Some retailers get lucky and select good locations, but many aren’t so lucky, and they select poor locations. Too often entrepreneurs, who are owners of their own business, believe that they can make their business successful despite a poor store location. They often fail. As a retailer in today’s multifaceted market, selecting the location for your store is the most important decision you will make in your efforts to achieve success in retailing.
To better grasp the essential elements of a retail location selection, three key steps are involved:
1. Know your market position
The first step in arriving at a decision making process is to identify the markets attractive to a retailer. This is important as the retailer needs to understand the market well, especially in a country like China, where consumer behavior varies city by city. A market analysis will include a careful evaluation of your:
- Industry and product: The industry aspect of your market analysis will show your specific types of business and the number of existing similar businesses. In addition, you will also need to know how long your type of business has been around; and whether your business type is a variation of an old concept or a niche in a general concept.
- Know your customers: Use the demographics to identify the needs of your products and services. Age group, gender, ethnic background, martial status, household type and income level can be used to justify the market potential and determine the appropriate products and services offering.
- Get to know your competitors: Discover the existing sales/market captured by your competitors to determine if there is an excess demands. Also survey your competitors’ location in realtd to regional exposure, visibility excellence, and accessibility.
2. Evaluate the market potential
In order to determine the market potential, the retailer needs to take into considerations of various elements.
- Demographic features of the population: understanding the features of the population is integral to develop a retail marketing strategy. The retailer also needs to understand the level of literacy and the level of education in the population.
- The characteristics of the households in the areas: Retailers need to have a clear understanding of the average household income and the distribution of this income in the area. This is very essential as the level of income largely determines the kind of retail facilities required.
- Competitor impacts: While determining the market potential, it is necessary to check the compatibility of the retailer store with the other competitors in the area. It is necessary to try and evaluate their strengths and weakness, to know the size of store and the sales productivity.
- Laws and regulations: Before opening a retail store in a region, it’s essential to have a good understanding of the laws and regulation for opening a retail shop in the area. Various permission which are needed, the hours for which the store can operated, the minimum wages to be offered to the persons working, the holiday required, etc. can affect the profitability of the store.
- Trade area analysis: An integral part of determine the market potential is the analysis of the trade areas.
3. Identify alternative sites and finalize decision making
After having determined the market potential and taking a decision on the store, a retailer has to select the site to locate the store. There are various factors to consider when making decision.
- Traffic flow: Traffic refers to both pedestrian and vehicular traffic. The traffic that passes the potential site is an important determinant of the potential sales that can be generated from that store
- Accessibility and visibility: Accessibility of the market is define in terms of availability of public transportation and parking space to the potential store. When considering visibility, look at the location from the customer’s view point. Can the store be seen from the main flow of traffic? Will your sign be easily seen? In many cases, the better visibility your retail store has, the less advertising needed.
- To buy or lease: An important factor to be considered before taking decision on the site is to buy or lease it. If the store is to be leased, then the terms of the lease will have to be studied carefully.
Finding new locations that are a good fit for your brand can be challenging, but with the right steps you can ensure a higher success rate. The larger your network, the more challenging this can be, which means what you might actually need to be concentrating on is network optimization, but in the short term following these steps will help you make big improvements to your store location decision process.