Case 10: Stephanies Boutique: Selecting a Store Location

Group 8, MBA-Marketing Abhinav Jain, 13121 Ankit Singh, 13067 Ankush Roy, 13062 Dishant Sharma, 13075 Malhar Shah, 13072 Nikhil Kumar, 13091 Rajesh Kumar, 13158

Case Facts


 

Stephanie Wilson is in her late 30s & has been working with the municipal government ever since college. She is divorced, with two children (aged five & eight). She has a flair for fashion & wants her own business, to be able to spend more time with her children. She has taken evening courses in fashion design & retail management. She has to decide location of her ready-to-wear boutique from the following available options:
The Downtown Arcade Tenderloin Village Appletree Mall

Q1. Give the pluses & minuses of each location.

The Downtown Arcade



Advantages
Citys central business district. Arcade renovation has been proposed under a master redevelopment plan, which new departmental store & offices. Includes a 3-level shopping facility with 68 shops & a series of restaurants, a convention center & validated parking. High visibility, situated near main ground floor entrance. Moderate rent at $20/sq. ft or $18,000 annually.

Disadvantages
Has been ailing for sometime, vacant for past 15 years. If sales exceed $225,000 rent will calculated at 8%. Minimum lease period is 3 years.

Tenderloin Village


Advantages
Gentrified urban area of the city. Trendy enclave. Stephanies lives here & its a neat & comfortable neighborhood. Excellent visibility, available site is on the Villages main street. Presence of about 20 small retailers & nouveau cuisine restaurants in the area. Least rent amongst the 3 locations, at $15,000 annually with no coverage clause. Landlord knows Stephanie. Lease period is shortest (2 years).

Disadvantages
High Competition, the neighborhood already has three small womens specialty clothing stores.

Appletree Mall


Advantages
Successful regional center, located just off a major interstate highway, about 8 miles from Downtown. It has 3 department stores & the site available to Stephanie is two doors from the local department chains outlet. Largest space as compared to other two sites, at 1200 sq. feet. Mall sales growth are 12% ahead of last year. Escape clause if sales dont reach $411,500 after 2 years.

Disadvantages
Very high annual rent at $28,800 ($24 per sq. feet). Additional charge of 1% of sales for mall maintenance & promotion. Longest minimum lease period (5 years). Very high competition, 9 women clothing retailers already present. If sales exceed $411,500 rent will be 7% of sales.

Q2. What type of store would be most appropriate for each location?


Stephanie is planning to open a specialty store & it would be most appropriate in The Arcade & Tenderloin Village. oth the sites are 900 square feet, with great locational advantage in terms of high visibility (Arcade store is located close to entrance & Village store is on the main street). Both will have a great chance to thrive with considerable presence in the target market. At the Village site, there are already 3 womens specialty stores operating, hence that will be the best type of store for Stephanie to open.

Q2. What type of store would be most appropriate for each location? (Contd..)


For the Appletree Mall, a shopping store or a large specialized store would be the most appropriate. The available space at 1200 square feet, is larger than other two sites & can be made more use of. For upscale clothing, customer would wish to compare prices before making the purchase. Thus, the store should have ample space & enough products to attract customers & allow trial. It should catch the attention of the people walking by, as it is located next to a large department store which would invariably get more visibility & footfalls as compared to Stephanies store.

Q3. If you were Stephanie which location would you choose? Why?


 

The best location for Stephanie s Boutique will be the one in TENDERLOIN VILLAGE. It offers the maximum advantages & has the least drawbacks. Some reasons why Tenderloin should be chosen are:
Stephanie lives here & hence, she can start her business & also spend more time with her children, which she specifically wants. The neighborhood is trendy with urban gentry. Thus, there will be a strong target market for her womens boutique, which would sell fashionable clothing. Being located on the ground floor of a house, on the main street of the neighborhood, it offers excellent visibility & would bring in more customers.

Reasons for choosing Tenderloin (contd.)

The rent at $15,000 annually, is lowest amongst the three options, with no coverage clause or any other hidden costs. Another very strong factor is that the landlord knows Stephanie. Thus, it allows flexibility in payments, lease terms, etc & a cooperative relationship in case of any problems. Also the minimum lease period is the shortest. Thus, unlike the Arcade & Appletree which have longer lease periods, here the lock-in duration is only 2 years. Hence, if Stephanie has any problems, she can move out easily after that period. The presence of 20 small retailers & upscale restaurants can also help Stephanie indirectly, through higher sales from people outside the neighborhood, who visit these shops.


Thus, this location is the best & should be chosen.

Thank You!