Retail Site Evaluation and Selection

Retail Site Evaluation Methods

Experts and analysts have at their disposal several methods to evaluate retail site alternatives. These are broadly classified as subjective and objective. Again some are quite simple and some are sophisticated. It suffices to take two most commonly used methods namely, checklist method and quantitative methods.

1. Checklist Method

It provides a retail site evaluator with a set of procedural steps for arriving at a subjective yet quantitative expression of a sites value. First, the evaluator enumerates the general factors that are usually considered in any site evaluation. A typical list of factors includes all or most of the site-evaluation principles~ interruption, cumulative attraction, compatibility and accessibility. Secondly, for each general factor, the evaluator identifies several attribute measurements that reflect the location needs of the proposed operation. For instance, interception which is a key location attribute for most convenience retailers, can be divided into the volume and quality of vehicular and pedestrian traffic. Thirdly, each location attribute receives a subjective weight based on its relative importance to a particular type of retailer. A common weightage system assigns ‘3’ to very important, ‘2’ to moderately important and ‘1’ to slightly important and ‘0’ to unimportant attributes. Fourthly, the evaluator is to go ahead with rating of each alternative in terms of such each location attribute. Any number of rating scales can be constructed; one possible scale might be ranging from say 01 to 10, with 01 as very poor and 10 as highly superior. To illustrate, a site alternative located on a major thoroughfare with a high volume of traffic throughout the day be rated a 09 or 10 ; another site alternative located on a traffic artery featured by high volumes of traffic only during morning and evening rush hours could be rated as a 05 or 06. Fifthly, evaluator should go ahead with calculating weighted rating for each attribute for each site alternative. The weighted rating is obtained by multiplying each attribute rating by its weight. Sixthly, the weighted ratings for all attributes are added to produce an overall rating of each site alternative. Seventhly and finally, the last steps is to rank all the evaluated alternative sites in order to know their overall ratings and to select the one with the highest.

2. Quantitative Methods

Several quantitative models can be used to evaluate retailer’s site.  The most commonly used are two, namely, Analog Models and Regression Analysis.

  1. Analog Models. Analog Models are used to make sales projections for a new stores based on the sales performance of existing stores. A chain retailer can approach the evaluation problem by finding the best ‘match’ between the site characteristics of a new site alternatives and those of successful existing site. This matching process is usually quantified into a statistical model. The only advantage of these analog models are the ease of implementation. However, analog model methodology suffers from two significant disadvantages: (1) The results are dependent on the particular store chosen as analogs and therefore, rely heavily on the analyst’s ability to make judicious selection of the analogous stores. (2) The method does not directly consider the competitive environment in evaluating the sites. The competitive situation is brought into consideration only through the selection of analog stores.
  2. Regression Models. Regression models are more rigorous approach to the problem of site location. Therefore, they offer certain advantages over checklist and a log approaches. (1) A regression model allows systematic consideration of both trading area and factors as well as site-specific elements in a single frame-work (2) The regression models allow. the analyst to identify the factors that are associated with various kinds of revenues from stores at different sites. Following is one such basic multiple regression model for  analyzing  the determinants of retail performance is expressed as a linear function of location (L), Store attributes (S), market attributes (M), price (P), and competition (C):   Y = f (L, S, M, P, C)

The Retail Site Selection Process

The final selection of a retail site is essentially a process of elimination.  By  analyzing  the regional and local markets, assessing retail-trading areas and appraising retail site locations, the range of choices has been narrowed to site alternatives consistent with the firms objectives, operations and the further expectations. In case markets, trading areas and sites have all been carefully evaluated, the retailer should be able to arrive at the final location decision. Normally, the retailer will not select the optimal location but rather a compromise location that has most of the desirable attributes. The very best location need not have all ideal attributes in total.

That is in the end, no steps, procedures, or models can totally quantity the final site selection process. However, the data generated and analysis completed in market trading area and site evaluations, the retailer has the sufficient information to make a good site selection. In other words, to appraise retail site locations, the location analyst must determine each site’s ability to interact with the trading area. Then the retailer’s problem is to how he is going to identify, evaluate and select a good site location. Essentially, the task of site selection becomes one of selecting the best location from several acceptable alternatives.

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