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Chapter

RMG 200 Chapter Notes -Census Geographic Units Of Canada, Bass Pro Shops, Shopping Mall


Department
Retail Management
Course Code
RMG 200
Professor
Brent Barr

Page:
of 4
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
entire chain
Retailer continue to open stores as long
as marginal revenues archived by
opening a new store are greater than
marginal costs
Better to have two separate store
producing $75 million than one store
producing $100 million
Each individual franchise owner wants
to maximize his or her profits
The franchisors grant their franchisees
an exclusive geographic territory so that
other stores under the same franchise do
not compete directly with them
Franchisor: the owner of a franchise in a
franchise agreement
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
trade area
A trade area that offers customers a good selection of goods and services,
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
trade area
An area that has few stores selling a specific good or service to satisfy the
needs of the population
Overstored
trade area
An area having so many stores selling a specific good or service that
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
concerned with
minimizing their effort
to get the product or
service they want
They are indifferent
about which brands to
buy or the retailer’s
image and are somewhat
insensitive to price
Consumers have general
idea about the type of
product or service they
want, but do not have a
strong preference for a
brand, model, or specific
retailer to patronize
Consumers know what
they want and do not
want a substitute
Brand loyal/retailer
loyal
Convenience stores,
drugstores, fast food
restaurants,
supermarkets, full line
discount stores
Furniture, appliance,
apparel, consumer
electronics, hand tools
and cameras
Furniture stores along
Dundas, enclosed malls,
category specialists
Destination store: a
retail store in which the
merchandise, selection,
presentation, pricing, or
other unique feature acts
as a magnet for
customers
Purchasing expensive
designer brand perfume,
adopting dog from
animal shelter, buying
dress made by specific
designer
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
o Traditional strip centre: a shopping centre that is designed to provide convenience shopping for the
day to day needs of consumers in their immediate neighbourhood
The shopping centre management maintains the common facilities (common area maintenance [CAM])
o Parking area, activities such as providing security, parking lot, lighting outdoor signage for the centre,
advertising and special events to attract consumers
Anchors: major retailers located in a shopping centre
o Supermarkets are typically anchors for strip centres
o Department stores for shopping malls
A. Strip shopping centres
Offer customers convenient locations and easy parking and they entail low rents for retailers
There is no protection from the weather
Offer less assortment and entertainment options for customers than malls
Does not attract as many customers as larger shopping centres that rely on community participation
National chains able to compete effectively in strip centres against rival stores in malls
B. Power Centres
Power centre: shopping centre that is dominated by several large anchors, including discount stores
(Walmart), off price stores (Winners), warehouse clubs (Costco), or category specialists such as Home Depot,
Staples Business Depot, Best Buy, and Toys “R” Us
Why has power centre become so popular
o Natural location for these large tenants
o Shoppers are seeking value alternatives to the stores found in shopping malls
2. Shopping Malls
Advantages
Disadvantages
Shopping malls have become the Main
Street for today’s shoppers – a place
with entertainment, food and shopping
Tenant mix can be planned shopping
mall owners control the number of
different types of retailers so that
customers can have a one stop shopping
experience with a well balanced
assortment of merchandise
Retailers and their customers don’t have
to worry about external environment
Mall rents are higher than those of some
strip centres, free standing sites and
most central business districts
Tenants may not like mall managers’
control of their operations
Competition within shopping centres
can be intense hard for small specialty
stores to compete directly with large
department stores
Challenges