Description
A retail marketing strategy involves selecting a retail market segment (i.e. the carefully/exactly identified group of final customers that lead to a retailer seeks to satisfy) and then implementing the corresponding retail marketing mix(i.e. a combination of product, price, promotion and distribution strategies to satisfy the market). The choice of a store location has a profound effect on the entire business life of a retail operation. A bad choice might lead to a failure whereas a rightly located store guarantees success.
Factors affecting location & strategy of modern trade outlets
Factors affecting location & strategy of modern trade outlets Table of Contents
INTRODUCTION ............................................................................................. 3 BACKGROUND ............................................................................................... 4 NEED AND SCOPE OF THE STUDY ................................................................... 5 RESEARCH METHODOLOGY............................................................................ 6 LOCATION STRATEGIES .................................................................................. 7 Important Factors ....................................................................................... 7 Type of Business ...................................................................................... 7 Type of Goods sold .................................................................................. 7 Demographics .......................................................................................... 8 Competition ............................................................................................. 9 Traffic Patterns ........................................................................................ 9 Merchant Associations ........................................................................... 10 City By-Laws, Zoning and Planning ......................................................... 10 Location Costs ........................................................................................ 11 Special Consideration............................................................................. 11 Trade Area Analysis .................................................................................. 12 Types of trading area ............................................................................. 12 CONCLUSIONS.............................................................................................. 13 REFERENCES................................................................................................. 14
2
Factors affecting location & strategy of modern trade outlets INTRODUCTION
Retailing consists of the business activities involved in the sale of goods and services to consumer for their personal, family or household use. It is the final stage in the channel of distribution, which comprises all of the businesses and people involved in the physical movement and transfer of ownership of goods and services from producer to consumer. Retailing involves interpreting the needs of the consumer, developing good assortment of merchandise and presenting them in an effective manner to find it easy and effective to buy. Retailing differs from marketing in the sense that it refers to only those activities, which are related to marketing goods and/or services to final consumers. Whereas American Marketing Association defines retailing as ‘the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual and organisational objectives.’ A retail marketing strategy involves selecting a retail market segment (i.e. the carefully/exactly identified group of final customers that lead to a retailer seeks to satisfy) and then implementing the corresponding retail marketing mix(i.e. a combination of product, price, promotion and distribution strategies to satisfy the market). The choice of a store location has a profound effect on the entire business life of a retail operation. A bad choice might lead to a failure whereas a rightly located store guarantees success. The study is an attempt to aid a retailer to choose a location for his store. These decisions include the demographics, economic and traffic analyses. It also offers questions the retailer must ask before making the all important decision of choosing the store location. The first step in picking a store sight is defining one’s business in the broadest sense and determines the company’s long term objectives. Many owners believe that it is enough to just know about the demographics of the population, about the kind of competition they would face and about the traffic patterns they are considering. However, before making a commitment to moving in and setting up, one must carefully check several other aspects of the location to help insure your satisfaction with the site you have chosen.
3
Factors affecting location & strategy of modern trade outlets BACKGROUND
Indian retail industry is the largest industry in India, with an employment of around 8% and contributing to over 10% of the country's GDP. Retail industry in India is expected to rise 25% yearly being driven by strong income growth, changing lifestyles, and favourable demographic patterns. The Indian retail market, which is the fifth largest retail destination globally, has been ranked the second most attractive emerging market for investment after Vietnam in the retail sector by AT Kearney's seventh annual Global Retail Development Index (GRDI), in 2008. However, the retail industry is also continuously changing as the global and regional economies transform. Hence though the opportunities are huge, the challenges are also equally enormous. The retail boom will also face stiff competition from the 12 million mom-and-pop stores, which are easily accessible and approachable and provide services like free home delivery, credit, etc. Also, competition is going to increase with a number of retail giants (like Wal-Mart) wanting to enter the Indian market. Shopping in India has witnessed a revolution with the change in the consumer buying behaviour and the whole format of shopping also altering. Industry of retail in India which has become modern can be seen from the fact that there are multi- stored malls, huge shopping centres, and sprawling complexes which offer food, shopping, and entertainment all under the same roof.
India retail industry is expanding itself most aggressively; as a result a great demand for real estate is being created. Indian retailers preferred means of expansion is to expand to other regions and to increase the number of their outlets in a city. It is expected that by 2010, India may have 600 new shopping centres.
Thus there is a huge potential for growth for the organised retail sector in India in the years to come.
4
Factors affecting location & strategy of modern trade outlets NEED AND SCOPE OF THE STUDY
With such a huge potential for growth in the retail sector in the years to come, the retail owners would want to make best use of the opportunities at hand.
The Most Important ‘P’ in Retailing
The choice of a store location has a profound effect on the entire business life of a retail operation. It is in the best interests of these store owners to know what factors go into the decision of choosing a store location and what product assortment to choose to suit their customers. The study would reveal all these factors and help the owner to make an informed decision. Store location is important to any retailer because: ? While retailer can change his merchandise mix, adjust prices, improve communication with consumers and offer better service, once the store comes into existence, it is very difficult to change the location ? The store must be situated at a location which optimises exposure to target consumers and is accessible on foot, by car or by transit ? ? The store should generate enough revenue per square foot of its area so that all the costs incurred in the store can be recovered It is also necessary for the store to turn profits within a reasonable amount of time in order to justify the setting up of the store at the given location in the first place
5
Factors affecting location & strategy of modern trade outlets RESEARCH METHODOLOGY
The method of research involved collection of data from 2 sources: ? ? Primary sources Secondary sources
The primary sources of data were: 1. The store managers at the retail outlets 2. The regional manager 3. Store employees The method of data collection were a. Structured Direct Interviews b. In-Depth Interviews (Personal and Telephonic)
The secondary source of data was the internet. These included various websites, annual report of the companies, articles in the newspaper as well as magazines. These secondary sources were studied to gather information about the locations of the existing retail stores, the demographics of the people around the area and the store’s product mix. Data regarding the product assortment mix at the different stores were also collected by observations at the stores.
6
Factors affecting location & strategy of modern trade outlets LOCATION STRATEGIES
Where do we want the store? How big will the store be? Who are my customers? What will be my product assortment? The above are a few important questions that a retailer needs to find answers for. The following are the important factors which when well established would give answers to the questions mentioned above:
Important Factors
Type of Business
Before going out on a search for a location, a retail outlet owner must first define the type of business that he will be carrying out. These may include the range of products that are present in his store, the storage space required, the office space required, etc. All the factors that would affect customer’s perception of the store must be well decided in advance. These may include display space, aisles, aisle width, storage space, operating space, parking area, etc. Once it is decided as to what the place should look like to a customer, space constraints will be clear to any retailer.
Type of Goods sold
One of the most important factor on which choice of a retail store location depends is the type of goods that a store sells. Consumers tend to group products into three major categories: Convenience, Shopping and Speciality goods.
Convenience Goods – Consumer goods mean low unit price, purchased frequently, little
selling effort, bought by habit and sold in numerous outlets. E.g. candy bars cigarettes, milk, etc. For stores handling these goods, the quantity of traffic is most important. The corner of an intersection, which offers two distinct traffic streams and a large window display area, is usually a better site than the middle of a block. Greater the automobile traffic, greater is the sales in these shops.
7
Factors affecting location & strategy of modern trade outlets
Shopping goods – Shopping goods usually mean high unit price, purchased infrequently,
more intensive selling effort usually required on the part of the store owner, price and features compared, and sold in selectively franchised outlets e.g. Men’s suits, automobiles and furniture. For these stores, the quality of traffic is more important. While convenience goods are purchased by nearly everyone, certain kinds of shopping goods are purchased by only a certain segment of shoppers. Moreover, it is sometimes the character of the retail establishment rather than the type of goods that governs the selection of the site. In many cases, buyers of shopping goods like to compare the items in several stores by travelling only a minimum distance. As a result, stores offering complimentary items tend to locate close to one another. A retailer trading in shopping goods has a much wider trading area. Without a heavily trafficked location – but with the help of adequate promotion – this more expensive type of store can generate its own traffic. In this case, a location with low traffic density but easy accessibility from a residential area is a satisfactory site. The consumer buys these goods infrequently and deliberately plans these purchases.
Speciality goods – These mean high unit price – although price is not a purchase
consideration, brought infrequently, requires a special effort on the part of the consumer to make the purchase, no substitutes considered, and sold in exclusively franchised outlets. E.g. precious jewellery, expensive perfume, etc. Stores catering to these types of customers may use isolated location because they generate their own consumer traffic. Stores carrying speciality goods that are complimentary to certain other kinds of shopping goods may desire to locate close to shopping goods stores. In general, the speciality goods retailer should locate in the type of neighbourhood where the adjacent stores and other establishments are compatible with his or her operation.
Demographics
Another critical aspect of retail location selection understands your target market, both in terms of the target shopper and the geographic area surrounding the proposed location. Once the target market has been established i.e. gender, age and income level, one needs to gather information about –
8
Factors affecting location & strategy of modern trade outlets
? ? How far will the prospective customer travel to shop at your location? What are the statistical trends in the proposed location i.e. Population growth, income growth, aging trends etc and the impact these would have in the years to come? ? What are the employee demographics in the area? With labour shortages becoming an ongoing challenge for retailers, does the proposed location have access to potential full time and part-time employees?
Competition
Thorough knowledge of competition, both good and bad, in terms of other retail stores as well as the mom and pop stores in the chosen area is essential. Bad competitors are those that could have a negative impact on ones business. These could be the stores that sell the same products as you do, but at a discount. Good competitors are retail stores that draw the same target audience as yours. Examples could be retail “pockets’ that exist in cities – shopping destinations that attract larger number if customers by offering complimentary stores in close proximity to one another.
Traffic Patterns
It is also important to know how vehicle and pedestrian traffic patterns might affect business at a proposed location. Some things to look for include: ? ? ? ? Access to the store by traffic moving in both directions (both by car and on foot). Number of cars passing the store location. Number of pedestrians walking by the location Proximity to public transit.
It is also important to note which is the busy side of the street and the parking facilities that are available or that can be made available to the consumers.
9
Factors affecting location & strategy of modern trade outlets
Merchant Associations
The Retail Merchants Association is a trade association representing retailers and related businesses. Its mission is to enhance the image and profitability of member companies through advocacy, information and networking opportunities. Presence of a strong Merchant’s Association can offer a number of benefits to the retail operations: ? ? ? ? A strong Merchant’s Association can promote and maintain business in a given area. It can strengthen one’s business and save money through group advertising programs, group insurance plans and collective security measures. It can be effective in promoting stores using common themes or events and during holiday seasons. A strong Merchant’s Association can accomplish through group strengths what an individual store owner can’t even dream of – these could be funds to remodel shopping centres, extension of parking lots, installation of better lightings etc. City By-Laws, Zoning and Planning
A retail store’s long term success could also depend on understanding all the rules and plans that the municipality has laid down. Some things to consider in this regard are: ? ? Zoning – restrictions that may prevent one from doing specific renovations or leasehold improvements By-Laws – These are laws that could have an effect on retail operation. For e.g. is it permitted to use the space in front of the store for promotions? Are you restricted from operating during certain hours? Etc. lease agreement. Directly related to zoning is the intended length of stay and the lease agreement. Before a retailer gets into any sort of rigid lease agreement, he must get information on the future zoning plans and how long he plans to remain in the given location. The questions to be answered are: ? ? Do you plan to operate your business in the first location indefinitely or have you set a specific number as the limit? If your business is successful, will you be able to expand at this location?
10
Factors affecting location & strategy of modern trade outlets
? Is your lease flexible, so that you have an option to renew after a specified number of years? ? Does the agreement o Peg you to sales volume or is the rent just fixed? o Protect you as well as the property owner? o Put in writing the promises the property owner has made about repairs, construction and reconstruction, decoration, alteration and maintenance? o Contain prohibitions against sub-leasing?
Location Costs
Cost of setting up the retail store and running it also plays an important role in the location of the site. The important considerations here are: ? ? ? ? What is the cost of land in the particular location? How good are the infrastructure facilities around the region? Who pays for the building maintenance, utilities and security? If the location is remote, how much additional marketing will it take for customers to find you? ? ? ? ? How much is the average utility bill? Will the retailer be responsible for property taxes? What will be the procurement and transportation costs involved? Will you need to make any repairs, do any painting or remodelling to have the location fit your needs? One way to find out what would be an appropriate rent for a place would be by comparison of industry averages and map it to the current location. This would give a fair idea of what is the right price to pay for the chosen location.
Special Consideration
There might be some special consideration that may affect the choice of store location: ? Presence of adequate fire and police protection in the area.
11
Factors affecting location & strategy of modern trade outlets
? ? ? ? ? ? ? ? Availability of good sanitation facilities. Crime rate in the area. Presence of adequate lighting facilities in the parking lot and building exteriors. Presence of a good network of roads and transport system. Will the advertising expenses be much higher if a relatively remote location is chosen? Can the area serve as a source of supply of employees? Is the population density of the area sufficient? Is the trade heavily seasonal?
Trade Area Analysis
A trade area is the area that generates the maximum customers for the store Knowing the boundaries of the trade area helps the retailer estimate the number of customers that will visit the store. Understanding the trade area also gives key inputs to the retailer for the promotional and communication strategies to be adopted by him. A trade area typically consists of three parts: ? ? ? Primary Area Seconday Area Fringe Area
Primary trading area covers between 50 to 80 % of the store's customers.Secondary area covers contains the additional 15-25% of the store's customer.And the remaining part is covered by the fringe area. Types of trading area
Types of trading area can be classified into two as follows: Convenient Shopping Trade Area Based on ease of access to the products e.g. Groceries, Foodstuff from the store near to them or that require lesser time to travel
Comparison Shopping Trade Area Based on price, selection, quality and style The trade area will grow or shrink depending upon the product sold.
12
Factors affecting location & strategy of modern trade outlets CONCLUSIONS
Based on the research carried out, following are the conclusions that can be made about the factors affecting location of a retail outlet: ? ?
Marketers rely more on first hand information than on the results of scientifically carried out research Managers feel that the penetration of outlets especially the modern trade outlets is too low in India to justify the need for a detailed study
? ? ?
General knowledge of the demography and population are main requirements for decision making Finer details such as traffic flow, parking space, presence of other retailers are major contributors Frequent changes are made to layout and merchandising within the outlet to suit the local preferences and to meet the changes in demand
How far do people travel to shop? ? ? ? ? Grocery – 1.5 kms Cosmetics – 4.05 kms Books – 2.74 kms Apparel – 2.75 kms
We feel that it will take a few more years before managers start taking market research data more seriously for deciding the location of retail outlets. As long as there aren’t enough stores that cater to all the affluent and growing parts of the town, the decisions will be based more on judgement without backing of a research. As the competition for space and customers grows, the reliance on market study would increase.
13
Factors affecting location & strategy of modern trade outlets REFERENCES
? ? ?
? ?
Mr. Onil, Chief Manager, Food Bazaar Contact: 020-66201600 [Direct Interview] Mr. Vikram Chavan, Area Manager, Reliance Fresh [Telephonic Interview] Mr. Praveen, Store Manager, Reliance Fresh [Direct Interview]
www.rai.net.in www.retailmerchants.com
14
doc_655027240.docx
A retail marketing strategy involves selecting a retail market segment (i.e. the carefully/exactly identified group of final customers that lead to a retailer seeks to satisfy) and then implementing the corresponding retail marketing mix(i.e. a combination of product, price, promotion and distribution strategies to satisfy the market). The choice of a store location has a profound effect on the entire business life of a retail operation. A bad choice might lead to a failure whereas a rightly located store guarantees success.
Factors affecting location & strategy of modern trade outlets
Factors affecting location & strategy of modern trade outlets Table of Contents
INTRODUCTION ............................................................................................. 3 BACKGROUND ............................................................................................... 4 NEED AND SCOPE OF THE STUDY ................................................................... 5 RESEARCH METHODOLOGY............................................................................ 6 LOCATION STRATEGIES .................................................................................. 7 Important Factors ....................................................................................... 7 Type of Business ...................................................................................... 7 Type of Goods sold .................................................................................. 7 Demographics .......................................................................................... 8 Competition ............................................................................................. 9 Traffic Patterns ........................................................................................ 9 Merchant Associations ........................................................................... 10 City By-Laws, Zoning and Planning ......................................................... 10 Location Costs ........................................................................................ 11 Special Consideration............................................................................. 11 Trade Area Analysis .................................................................................. 12 Types of trading area ............................................................................. 12 CONCLUSIONS.............................................................................................. 13 REFERENCES................................................................................................. 14
2
Factors affecting location & strategy of modern trade outlets INTRODUCTION
Retailing consists of the business activities involved in the sale of goods and services to consumer for their personal, family or household use. It is the final stage in the channel of distribution, which comprises all of the businesses and people involved in the physical movement and transfer of ownership of goods and services from producer to consumer. Retailing involves interpreting the needs of the consumer, developing good assortment of merchandise and presenting them in an effective manner to find it easy and effective to buy. Retailing differs from marketing in the sense that it refers to only those activities, which are related to marketing goods and/or services to final consumers. Whereas American Marketing Association defines retailing as ‘the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual and organisational objectives.’ A retail marketing strategy involves selecting a retail market segment (i.e. the carefully/exactly identified group of final customers that lead to a retailer seeks to satisfy) and then implementing the corresponding retail marketing mix(i.e. a combination of product, price, promotion and distribution strategies to satisfy the market). The choice of a store location has a profound effect on the entire business life of a retail operation. A bad choice might lead to a failure whereas a rightly located store guarantees success. The study is an attempt to aid a retailer to choose a location for his store. These decisions include the demographics, economic and traffic analyses. It also offers questions the retailer must ask before making the all important decision of choosing the store location. The first step in picking a store sight is defining one’s business in the broadest sense and determines the company’s long term objectives. Many owners believe that it is enough to just know about the demographics of the population, about the kind of competition they would face and about the traffic patterns they are considering. However, before making a commitment to moving in and setting up, one must carefully check several other aspects of the location to help insure your satisfaction with the site you have chosen.
3
Factors affecting location & strategy of modern trade outlets BACKGROUND
Indian retail industry is the largest industry in India, with an employment of around 8% and contributing to over 10% of the country's GDP. Retail industry in India is expected to rise 25% yearly being driven by strong income growth, changing lifestyles, and favourable demographic patterns. The Indian retail market, which is the fifth largest retail destination globally, has been ranked the second most attractive emerging market for investment after Vietnam in the retail sector by AT Kearney's seventh annual Global Retail Development Index (GRDI), in 2008. However, the retail industry is also continuously changing as the global and regional economies transform. Hence though the opportunities are huge, the challenges are also equally enormous. The retail boom will also face stiff competition from the 12 million mom-and-pop stores, which are easily accessible and approachable and provide services like free home delivery, credit, etc. Also, competition is going to increase with a number of retail giants (like Wal-Mart) wanting to enter the Indian market. Shopping in India has witnessed a revolution with the change in the consumer buying behaviour and the whole format of shopping also altering. Industry of retail in India which has become modern can be seen from the fact that there are multi- stored malls, huge shopping centres, and sprawling complexes which offer food, shopping, and entertainment all under the same roof.
India retail industry is expanding itself most aggressively; as a result a great demand for real estate is being created. Indian retailers preferred means of expansion is to expand to other regions and to increase the number of their outlets in a city. It is expected that by 2010, India may have 600 new shopping centres.
Thus there is a huge potential for growth for the organised retail sector in India in the years to come.
4
Factors affecting location & strategy of modern trade outlets NEED AND SCOPE OF THE STUDY
With such a huge potential for growth in the retail sector in the years to come, the retail owners would want to make best use of the opportunities at hand.
The Most Important ‘P’ in Retailing
The choice of a store location has a profound effect on the entire business life of a retail operation. It is in the best interests of these store owners to know what factors go into the decision of choosing a store location and what product assortment to choose to suit their customers. The study would reveal all these factors and help the owner to make an informed decision. Store location is important to any retailer because: ? While retailer can change his merchandise mix, adjust prices, improve communication with consumers and offer better service, once the store comes into existence, it is very difficult to change the location ? The store must be situated at a location which optimises exposure to target consumers and is accessible on foot, by car or by transit ? ? The store should generate enough revenue per square foot of its area so that all the costs incurred in the store can be recovered It is also necessary for the store to turn profits within a reasonable amount of time in order to justify the setting up of the store at the given location in the first place
5
Factors affecting location & strategy of modern trade outlets RESEARCH METHODOLOGY
The method of research involved collection of data from 2 sources: ? ? Primary sources Secondary sources
The primary sources of data were: 1. The store managers at the retail outlets 2. The regional manager 3. Store employees The method of data collection were a. Structured Direct Interviews b. In-Depth Interviews (Personal and Telephonic)
The secondary source of data was the internet. These included various websites, annual report of the companies, articles in the newspaper as well as magazines. These secondary sources were studied to gather information about the locations of the existing retail stores, the demographics of the people around the area and the store’s product mix. Data regarding the product assortment mix at the different stores were also collected by observations at the stores.
6
Factors affecting location & strategy of modern trade outlets LOCATION STRATEGIES
Where do we want the store? How big will the store be? Who are my customers? What will be my product assortment? The above are a few important questions that a retailer needs to find answers for. The following are the important factors which when well established would give answers to the questions mentioned above:
Important Factors
Type of Business
Before going out on a search for a location, a retail outlet owner must first define the type of business that he will be carrying out. These may include the range of products that are present in his store, the storage space required, the office space required, etc. All the factors that would affect customer’s perception of the store must be well decided in advance. These may include display space, aisles, aisle width, storage space, operating space, parking area, etc. Once it is decided as to what the place should look like to a customer, space constraints will be clear to any retailer.
Type of Goods sold
One of the most important factor on which choice of a retail store location depends is the type of goods that a store sells. Consumers tend to group products into three major categories: Convenience, Shopping and Speciality goods.
Convenience Goods – Consumer goods mean low unit price, purchased frequently, little
selling effort, bought by habit and sold in numerous outlets. E.g. candy bars cigarettes, milk, etc. For stores handling these goods, the quantity of traffic is most important. The corner of an intersection, which offers two distinct traffic streams and a large window display area, is usually a better site than the middle of a block. Greater the automobile traffic, greater is the sales in these shops.
7
Factors affecting location & strategy of modern trade outlets
Shopping goods – Shopping goods usually mean high unit price, purchased infrequently,
more intensive selling effort usually required on the part of the store owner, price and features compared, and sold in selectively franchised outlets e.g. Men’s suits, automobiles and furniture. For these stores, the quality of traffic is more important. While convenience goods are purchased by nearly everyone, certain kinds of shopping goods are purchased by only a certain segment of shoppers. Moreover, it is sometimes the character of the retail establishment rather than the type of goods that governs the selection of the site. In many cases, buyers of shopping goods like to compare the items in several stores by travelling only a minimum distance. As a result, stores offering complimentary items tend to locate close to one another. A retailer trading in shopping goods has a much wider trading area. Without a heavily trafficked location – but with the help of adequate promotion – this more expensive type of store can generate its own traffic. In this case, a location with low traffic density but easy accessibility from a residential area is a satisfactory site. The consumer buys these goods infrequently and deliberately plans these purchases.
Speciality goods – These mean high unit price – although price is not a purchase
consideration, brought infrequently, requires a special effort on the part of the consumer to make the purchase, no substitutes considered, and sold in exclusively franchised outlets. E.g. precious jewellery, expensive perfume, etc. Stores catering to these types of customers may use isolated location because they generate their own consumer traffic. Stores carrying speciality goods that are complimentary to certain other kinds of shopping goods may desire to locate close to shopping goods stores. In general, the speciality goods retailer should locate in the type of neighbourhood where the adjacent stores and other establishments are compatible with his or her operation.
Demographics
Another critical aspect of retail location selection understands your target market, both in terms of the target shopper and the geographic area surrounding the proposed location. Once the target market has been established i.e. gender, age and income level, one needs to gather information about –
8
Factors affecting location & strategy of modern trade outlets
? ? How far will the prospective customer travel to shop at your location? What are the statistical trends in the proposed location i.e. Population growth, income growth, aging trends etc and the impact these would have in the years to come? ? What are the employee demographics in the area? With labour shortages becoming an ongoing challenge for retailers, does the proposed location have access to potential full time and part-time employees?
Competition
Thorough knowledge of competition, both good and bad, in terms of other retail stores as well as the mom and pop stores in the chosen area is essential. Bad competitors are those that could have a negative impact on ones business. These could be the stores that sell the same products as you do, but at a discount. Good competitors are retail stores that draw the same target audience as yours. Examples could be retail “pockets’ that exist in cities – shopping destinations that attract larger number if customers by offering complimentary stores in close proximity to one another.
Traffic Patterns
It is also important to know how vehicle and pedestrian traffic patterns might affect business at a proposed location. Some things to look for include: ? ? ? ? Access to the store by traffic moving in both directions (both by car and on foot). Number of cars passing the store location. Number of pedestrians walking by the location Proximity to public transit.
It is also important to note which is the busy side of the street and the parking facilities that are available or that can be made available to the consumers.
9
Factors affecting location & strategy of modern trade outlets
Merchant Associations
The Retail Merchants Association is a trade association representing retailers and related businesses. Its mission is to enhance the image and profitability of member companies through advocacy, information and networking opportunities. Presence of a strong Merchant’s Association can offer a number of benefits to the retail operations: ? ? ? ? A strong Merchant’s Association can promote and maintain business in a given area. It can strengthen one’s business and save money through group advertising programs, group insurance plans and collective security measures. It can be effective in promoting stores using common themes or events and during holiday seasons. A strong Merchant’s Association can accomplish through group strengths what an individual store owner can’t even dream of – these could be funds to remodel shopping centres, extension of parking lots, installation of better lightings etc. City By-Laws, Zoning and Planning
A retail store’s long term success could also depend on understanding all the rules and plans that the municipality has laid down. Some things to consider in this regard are: ? ? Zoning – restrictions that may prevent one from doing specific renovations or leasehold improvements By-Laws – These are laws that could have an effect on retail operation. For e.g. is it permitted to use the space in front of the store for promotions? Are you restricted from operating during certain hours? Etc. lease agreement. Directly related to zoning is the intended length of stay and the lease agreement. Before a retailer gets into any sort of rigid lease agreement, he must get information on the future zoning plans and how long he plans to remain in the given location. The questions to be answered are: ? ? Do you plan to operate your business in the first location indefinitely or have you set a specific number as the limit? If your business is successful, will you be able to expand at this location?
10
Factors affecting location & strategy of modern trade outlets
? Is your lease flexible, so that you have an option to renew after a specified number of years? ? Does the agreement o Peg you to sales volume or is the rent just fixed? o Protect you as well as the property owner? o Put in writing the promises the property owner has made about repairs, construction and reconstruction, decoration, alteration and maintenance? o Contain prohibitions against sub-leasing?
Location Costs
Cost of setting up the retail store and running it also plays an important role in the location of the site. The important considerations here are: ? ? ? ? What is the cost of land in the particular location? How good are the infrastructure facilities around the region? Who pays for the building maintenance, utilities and security? If the location is remote, how much additional marketing will it take for customers to find you? ? ? ? ? How much is the average utility bill? Will the retailer be responsible for property taxes? What will be the procurement and transportation costs involved? Will you need to make any repairs, do any painting or remodelling to have the location fit your needs? One way to find out what would be an appropriate rent for a place would be by comparison of industry averages and map it to the current location. This would give a fair idea of what is the right price to pay for the chosen location.
Special Consideration
There might be some special consideration that may affect the choice of store location: ? Presence of adequate fire and police protection in the area.
11
Factors affecting location & strategy of modern trade outlets
? ? ? ? ? ? ? ? Availability of good sanitation facilities. Crime rate in the area. Presence of adequate lighting facilities in the parking lot and building exteriors. Presence of a good network of roads and transport system. Will the advertising expenses be much higher if a relatively remote location is chosen? Can the area serve as a source of supply of employees? Is the population density of the area sufficient? Is the trade heavily seasonal?
Trade Area Analysis
A trade area is the area that generates the maximum customers for the store Knowing the boundaries of the trade area helps the retailer estimate the number of customers that will visit the store. Understanding the trade area also gives key inputs to the retailer for the promotional and communication strategies to be adopted by him. A trade area typically consists of three parts: ? ? ? Primary Area Seconday Area Fringe Area
Primary trading area covers between 50 to 80 % of the store's customers.Secondary area covers contains the additional 15-25% of the store's customer.And the remaining part is covered by the fringe area. Types of trading area
Types of trading area can be classified into two as follows: Convenient Shopping Trade Area Based on ease of access to the products e.g. Groceries, Foodstuff from the store near to them or that require lesser time to travel
Comparison Shopping Trade Area Based on price, selection, quality and style The trade area will grow or shrink depending upon the product sold.
12
Factors affecting location & strategy of modern trade outlets CONCLUSIONS
Based on the research carried out, following are the conclusions that can be made about the factors affecting location of a retail outlet: ? ?
Marketers rely more on first hand information than on the results of scientifically carried out research Managers feel that the penetration of outlets especially the modern trade outlets is too low in India to justify the need for a detailed study
? ? ?
General knowledge of the demography and population are main requirements for decision making Finer details such as traffic flow, parking space, presence of other retailers are major contributors Frequent changes are made to layout and merchandising within the outlet to suit the local preferences and to meet the changes in demand
How far do people travel to shop? ? ? ? ? Grocery – 1.5 kms Cosmetics – 4.05 kms Books – 2.74 kms Apparel – 2.75 kms
We feel that it will take a few more years before managers start taking market research data more seriously for deciding the location of retail outlets. As long as there aren’t enough stores that cater to all the affluent and growing parts of the town, the decisions will be based more on judgement without backing of a research. As the competition for space and customers grows, the reliance on market study would increase.
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Factors affecting location & strategy of modern trade outlets REFERENCES
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Mr. Onil, Chief Manager, Food Bazaar Contact: 020-66201600 [Direct Interview] Mr. Vikram Chavan, Area Manager, Reliance Fresh [Telephonic Interview] Mr. Praveen, Store Manager, Reliance Fresh [Direct Interview]
www.rai.net.in www.retailmerchants.com
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