Location Strategy: Site Selection McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies,...
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Transcript of Location Strategy: Site Selection McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies,...
Location Strategy:
Site Selection
McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
7-2
Questions
■ What types of locations are available to retailers?
■ What are the relative advantages and disadvantages of each location type?
■ What criteria are used to evaluate the attractiveness of a specific site?
■ What are the different types and terms of a retail lease?
7-3
Steps in the Location Planning Process
Evaluate Alternative Trading Areas
Determine the Type of Location Desired
Select the Specific Site within the Desired Location
7-4
Determining the Type of Location Desired
■ Central Business District
■ Shopping Centers Neighborhood / Community
Shopping Centers Power Centers Enclosed Malls Lifestyle Centers
■ Freestanding Site
7-5
Tradeoff Between Location Types
Rent
Traffic
There are relative advantages and disadvantages to consider with each location.
7-6
Types of Locations
7-7
Central Business District (CBD)
The traditional downtown area of a city or town
■ Draws people into areas during business hours■ Pedestrian traffic■ Hub of public transportation■ Residents
■ Potential urban decay■ Higher security costs■ Parking is poor■ Evenings and weekends are slow
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Spike Mafford/Getty Images
7-8
Freestanding Site
■ Location for individual store unconnected to other retailer
■ Advantages: Convenience High traffic and visibility Separation from competition Fewer restrictions
■ Disadvantages: Lack of synergy with other
stores Little pedestrian traffic Can have higher occupancy costs
The McGraw-Hill Companies, Inc./Andrew Resek, photographer
7-9
Shopping Centers
A group of retail and other commercial establishments that are planned, developed, owned, and managedas a single property..
Advantages:•Located where the people are•Synergy with other stores•Shared operating costs
Disadvantages:•High rent•Limited flexibility•Competition intense The McGraw-Hill Companies, Inc./Andrew Resek, photographer
7-10
Types of Shopping Centers
■ Neighborhood and Community Centers (Strip Centers)
■ Power Centers■ Enclosed Malls■ Lifestyle Centers
7-11
Neighborhood and Community Centers
Attached row of stores
Managed as a unit
Onsite parking
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Usually anchored by a supermarket or discountStore.
7-12
Power Centers
Shopping centers that consist primarily of collections of big-box retail stores such as discount stores (Target), off-price stores (Marshall’s), warehouse clubs (Costco), and category specialists (Lowe’s, Best Buy, Dick’s)
■ Open air set up■ Limited small specialty stores■ Many located near enclosed malls
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7-13
Shopping Malls
■ Enclosed climate controlled, shopping centers with retail stores on both sides of an enclosed walkway.
■ Parking provided around
perimeter. ■ Anchored by major
department stores■ Have seen decline in
popularity in recent
years. Why? The South China Mall in Dongguan, China
7-14
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■ Strategies?
Make shopping more enjoyable (e.g., sofas, children’s playing areas) Great food destination (fast food and full-service restaurants) Tailor make its offering to cater to changing demographics (e.g.,
repositioning older shopping centers for Hispanic markets) Mall renovation and redevelopment
7-15
Lifestyle Centers
■ Usually located in affluent residential neighborhoods
■ Includes upscale chain specialty stores
■ Open-air configuration
■ Design ambience and amenities
■ Designed to resemble the main streets in small town
■ Restaurants and often a cinema or other entertainment
7-16
Stores and Restaurants at Lifestyle Centers
Starbucks
Panera BreadBed Bath & Beyond
Ann Taylor
Victoria’s Secret
Eddie Bauer
Coldwater Creek
Banana RepublicThe Gap
Restoration Hardware
Williams-Sonoma
Pottery Barn
Barnes & Noble/Borders
Dick’s Sporting Goods
AeropostaleHallmark
Johnny Rockets
7-17
Selecting a Specific Site: Criteria
Accessibility
The degree of ease with which a customer may get into and out of the site
Visibility
Store sites ability to be seen by pedestrian and vehicular traffic
Store Composition
Evaluate the number and size of stores in the area, as well as their affinity
Parking facilities
Size and shape of the site
Age and condition of the site
Occupancy costs and terms of the lease
Maintenance costs
Zoning compatibility
8-18
Traffic Flow and Accessibility
When traffic is greater, more customers shop
Good for convenience retailers
Not necessary for destination retailers
Too much can impede access to store
Accessibility to store is as important as traffic flow
PhotoLink/Getty Images
7-19
Selecting a Specific Site:
Additional Considerations for Shopping Centers
• What is the trading area of the shopping center?
• Is the type of center appropriate for the store?
• What is the occupancy rate?
• Is the site adjacent to the anchor tenants?
• Will adjacent stores complement or compete with your store?
• What are the restrictions on the retailer’s strategy?
8-20
Adjacent Tenants
■ Complementary (also competing) adjacent retailers build traffic
■ What other retailers would Save-a-Lot want to be located near?
Big Lot, Family Dollar, or even Wal-Mart All target price-sensitive consumers
■ In an enclosed mall, what retailers would Abercrombie & Fitch want to be located near?
American Eagle Outfitter, Ann Taylor, Body Shop, Electronic Boutique?
8-21
Types of Leases: Percentage Lease
Percentage leases – lease based on a % of sales.
Retailers also typically pay a maintenance fee based on a percentage of their square footage of leased space.
Most malls use some form of percentage lease.
May have a maximum or minimum threshold
8-22
Types of Leases: Fixed Rate Leases
Fixed Rate Leases - used by community and neighborhood centers.
-Retailer pays a fixed amount per month over the life of the lease.
-Not as popular as percentage leases
8-23
Terms of the Lease
■ Prohibited Use Clause
Limits the landlord from leasing to certain tenants.
Some tenants take up parking spaces and don’t bring in shoppers: bowling alley, skating rink, meeting hall, dentist, or real estate office
Some tenants could harm the shopping center’s wholesome image: bars, pool halls, game parlors, off-track betting establishments, massage parlors and pornography retailers
8-24
■ Exclusive Use Clause
Prohibits the landlord from leasing to retailers selling competing merchandise
Specify no outparcels Specify if certain retailer leaves center, they can terminate lease
■ Escape Clause
Allows the retailer to terminate its lease if sales don’treach a certain level after a specified number of years, or if a specific co-tenant in the center terminates its lease
Terms of the Lease