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RMG 200 (57)
Brent Barr (19)

ch 5 part 1

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Ryerson University
Retail Management
RMG 200
Brent Barr

Ch 5: Retail Locations Strategy – Trade Area Decisions and Site Assessment Reasons Why Store Location is Important  Prime consideration in customer’s store choice  Location can be used to develop a sustainable competitive advantage because location is harder to change compared to pricing and service  Region: in retail location analysis, refers to the part of the country, a particular city, or Census Metropolitan Area (CMA)  Trade area: a geographic sector that contains potential customers for a particular retailer or shopping centre FACTORS AFFECTING THE DEMAND FOR AREGION OR TRADE AREA 1. Economies of Scale Versus Cannibalization Company-owned stores Franchise Operations  Objective is to maximize profits for  Each individual franchise owner wants entire chain to maximize his or her profits  Retailer continue to open stores as long  The franchisors grant their franchisees as marginal revenues archived by an exclusive geographic territory so that opening a new store are greater than other stores under the same franchise do marginal costs not compete directly with them  Better to have two separate store  Franchisor: the owner of a franchise in a producing $75 million than one store franchise agreement producing $100 million  Franchisee: the owner of an individual store in a franchise agreement 2. Demographic and Lifestyle Characteristics  Growing population  Size and composition of households in an area  Lifestyle characteristics of population, depending on target maret(s) 3. Business Climate  Market’s employment trends – high level of employment = high purchasing power  Growth must be also diversified in a number of industries 4. Competition Saturated  A trade area that offers customers a good selection of goods and services, trade area while allowing competing retailers to make good profits  Retailers who believe they can offer customers a superior retail format in terms of merchandise, pricing or service may find these areas attractive (eg. McDonalds) Understored  An area that has few stores selling a specific good or service to satisfy the trade area needs of the population Overstored  An area having so many stores selling a specific good or service that trade area some stores will fail 5. Span of Managerial Control  Some retailers focus on certain geographic regions or trade areas because: o They can maintain loyal customer base by remaining a regional chain o They are well known throughout the area o Merchandising, pricing, promotional strategies specifically target needs of a regional market rather than national market o Management team can have greater locus of control over regional market LOCATION AND RETAIL STRATEGY 1. Shopping Behaviour of Consumers in Retailer’s Target Market Three types of shopping situation are: Convenience Shopping Comparison Shopping Specialty Shopping  Consumers are primarily  Consumers have general  Consumers know what concerned with idea about the type of they want and do not minimizing their effort product or service they want a substitute to get the product or want, but do not have a  Brand loyal/retailer service they want strong preference for a loyal  They are indifferent brand, model, or specific about which brands to retailer to patronize buy or the retailer’s image and are somewhat insensitive to price  Convenience stores,  Furniture, appliance,  Purchasing expensive drugstores, fast food apparel, consumer designer brand perfume, restaurants, electronics, hand tools adopting dog from supermarkets, full line and cameras animal shelter, buying discount stores  Furniture stores along dress made by specific Dundas, enclosed malls, designer category specialists  Destination store: a retail store in which the merchandise, selection, presentation, pricing, or other unique feature acts as a magnet for customers 2. Density of Target Market  A good location has many people in the target market that are drawn to it  It is not as important to have high customer density near a store that sells specialty merchandise because people are willing to search out this type of merchandise 3. Uniqueness of Retail Offering  Eg. Bass Pro Shop provide unique merchandise assortment and store atmosphere so customers will travel to wherever the store is located TYPES OF LOCATION 1. Shopping Centres  Shopping centre: a group of retail and other commercial establishments that is planned, developed, owned and managed as a single property o Strip centre: a shopping centre that usually has parking directly in front of the stores and does not have enclosed walkways linking the stores o Mall: a shopping centre with a pedestrian focus where customers park in outlying areas and walk to the stores
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