Retailing Strategy

Retail Locations Chapter 7

Site LocationsChapter 8

Human Resource Management

Chapter 9

Information and Distribution Systems Chapter 10

Customer Relationship Management Chapter 11

Retail Market and Financial Strategy

Chapter 5, 6

Assignment 1

• Individual

• Choose a retail type (i.e. Specialty Store, Convenience, Department Store, etc.)

• Name your store (i.e. My Shop, More Food, Malee-Mart)

• Choose a secondary channel (besides B+M) and explain your choice in one paragraph. (i.e. kiosk better than electronic because…..)

• One typed page due July 5

What Are the Three Most Important Things in Retailing?

Location! Location! Location!

Retail Locations

Shopping Centers

– Strip Shopping Centers

– Shopping Malls

City or Town Locations

– Inner City

– Main Street

Free Standing Sites

Other Location Opportunities

Types of Strip Shopping Centers

Traditional

Mom and Pop Local Merchants, Children’s Place, GapKids, Blockbuster Video

Power Centers

Target, Home Depot, Office Depot, PetsMart, Best Buy, Sports Authority,Toys R Us

Elements in Retail Mix

Customer Service

MerchandiseAssortment

PricingCommunication Mix

Store DisplayAnd Design

Location Strategy

Types of Shopping Malls

Regional Centers

Super regional Centers

Lifestyle Centers

Fashion/Specialty Centers

Outlet Centers

Theme/Festival Centers

Merchandise Kiosks

Problems Facing Regional Malls

• Competition from Alternative, More Convenient Locations

• Focus on Apparel – Weak Apparel Sales

• Aging

• Demographic Shifts

The Most Expensive Shopping Streets in the World

Street Location Cost / sq foot / year

Fifth Avenue (48th to58th St.)

57th Street (5th Ave.to Madison Ave.)

Oxford Street

Madison Avenue (57thto 72nd St.)

Ave. des Champs Elysee

New York City

New York City

London

New York City

Paris

$580

$500

$400

$375

$360

Tradeoff Between Locations

Rent

Traffic

There are relative advantages and disadvantages to consider with each location.

Relative Advantages of Major Retail Locations

Location City Strip Shopping Free

Issues Center Mall Standing

Large size + - + -draws peopleto area

People + + - -working/livingin areaprovided sourceof customers

Source of ? - + -entertainment/recreation

Protection - - + -against weather

Relative Advantages of Major Retail Locations

Location CBD Strip Shopping Free

Issues Center Mall Standing

Security - - + -Long, uniform - + + + hours ofoperation

Planned - - + -shoppingarea/balancedtenant mix

Parking - + - +Occupancy ? + - +costs(e.g. rent)

Relative Advantages of Major Retail Locations

Location City Strip Shopping Free

Issues Center Mall Standing

Pedestrian + - + -traffic

Landlord + + - +control

Strong + + - +competition

Tax ? ? ? ?incentives

Other Retail Location Opportunities

Mixed Use Developments AirportsResorts HospitalsStore within a Store

Matching Location to Retail Strategy

• Department Stores Regional Mall

• Specialty Apparel Central Business District, Regional Malls

• Category Specialists Power Centers, Free Standing

• Grocery Stores Strip Shopping Centers

• Drug Stores Stand Alone

Types of Leases

Percentage

Fixed - Rate

Percentage leases – lease based on a % of sales.

Retailers also typically pay a maintenance fee based on a percentage of their square footage of leased space.

Most malls use some form of percentage lease.

Variations of Percentage Leases

Percentage lease with specified maximum -

percentage of sales up to a maximum amount.

Rewards retailer performance by allowing retailer to hold rent constant above a certain level of sales

Percentage lease with specified minimum -

retailer must pay a minimum rent no matter how low sales are.

Sliding scale - percentage of sales as rent decreases as sales go up.

Fixed Rate Leases

Fixed Rate Leases - used by community and neighborhood centers.

-Retailer pays a fixed amount per month over the life of the lease.

-Not as popular as percentage leases

Graduated Lease - a variation of the fixed rate lease

-Rent increases by a fixed amount over a specified period of time.

Percentage or Fixed Rate Leases

Maintenance-increase-recoupment lease - used with either a percentage or fixed rate lease.

Rent increases if insurance, property taxes, or utility bills increase beyond a certain point.

Net lease - retailer is responsible for all maintenance and utilities.

Prohibited Use Clause

Limits the landlord from leasing to certain tenants.

Some tenants take up parking spaces and don’t bring in shoppers: bowling alley, skating rink, meeting hall, dentist, or real estate office.

Some tenants could harm the shopping center’s wholesome image: bars, pool halls, game parlors, off-track betting establishments, massage parlors and pornography retailers.

Exclusive Use Clause

Prohibits the landlord from leasing to retailers selling competing merchandise

Specify no out parcels

Specify if certain retailer leaves center, they can

terminate lease.

Escape Clause

Allows the retailer to terminate its lease if sales don’treach a certain level after a specified number of years, or if a specific co-tenant in the center terminates its lease.

Other Legal Issues

Zoning and Building Codes

Zoning determines how a particular site can be used.

Building codes determine the type of building, signs, size, type of parking lot, etc. that can be used

Signs Restrictions on the use of signs can also impact

a particular site’s desirability

Licensing Requirements Some areas may restrict or require a license for

alcoholic beverages