Location: the key determinant

Success of a retail outlet is built upon a perfect location. While the process of selection is on, what are the points one should keep on ticking?
Location for success

Closing down of almost 40 outlets of More, Shoppers Stop’s announcement of going slow in airport retail and winding up of outlets by Globus has one thing in common, that is,  wrong evaluation of location. All these named brands are well-known across the country but still could not avoid the fate of wrong-judgement. The miss-fit locations have resulted in low sales conversion and low profitability at the store level.  Backing up with any other excellences could not save the debacle; such is the power of location.  So, what is the basis for right location? In fact a location acquires its appropriateness only when it perfectly aligns with value, offerings and purpose of the outlet. Some key factors for the evaluation have been discussed below.

                               

Point 1: Target Audience

An elaborate market survey, both at the demographics and psychographics levels, is absolutely indispensable for any store to take off.  Consider Zara, an upmarket international couture brand. Could we expect it’s outlet at any local community market or at any reputed wholesale market? Zara has always made its presence felt at some plush high street market, such as Oxford Street in London, or a luxury mall like Promenade in New Delhi. The choice depends on the target audience the brand is eying. For Zara, it’s always the top-end customers having high affinity for international styling. They are the frequent visitors to such shopping destinations.

 

Point 2: Product Offerings

Take an example of simple kirana stores that cater to the daily top-up requirements. They have acquired the name neighborhood stores for their proximity to neighborhood. Despite the advent of organised retail, the importance of these mom & pop stores cannot be erased. Where does the winning streak lie? Obviously, at the perfect location matched with perfect retail mix.  The small retailer knows thoroughly the demand of the locality and accordingly he stocks his merchandise. Again, a hypermarket like HyperCity finds its perfect location in a mall.  The retail outlet is ideal for bulk buying and consumers visit once in a month to purchase monthly grocery and other requirements. Ample parking space and other facilities of such a commercial spot sets the ideal background for a big box retailer to flourish. In the context of commercial places, comes in the forefront the importance of other places which are being visited frequently, such as clubs, educational institutes, temples, airports and railway stations and places with high traffic flow. Eating joints can do roaring business in such locations.

 

 

Point 3: USP

Battling the competition posed by other retailers at the same location can be a hard task for a retailer. The problem is a serious threat for profitability. So, while selecting a location, a retailer should look for filling the gap.  But for a common product category it’s hard to do. So, for an apparel or footwear retailer the catch lies in the USP of their product offerings and brand positioning. There can be a healthy competition between Bata and Metro Shoes in the same locality. Bata is for the consumers with classy and traditional preferences who seek quality and comfort over styles, and Metro is for those who prefer contemporary styling and seek designs from multiple brands under one roof.

 

Point 4: Problem-free Product Sourcing

Supply chain loss is a major concern for any retailer that reflects on a store’s success. Streamlining supply chain also includes easy transportability of goods. An ideal location of a retail outlet should be logically close to the sourcing centre keeping in mind that transport cost is included in the selling price. The location should be within the area covered by the distribution network of the vendors and suppliers.

 

Point 5: Employees from Local Areas

Retail sector is reeling under the problem of attrition. The problem can be abated if employees can be sourced from places closer to the store provided they are armed with adequate skills.

 

Point 6: Perfect Rent to Profit Ratio

Ideally rental should constitute 4% of the turnover at the max.  Choosing location depends on this very simple fact. A retailer should not sacrifice its profit for the sake of premium space.

 

When the above-mentioned criteria fall in place, the location sets to become the perfect foundation for successful retailing.

 

 

 

 

 

 

 

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