Site Selection Criteria in Retail

There is no such thing, such as a  “Perfect site” in retailing. Retailers must decide which attributes are the most important to  their business.  Let’s summarize the key criteria critical to the site selection decision in retailing.

  1. Sales potential for the site. The demographic, economic, and competition  factors and strategies by which management hopes to create a competitive  advantage determine the estimate of sales for a site. Growth potential  should be a basic consideration in the evaluation of the sales potential.
  2. Accessibility to the site. Automobile and public transportation access to  the site and adequate parking may well be defining criteria. There may be  a number of barriers to the target market seeing the site as accessible. The  barriers may be geographical, such as mountains or rivers. They may be  psychological, such as the perceived quality of the  neighbor  hoods that  customers must travel through. Barriers are often man made, such as one  way frontage roads, bridges, clover leafs, and long term public works  construction projects.
  3. Pedestrian accessibility at the site. The site must provide reasonable actual  and perceived access to the store. Traffic patterns within malls or on city  streets can help or hinder pedestrian access. The storefronts can intimidate  or encourage entry.  Neighboring  stores can bring  potential  customers  near or drive them away. Have you ever watched customers turn away  when they have to try to get to a store through a group of teens waiting in  line to get tickets to the movie in the mall?
  4. Synergies from nearby stores. We discussed image transference as either a  help or a hindrance to drawing traffic to the store. There is cumulative  attraction when business can draw more customers together than they  could individually. That is why auto dealers will tend to locate where  shoppers can visit each of them in a single trip. In a shopping center a  group of complementary stores such as apparel and accessories benefit  from being near one have similar retailing strategies on dimensions of  merchandise quality and price lines, service quality and store atmosphere.  Technology is providing new ways to fine-tune the site evaluation  process in terms of the architectural fit with  neighboring  stores. How the  store and its exterior design mesh with the  neighboring  stores is a  concern. Advanced computer imaging allows the retailer to see how the  storefront will look in the area before construction or moving begins.
  5. Site economics.  Leasing and occupancy terms. The terms of the lease or  purchase contracts have critical implications for the retailers. In a recent  survey of retail managers, leasing options and terms were expressed as  among their top concerns. Occupancy rates in the immediate or  surrounding vicinity also have important implications to retail managers.  For example, lower occupancy rates may improve your ability to  negotiate a more  favorable  lease because the developer is anxious to fill  vacant space; but low occupancy may signal poor access, poor market  variables, or poor management relations with the center owner /developer.  Further more, even if the vacant space; but low occupancy may signal  poor economic viability in the market, too much vacancy can be an open  door to a competitor. In fact, if the vacant space is sufficient, it can  quickly be occupied by a competitor that you did not anticipate. The full  range of the costs of occupancy must be considered. Local taxes,  maintenance costs, renovation costs, utilities, as well as the  cost to rent or own are all critical factors.
  6. Legal and political environment. Increasingly, the legal and political  environment is an important consideration in site location decisions.  Changes in zoning laws, taxing districts, and road maintenance projects  can threaten the long run viability of a specific site.
  7. Physical features. The physical features of the site and  neighboring  area  must not be overlooked. Whether it is raw land or an existing building, the  physical dimensions of the site must fit your needs. Gap, for example, has  adopted a standard layout for all its stores to simplify shelving, checkout,  stock room, and merchandise display needs. Consequently if a site will  not accommodate this predetermined configuration it is abandoned. The  size and shape of a site, visibility of a site for signs, age of surrounding  buildings , traffic flows by time of day, traffic turning patterns, and  number of traffic lanes have critical implications to factors such as access,  number of cars that can be parked or room for future expansion.  Condition of building or rental space, visibility from the street, disabled  and delivery access, parking lot condition and size, and interior  decor  must also be considered. A site that is functional today may not be  functional tomorrow as your business expands. As an area grows, you  need to be able to access whether or not the existing streets, highways,  and intersections will accommodate the expanded vehicular traffic. The  close proximity of older buildings may suggest that furniture development  is unlikely or that the area is suffering from economic decline. Close  attention to zoning must be paid when evaluating the physical features of  a proposed site.

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