Chapter 7 Marketing Selection and Retail Location Analysis.

Chapter 7

Marketing Selection and Retail Location Analysis

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Selecting a Target Market

The Internet is becoming a major force in retailing, with sales expected to reach a little more than 5 percent of total retail sales over the next decade.

Reaching the target market can be achieved through a:store-based location in which the consumer travels to

the store orthrough a nonstore retailing format in which products

and services are offered to the consumer at a more convenient or accessible location.

LO 1



Home page - Introductory or first material viewers see when they access a retailer’s Internet site. It is the equivalent of a retailer’s storefront in the physical world.

Virtual store - Collection of all the pages of information on the retailer’s Internet site.

Ease of access - Consumer’s ability to easily and quickly find a retailer’s Web site in cyberspace.

LO 1



Market segmentationTarget market - Group of

customers that the retailer is seeking to serve.

It is not easy to reach every target market, because each

target market is different from the other.

LO 1


Criteria to reach target market

Seek a measurable market segment.

Accessibility or the degree to which the retailer can target its promotional or distribution efforts to a particular market segment.

Segment should be substantial or large enough to be profitable for the retailer.

LO 1



Exhibit 7.2 - Retail Formats for Accessing Your Target Market

LO 2


Location of Store-Based Retailers

Central business

district (CBD)

Advantages Disadvantages

An unplanned shopping

area around the

geographic point where all

public transportation

systems converge; it is

usually in the center of the

city and often where the

city originated historically.

Easy access to public transportation.

Wide product assortment.

Variety in images, prices, and services.

Proximity to commercial activities.

Inadequate and usually expensive parking.

Older stores.High rents and taxes.Traffic and delivery

congestion.Potentially high crime

rate.Decaying conditions of

inner cities.

LO 2



Secondary business district (SBD)

Shopping area that is smaller than the CBD and that revolves around at least one department or variety store at a major street intersection.

Neighborhood business district (NBD)

Shopping area that evolves to satisfy the convenience-oriented shopping needs of a neighborhood; generally contains several small stores (with the major retailer being a supermarket or a variety store), and is located on a major artery of a residential area.

LO 2



Shopping center or

mall

Centrally owned or managed shopping district that is planned, has balanced tenancy (the stores complement each other in merchandise offerings), and is surrounded by parking facilities.

Anchor stores Stores in a shopping center that are the most dominant and are expected to draw customers to the shopping center.

LO 2



Advantages of shopping centres Disadvantages of shopping centres

Heavy traffic resulting from the wide range of product offerings

Cooperative planning and sharing of common costs

Access to highways and available parking

Lower crime rateClean and neat environment

Inflexible store hoursHigh rentsRestrictions as to what merchandise or

services the retailer may sell Inflexible operations and required

membership in the center’s merchant

organizationPotentially too much competition and

much of the traffic is not interested in a particular product offering

An anchor tenant’s dominance of the smaller stores

LO 2



Freestanding retailer

Advantages Disadvantages

Locates along major traffic arteries and does not have any adjacent retailers to share traffic.

Lack of direct competition

Lower rentsFreedom in operations

and hoursFacilities that can be

adapted to individual needs

Inexpensive parking

Lack of drawing power from complementary stores

Difficulties in attracting customers for the initial visit

Higher advertising and promotional costs

Operating costs cannot be shared with others

Stores may have to be built rather than rented

Zoning laws may restrict some activities

LO 2


Exhibit 7.5 - Selecting a Retail Location

LO 4


Market Identification

Retail location theoriesMarket demand potential Market supply factors

LO 4


Retail Location Theories

Retail store saturation

There are just enough store facilities for a given type of store to efficiently and satisfactorily serve the population and yield a fair profit to the owners.

Understored The number of stores in relation to households is relatively low so that engaging in retailing is an attractive economic endeavor.

Overstored Where the number of stores in relation to households is so large that to engage in retailing is usually unprofitable or marginally profitable.

LO 4


Market Demand Potential

Major components are:Population characteristicsBuyer behavior characteristicsHousehold incomeHousehold age profileHousehold compositionCommunity life cyclePopulation densityMobility

LO 4


Market Supply Factors

Square feet per storeSquare feet per employeeGrowth in storesQuality of competition

LO 4


Site Analysis

An evaluation of the density of demand and supply within each market with the goal of identifying the best retail site(s).

Description of trading areaRetailers can access, at a relatively low cost,

information concerning the trading area for various retail locations and the buyer behavior of the trading area.

LO 5


Site Analysis

Demand density - The extent to which the potential demand for the retailer’s goods and services is concentrated in certain census tracts, ZIP code areas, or parts of the community.

Supply density - The extent to which retailers are concentrated in different areas of the market under question.

LO 5


Exhibit 7.10 - Demand Density Map

LO 5


Exhibit 7.11- Store Density and SiteAvailability Map

LO 5


Exhibit 7.12 - Checklist for SiteEvaluations

LO 5


Site Selection

100 percent location - When there is no better use for a site than the retail store that is being planned for that site.

The traffic that passes a site, whether it is vehicular or pedestrian, can be an important determinant of the potential sales at that site.

LO 6


Nature of Site

Two traffic-related aspects of the site should be evaluated.Availability of sufficient

parking, either at the site or nearby.

Whether direction of traffic is relative to the shopping area.

LO 6


Nature of Site

Type of neighborsStore compatibility - Exists when two similar retail

businesses locate next to or nearby each other and they realize a sales volume greater than what they would have achieved if they were located apart from each other.

Retail clusters - Groups of stores closely located that share similar characteristics.Once potential customers identify a need for a line of merchandise or

service, they don’t need to decide on the specific store to visit; they just need to decide to travel to the retail cluster.

It allows customers to walk from store to store, comparing prices, products, and service.

LO 6


Terms of Purchase or Lease

The retailer should review:Length of leaseExclusivity clauseGuaranteed traffic rateAnchor clause

LO 6


Expected Profitability

The final step in site-selection analysis is construction of a pro forma (expected) return-on-asset model for each possible site.The return-on-asset

model comprises of net profit margin, asset turnover, and return on assets.

LO 6

Chapter 7 Marketing Selection and Retail Location Analysis.

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Transcript of Chapter 7 Marketing Selection and Retail Location Analysis.