Chapter 7 Retail Locations Mc Graw-Hill Irwin Retailing Management

Chapter 7 Retail Locations Mc. Graw-Hill/Irwin Retailing Management, 6/e Copyright © 2007 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

2 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 Customer Relationship Management Chapter 11

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

What Are the Three Most Important Things in Retailing? 4 Location! Eddie Tan/Life File/Getty Images

5 Why is Store Location Important for a Retailer? • Location is typically prime consideration in customer’s store choice. • Location decisions have strategic importance because they can help to develop sustainable competitive advantage. • Location decisions are risky: invest or lease? F. Schussler/Photo. Link/Getty Images

6 Types of Retail Locations • Free Standing Sites • City or Town Locations – Inner City – Main Street • Shopping Centers – Strip Shopping Centers – Shopping Malls • Other Location Opportunities Photo. Link/Getty Images

7 Types of Locations

8 Unplanned Retail Locations Freestanding Sites – location for individual store unconnected to other retailer Advantages: Convenience High traffic and visibility Modest occupancy cost Separation from competition Few restrictions The Mc. Graw-Hill Companies, Inc. /Andrew Resek, photographer JCPenney, Sears, Walgreens are shifting to stand alone locations

9 Unplanned Retail Locations Merchandise Kiosks – small temporary selling stations located in walkways of enclosed malls, airports, train stations or office building lobbies. Kent Knudson/Photo. Link/Getty Images

10 City or Town Locations Gentrification is bringing population back to the cities. Advantage to Retailers: • Affluence returned • Young professionals • Returned empty-nesters • Incentives to move provided by cities • Jobs! • Low occupancy costs • High pedestrian traffic The Mc. Graw-Hill Companies, Inc. /Andrew Resek, photographer

11 Advantages • • Draws people into areas during business hours Hub for public transportation Pedestrian traffic Residents Disadvantages Central Business District • • High security required Shoplifting Parking is poor Evenings and weekends are slow Spike Mafford/Getty Images

12 Main Streets vs. CBDs • • • Occupancy costs lower than CBDs They don’t attract as many people There are not as many stores Smaller selections offered Not as much entertainment Some planners restrict store operations

The Most Expensive Shopping Streets in the World Street 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 13

14 Unmet demand tops 25% in many inner city markets (c) Brand X Pictures/Punch. Stock Inner City Inner city customer wants branded merchandise Inner city retailers achieve high sales volume, higher margins and higher profits

15 Shopping Centers Shopping Center Management Controls: Parking • Security • Parking lot lighting • Outdoor signage • Advertising • Special events for customers The Mc. Graw-Hill Companies, Inc. /Andrew Resek, photographer

16 Types of Shopping Centers • Neighborhood and Community Centers (Strip Centers) • Power Centers • Enclosed Malls • Lifestyle Centers • Fashion Specialty Centers • Outlet Centers

17 Neighborhood and Community Centers Attached row of stores Onsite parking The Mc. Graw-Hill Companies, Inc. /Andrew Resek, photographer Managed as a unit

18 Power Centers Open air set up Big box stores Many located near enclosed malls Available parking Free-standing stores Limited small specialty stores Photo. Link/Getty Images Low occupancy costs Large trade areas Modest vehicular and pedestrian traffic Convenient Desirable shopping experience

19 The Largest North American Shopping Malls

20 Mall of America • Located near Minneapolis, MN • Largest mall in the US • Enough people to qualify as the third largest city in Minnesota • Has more than 42 million visitors a year • More people visit than Disney World, the Grand canyon and Graceland combined Digital Vision/Getty Images

21 Advantages and Disadvantages of Shopping Malls Many different types of stores Many different assortments available Attracts many shoppers Main Street for today’s shoppers Never worry about the weather Comfortable surrounding to shop Uniform hours of operation Photo. Link/Getty Images Advantages: Disadvantages: Occupancy costs are high Tenants may not like mall management control of operations Competition can be intense

22 Challenge to Malls • Time pressured society makes it impractical to wander malls • Fashion apparel sold in malls experiencing limited growth • Malls are getting old and rundown – unappealing to shop • Anchor tenants are decreasing due to retail consolidation

23 Lifestyle Centers Photo provided by ICSC and used with permission of Aspen Grove Lifestyle Center Courtesy of General Growth Properties

24 Stores and Restaurants at Lifestyle Centers Williams-Sonoma Victoria’s Secret Restoration Hardware Barnes & Noble/Borders Coldwater Creek Pottery Barn The Gap Eddie Bauer Banana Republic Bed Bath & Beyond Panera Bread Ann Taylor Starbucks Aeropostale Dick’s Sporting Goods Hallmark Johnny Rockets

25 Lifestyle Centers Usually located in affluent residential neighborhoods Includes 50 K sq. ft. of upscale chain specialty stores Open-air configuration Design ambience and amenities Upscale stores Restaurants and often a cinema or other entertainment Small department store format may be there

26 Upscale apparel shops Need to be anchored Décor is elegant The Mc. Graw-Hill Companies, Inc. /Lars A. Niki, photographer Fashion Specialty Centers

27 Outlet Centers These shopping centers contain mostly manufacturers and retail outlet stores Courtesy of Beall’s, Inc.

28 Tradeoff Between Locations There are relative advantages and disadvantages to consider with each location. Rent Traffic

Relative Advantages of Major Retail Locations Location City Issues Strip Center Shopping Mall Free Standing Large size draws people to area + - People working/living in area provided source of customers + + - - Source of entertainment/ recreation ? - + - Protection against weather - + - - 29

Relative Advantages of Major Retail Locations Location CBD Issues Strip Shopping Free Center Mall Standing - + + Planned shopping area/balanced tenant mix - - + - Parking - Occupancy costs (e. g. rent) ? + + Security Long, uniform hours of operation - + + 30

Relative Advantages of Major Retail Locations Location City Issues Strip Shopping Center Mall Free Standing Pedestrian traffic + - Landlord + + - + Strong competition + + - + Tax incentives ? ? control 31

32 Other Retail Location Opportunities Mixed Use Developments Airports Resorts Hospitals Store within a Store Royalty-Free/CORBIS

33 Alternative Locations Mixed Use Developments MXDs Rob Melnychuk/Getty Images Hotels Office Buildings D. Falconer/Photo. Link/Getty Images Civic Centers Skip Nall/Getty Images

34 Alternative Locations Airports: Why wait with nothing to do? Kim Steele/Getty Images Rents are 20% higher than malls Sales/sqft are 3 -4 times higher than malls Best airports are ones with many connecting flights

35 Alternative Locations Resorts Captive audience Well-to-do customer Customers have time to shop Royalty-Free/CORBIS

36 Alternative Locations Hospitals Patients cannot leave Gifts are available Royalty-Free/CORBIS

37 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

38 Shopping Situations Minimize the customer’s effort to get the product or service by locating store close to where customers are located The Mc. Graw-Hill Companies, Inc. /Andrew Resek, photographer Convenience Shopping

39 Shopping Situations Comparison Shopping Customers have a good idea of what type of product they want, but don’t have a strong preference for brand, model or retailer. Typical for furniture, appliances, apparel, consumer electronics, hand tools and cameras. Ryan Mc. Vay/Getty Images

40 Category Specialists Consumers can see almost all brands and models in one store The Mc. Graw-Hill Companies, Inc. /Andrew Resek, photographer

41 Shopping Situations Specialty Shopping Customers know what they want Designer labels Convenient location matters less The Mc. Graw-Hill Companies, Inc. /Andrew Resek, photographer

42 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.

43 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 Some areas may restrict or require a license for alcoholic beverages