RETAIL LOCATION 

The choice of location is the most vital aspect for any business that relies on customers, of which retailing is the classic example. Deciding on location is the most complex of the decisions to be taken by a retailer. Firstly the costs are very high and once a location has been selected, there is very little flexibility. Choosing a wrong location can lead to losses and even closure of the store. This makes the selection of the appropriate location the most critical aspect of retailing. 

Importance of location decision in retailing: 

• Location choice is a major cost factor.
• It involves large capital investment (the high cost of land or building if it is being purchased or recurring cost of rent if it is leased).
• It affects the transportation cost structure(Distance from the manufacturer, distributor etc. affects the total cost of transportation).
• It has a significant bearing on human resources cost(if the retail store is located away from central locations i.e. areas where public transport is weak the cost of employees will be higher as employees will have to be provided with transportation or paid for transport).
• It is dependable on the quantum of customer traffic(depending on the number of consumers who are frequent the area).
• It affects the volume of business (if the number of customers visiting the store are low then  the volume of business done by the retail store is obviously affected)

Levels of competition, has classified trade areas into:

• Saturated trade area offers wide variety of merchandise, also ensuring impressive profits for retailers. Customers tend to prefer these because of the variety of merchandise offered and competitive pricing. Eg. Pizza hut, McDonalds’. Retailers here look for head to head competition. They believe locating in places with competition ensure high footfalls which can be converted into sales. 
• Under stored trade area – Too few stores selling specific merchandise to meet the needs of the segment efficiently. 
• Over stored trade areas are characterized by the presence of multiple retailers in a specific product category. These areas possess great challenge for new retailers. 

Levels of Location decision and its Determining Factors

Based on 3 aspects:

1. Selection of a City
2. Selection of an area or type of location within a city
3. Identification of a Specific site

Selection of a City

• Size of the city’s trading area – refers to geographic area from which the customers come to the city for shopping. 
• Population or Population growth in the trading area – Larger the population or Higher the population growth, better shopping location it is. 
• Total purchasing power and its distribution – Purchasing power of the customers living in the city. Whether middle, upper or lower class. 
• Total retail trade potential for different lines of trade – Certain cities maybe specialized in certain line of trade and attract customers from other cities as well. Eg Kancheepuram. 
• Number, size and quality of competition.
• Development cost – Cost of land, rental value, other retail development costs etc. 

Selection of an area or type of location within a city

• Customer attraction power of shopping district or a particular store – Certain shopping centres attract customers from far off places. 
• Quantitative and Qualitative nature of competitive stores – Retailers would like to evaluate the product lines carried out by competitors, number of stores in an area etc. 
• Availability of access routes – There should not be any traffic jams or congestions. There should be easy accessibility. 
• Nature of Zoning regulations – Examine the plans and regulations of Municipal Corporation etc regarding their plans. Eg. Flyovers 
• Direction of spread of the city – The direction in which the city is developing. Eg. Mumbai’s suburbs are developing. 

Selection of a specific site

• Adequacy and potential traffic passing the site – Volume of vehicular traffic and pedestrians passing by.
• Ability of the site to intercept the traffic flowing past the site 
• Complementary nature of adjacent stores – Eg Store selling school uniform will have greater potential if adjacent stores sell school books, stationary etc. 
• Adequacy of Parking
• Vulnerability of the site to unfriendly competition – Eg. Many small stores in USA had to close or relocate when Wal-Mart setup its stores in the neighbourhood. 

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