communicating and creating
the image of the store in the mind of the customers.
The design and layout of the store are a means of
communicating the image of the retail store.
The environment which is creates in the retail store,
is a combination of the exterior look of the store, the
store interiors, the atmosphere in the store and the
events, promotions and the themes.

 The overall look of a store and the series of mental pictures and
feelings it evokes within the beholder.
For the retailer, developing a powerful image provides the
opportunity to embody a single message, stand out from the
competition and be remembered.

Elements of store design

Ext.

Frontage &
Entrance

Parking

Display

space
Building
architecture

Health &
Safety

Location

Store
design

Access

Store
theme
Target
Customers

Merchand
ise Mix

Exterior Store Design & Interior Design

Exterior
Location
Parking
Ease of access
The building architecture
Health and safety standards
Store windows, lighting
Interior
Fixtures
Flooring & Ceilings
Lighting
Graphics & Signages
Atmospherics

Visual merchandising

Can be termed as the orderly, systematic, logical

and intelligent way of putting stock on the floor
VM is the art of presentation, which puts the merchandise in
focus. It educates the customers, creates desire and finally
augments the selling process.

METHODS OF DISPLAYS
Color Dominance
Co-ordinated Presentation
Presentation by price