MGT 3230 Lecture Notes - Census Tract, Census Geographic Units Of Canada, Environics
Chapter 5: Retail location Strategy
LOCATION DECISIONS BASED ON 4 LEVELS
EVALUATING SPECIFIC AREAS FOR LOCATIONS
• Factors to consider:
o Economic Conditions
o Competition
o Strategic Fit
o Costs of operating
FACTORS AFFECTING PROFIT POTENTIAL WITHIN A REGION OR TRADE AREA
ECONOMIC CONDITIONS
• Growth of population
• Employment
COMPETITION
• Level of Competition
o Saturated Trade Area
o Understored Trade Area
o Overstored Trade Area
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STRATEGIC FIT
• Consumers that are in the retailers target market
• Attracted to the retailers offerings and interested in patronizing its stores
• Right Demographic characteristics
• Right Lifestyle profiles
OPERATING COSTS
Can vary due to:
• Proximity to distribution support
• Local, Provincial legal and regulatory environment
• Example – Section 63 of Quebec Language Charter
NUMBER OF STORES IN AN AREA
• Best location in each CMA (Census Metropolitan Area)
• Larger CMA’s a support ore stores
Trade-off between:
• Lower operating costs and Cannibalization
ECONOMIES OF SCALE VERSUS CANNIBALIZATION
• Oe est loatio is’t the aser
• Most chains plan to go into an area with a network of stores
• Promotion and distribution economies of scale can be achieved with multiple locations
The question is: What is the best number of stores to have in an area? The answer depends on
who owns the stores.
• for company-owned stores, the objective is to maximize profits for the entire chain
• the retailer would continue to open stores as long as the marginal revenues achieved by
opening a new store are greater than the marginal costs
EVALUATING A SITE FOR LOCATING A RETAIL STORE
Retailers consider 3 factors:
• Characteristics of the site.
• Characteristics of the trading area for a store at this site.
• Estimated potential sales that can be generated by a store at this site.
FACTORS AFFECTING THE ATTRACTIVENESS OF A SITE
Four site characteristics to consider:
• Traffic Flow and Accessibility (ease of vehicle access, transit nearby, street congestion)
• Location Characteristics (parking, size/shape of store. Adjacent retailers, access to
entrance/exit)
• Restrictions (zoning, signage, restrictions on tenant site, safety code restrictions)
• Costs (rental fee, length of lease, advertising, taxes)
TRADE AREA CHARACTERISTICS
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Document Summary
Evaluating specific areas for locations: factors to consider, economic conditions, competition, strategic fit, costs of operating. Factors affecting profit potential within a region or trade area. Level of competition: saturated trade area, understored trade area, overstored trade area. Strategic fit: consumers that are in the retailers target market, attracted to the retailers offerings and interested in patronizing its stores, right demographic characteristics, right lifestyle profiles. Can vary due to: proximity to distribution support. Local, provincial legal and regulatory environment: example section 63 of quebec language charter. Number of stores in an area: best location in each cma (census metropolitan area) Economies of scale versus cannibalization: o(cid:374)e (cid:271)est lo(cid:272)atio(cid:374) is(cid:374)"t the a(cid:374)s(cid:449)er, most chains plan to go into an area with a network of stores, promotion and distribution economies of scale can be achieved with multiple locations. Evaluating a site for locating a retail store.
