The Concept of Retail Sites and it’s Classification

A “retail site” is the actual physical location from which a retail business operates. According to retail specialists, retailer’s site is one of the principal tools obtaining and maintaining a competitive advantage through spatial monopoly. A given site is unique when its “positional qualities” serve a particular trading area consumer in way that no other site can match. That is why, retailer’s site problem has solution in its identification evaluation and final decision of perfectly matching site.

The first step in appraising retail site locations is to identify all potential site alternatives. The number of site alternatives in any given trading area can range from an extremely limited to a very large selection. Therefore, before a retailer attempts to have any formal evaluation, he should scan and screen the alternatives by asking three crucial questions. These are :

  1. Availability. Is the site available for rent or out-right purchase?
  2. Suitability. Are the site and the facilities of a suitable size and structure?
  3. Acceptability. Is the asking rental rate within the retailer’s operating budget? 

To be considered for further evaluation, a site alternative must meet all the three screening criteria. That is a selectable site is available, suitable and acceptable.

Retail sites can be classified as either Isolated or Clustered.

Isolated Retail Sites

Isolated sites are retail locations that are geographically separated from other retail sites. However, they can be next to other forms of economic and social activity. One site alternative is to “go it alone” by selecting an absolute location isolated from other retailers. The degree of isolation can range from “around the corner down the block” to for out on the outskirts of town. Here isolation means physical isolation, In relative location terms, “an isolated site is located or situated so that it will not normally share consumer traffic, with other retailers, however, its relative location offers certain advantages in attracting customers from other sources of business. Generally, a retailer selects an isolated site in seeking to gain either a monopolistic or an operational advantage. Let us understand the implications of monopolistic and operational isolation.

  1. Monopolistic Isolation. Monopolistic isolation is a site that affords the retailer a unique, convenient and accessible location to serve consumers. A monopolistically isolated site is isolated from competing retail sites but is uniquely situated for traffic generating activities. The common examples of these kinds are, convenience-food store in a residential area, a neighborhood bar, a local service station a cafeteria located in an office complex. Exclusive airport, bus terminals, railway stations and in campus book stores and so on.
  2. Operational Isolation. Some retailers prefer to locate in isolated areas because they think it gives them greater flexibility in operating a retail business. This greater operational flexibility are seen in terms of :
    • Site Geography. Site alternatives that meet the size, shape and terrain requirements of the retailers operation constitute site-geography. A home-improvement center, for example, normally requires a large, flat site to accommodate large show-rooms and storage facilities.
    • Transportation Network. Some site alternatives haw transportation networks that generate good consumer traffic and also have good supply connections. A large warehouse-showroom retailer might think of locating the store at the junction of two major highways where customer traffic is high, but should also consider whether there is an adjacent railroad spur to handle large number of heavy, bulky products, particularly.
    • Type of Facilities. Certain site alternatives permit the installation of facilities that are conducive to the retailers operations. For a retailer, the store’s architectural motif, internal layout fixturing, atmosphere as well as the supporting facilities such as parking and signing and the like are really important. Majority of clustered locations have numerous facility restrictions unlike isolated location that permit great deal of freedom in these regards.
    • Operating Methods. Some sites offer the retailer much warranted freedom of operation and avoidance of group rules that are common to shopping centers. These restrictions include the working hours of store, external displays and cooperative advertising programmes including holidays.
    • Operating Costs. A site must give the retailer the opportunity to operate within the business cost constraints. Naturally, a low margin, high­ turnover retailer needs to keep the operating expenses at lowest point to offer the consumers the discount prices. Normally, an isolated site has low rental costs that helps in lowering operating costs.

Though isolated sites give certain advantages to the retailer he has to accept certain disadvantages also. These are :

  1. The retailer must attract. and hold his own customers. An isolationist strategy may cause the shopping goods retailer to encounter serious problems, since these consumers prefer either to compose brands or are one stop shoppers.
  2. Retailers must design and build their own facilities. It is possible to do so only for largest retail organisations which possess human and financial resources.
  3. The isolated retailer can not share operating costs with neighboring establishments, as it is possible in case of clustered locations where they share. Such expenses such as maintenance, security, lighting, garbage removal, on common grounds.

Clustered Retail Sites

Clustered sites are retail locations that are either next to each other or in close proximity. From a shopping perspective, a cluster is two or more closely located retailers capable of sharing customers with minimum effort. Retail clusters are two types namely, ‘unplanned’ and ‘planned’.

  1. The Unplanned  Clustered Site. An unplanned retail cluster is the result of a natural evolutionary process. In any country in absence of urban planning and zoning laws, unplanned retail clusters come up and continue to exist. Though these planning laws and zoning restrictions are not strictly implemented, it allows much room growth of unplanned retail clusters. Unplanned retail clusters are often part of larger unplanned business districts where retailers can be either clustered together or scattered with no discernible pattern. One can think of four general types of unplanned clusters namely, central business district, the secondary business district, the neighborhood business district and the string-strip shopping cluster. This classification is applicable to advanced nations particularly U.S. Here a mere reference is made.
    • “Central Business District” (CBD) is the single most important retailing cluster. These are mostly down town retail clusters.
    • “Secondary Business Districts” (SBD) are those clusters  which are located in medium and large size cities having one or more secondary business districts, located at the intersections of major traffic arteries. They were originally down town clusters.
    • “Neighborhood Business Districts” (NBD) is small retail cluster that serves primarily one or two residential areas. The NBDs generally contain four or five stores combining food and drug, gasoline service stations, neighborhood bars, self-service laundries, barber shops, beauty parlors and small general merchandise stores. It has a four-corner structure each locating at each corner.
    • “String/Strip cluster” is one that develops along major thoroughfares and depends on the consumption activity of people who travel these busy thoroughfares. The size of the strip or string is directly related to the average volume of traffic along the thorough-fares. Some strings stretch for kilometers along the heavily traveled arteries leading in out of a CBD and others are limited to one or two blocks along streets carrying a lower density of traffic. The long strips are dealing in new and old cars, rows of mobile home dealerships, strings of home-furnishings, outlets and a strand of side­-by-side fast food restaurants or even a collection of specialty shops.
  2. The Planned Cluster Site. Growth of suburban population has given the golden opportunity to the retailers to meet the needs of suburban shopper. Originally, the basic problem was to develop an institution that could satisfy the shopping needs 0f a geographically dispersed market. The most common solution was and is a one-stop shopping institution such as a planned shopping center  A planned shopping center is a purposeful cluster of retail and service establishments at a location designed to serve a specific geographic, demographic and psychographic market segment. Through deliberate and careful planning. a developer could offer a merchandise-mix-products, services, prices, to meet most customer needs for convenience, shopping and specialty goods. These planned clustered shops or shopping centers vary in nature according to their tenants and the size of the market they serve. On the basis of type and size, the planned shopping centers can be of four types namely, regional, community, neighborhood and specialty retailers. A “regional shopping centers serve regional markets varying in size according to the type of transportation network serving the center  the location of competing centers and unplanned business districts, the willingness of consumers to travel various distances to shop and the tenant mix. They provide consumers with a wide range of assortment of convenience, shopping and specialty goods as well as numerous personal and professional facilities. “Community and Neighborhood centers”  serve the market areas their names suggest. A community shopping center serves a composite of many neighborhoods within a ten to fifteen minute drive from the center. It is a larger center and diverse in its mix than neighborhood centers  It contains ten to thirty retail establishments. It provides consumers with shopping and convenience goods. On the other hand, the “neighborhood shopping center”  gets its customers from one or a few neighborhoods within the immediate vicinity. Its trading area can be roughly defined as the area within five minutes drive of the center  containing anywhere from 7000 to 50,000 potential customers. A “specialty shopping center”  is essentially a smaller cluster of specialty retailers that tends to be more focussed in its target market. 

Credit: Retail Management-AU

About Abey Francis

Abey Francis is the founder of MBAKnol - A Blog about Management Theories and Practices - and he's always happy to share his passion for innovative management practices. You can found him on Google+ and Facebook. If you’d like to reach him, send him an email to: francisabey@gmail.com
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