Retail headstart

You can be the best retailer in the world, but if you set your shop in the wrong location, chances of a successful business are lessened considerably. Starting off with the wrong location is like running with your hands tied behind your back. Certain parameters should be taken care of to select the right location.

 

Getting it right


Before choosing a location the retailer should consider the

  • Target Audience: Examine your Target Audience. This is critical since distribution of potential customers in the catchment area can make or break a store. Juxtaposing your store location with your to-be-customer’s living or shopping area is half the battle won. 

Consider the case of a café being located in the vicinity of a school or college. By the very nature of the format, a café is a place where youngsters hang out and is a meeting place for collegians after class hours. Step into any Café Coffee Day or Barista outlet in a metro to realise this.

 

The diagram below depicts an ideal fictitious Café location in an area housing several educational Institutions as well as the city’s IT park-Infocity.

  • Locality - commercial or residential: This will vary according to the format. A residential area would be more suitable for a supermarket, whereas a commercial area will be better for a departmental store. For a grocery store, one has to look at a residential area that is heavily populated, since the shopping requirement would be for day-to-day needs. Hence the closer a store is to a customer’s residence, the more likely is she to frequent it. This will also take care of parking woes, which has been the bane for many a retailer. There have been cases where a supermarket has been very successful catering to a single large apartment complex (eg,  More store in “Mantri Paradise” -an apartment complex in Bangalore). In fact, many large builders are now making a provision in their building plan for an “in-house” supermarket to cater to the residents.

A variation of this is the approach of “heavily frequented” area. These are interesting openings, literally. Retailers have experimented by opening stores in places, which need not be heavily ‘populated’ but heavily ‘frequented’, such as clubs, offices premises, temple complexes, colleges and institutions, airports, railway stations, etc. Some eye-catching examples are the Mysore campus of Infosys or the ‘Comesum’ concept in the railway stations or the Sankar’s series of book stores at the airports.

 

  •  Neighborhood and Neighbors: As is the case with choosing a residence, neighbours and neighborhood too can make an important difference to a store’s success. Neighbours here refer to the presence of competition, numbers, type and the share of market they already have. Sarojini Market in Delhi and Fashion Street in Mumbai are a bargain hunter’s paradise. In such a milieu, an haute couture brand will certainly not only be out of place, but will not get many serious shoppers apart from curious onlookers. Similarly, it is a well-known fact that most cities in India, big or small, have certain demarcated “shopping zones” for specific categories. Customers are used to visiting these areas for specific category related purchase, for example, jewellery, electronics, books, etc. Hence it might just give even an established brand that edge to set up a shop in such areas for “ready footfalls”.

Pricing will be another critical factor especially if a retailer is getting into an already crowded retail space which has many players operating in similar spaces. If one sets up a fruit shop in close vicinity of a city’s wholesale fruit market, the back-end sourcing has to be robust enough to match prices without a quality compromise.

 

We see many examples of similar formats existing peacefully (seemingly!) in the same catchment area.  A retailer getting into such an area has to weigh the pros and cons very carefully before doing so. 

 

  • Supply Chain and Logistics: Proximity to supply source points is an important factor while considering store location. This also has an effect on the pricing strategy of merchandise. Transport charges get incorporated into the product costing thereby impacting the selling price of products.

For a multi store format, the retailer has to evaluate the distance between his warehouse and proposed sites and look at the economies involved in transport of goods. In case of a single store format, the retailer has to check the feasibility of suppliers distributing goods to the outlet regularly. 

  • Availability and cost of labour: The nature of the retail business is such that people have to put in long working hours and work in shifts. Some retailers have almost all the front end staff sourced from particular nearby villages and put up in a hostel-like arrangement. This is a win-win situation for both. The retailer is assured of more loyalty and there-by lesser attrition and the employee also feels taken care of, and feels a strong sense of belonging with each other and the store.
  • Parking space: This is a topic of hot debate amongst retailers. There are many retailers with the view that people will come for shopping irrespective of parking space. If there is a lack of parking space, “home delivery” can be considered as an option. But one needs to remember that lack of parking space is a heavy deterrent for the shopper. 

If a retailer is putting up a large format store like a hypermarket or a mall, then adequate parking space becomes a non-negotiable hygiene factor. In cities having multiple shopping malls, availability and ease of parking becomes the deciding factor in a shopper’s decision to visit a particular mall over the other available options.

  • Property costs: Every retailer has to evaluate the cost/lease of the property against the projected sales. Sometimes, in a frenzy to grab the “best” place in town, retailers end up paying exorbitant prices to realise their folly later. It might make better sense at times to have a “2nd best” location but at “first rate” property cost.

In addition to the above considerations, the facade or frontage of the proposed retail store has to be given due importance. Visibility of a store from the main road acts as the best advertisement for the store. Of course, the weightage given to this aspect will depend on the format.

 

Whenever there is a retail venture being planned, the initial phase always is the most critical phase involving location identification. Most seasoned retailers would rather postpone launch dates than rush in with wrong location choices as they understand that this is one of the most important factors for success. A good head start here gives you a long term advantage, as they say “well begun is half done”!

The author is Principal Consultant, Competency Development Services

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