Retail Operations and

Store Management-II UNIT 3 STORE SITE SELECTION

Structure
3.0 Objectives
3.1 Introduction
3.2 Types of Locations
3.2.1 Isolated Store
3.2.2 Unplanned Business District
3.2.3 Planned Shopping Centre
3.3 The Choice of a General Location
3.4 Location and Site Evaluation
3.5 Decision Process for Site Selection
3.6 Let Us Sum Up
3.7 Keywords
3.8 Answers to Check Your Progress
3.9 Terminal Questions
3.10 Further Readings

3.0 OBJECTIVES
After going through this unit, you should be able to:
● discuss various types of locations;
● find out general locations on the basis of choice;
● identify location and site evaluation; and
● decide the process for site selection.

3.1 INTRODUCTION
After talking a lot about Customer Buying Behaviour and Customer Retention w.r.t
retail in our preceding two units, in this unit you are going to learn about certain site
selection of stores.
For a store a right site ensures that right type of customers walk into the store and
hence, the site selection has to be done in proper stages. The first stage in site selection
is to identify the trading area, then to identify the type of location that is desirable as per
company’s retail objectives. Thereafter the selection of general location is done, which
is followed by evaluation of alternative store sites.
Thus, it will be clear that the retail team needs to assess the store sites very carefully as
the management has to make substantial investment into opening a new retail store.
Any miscalculated decision may cost the retailer a substantial loss in terms of cash-flow
besides the loss of image. It is imperative that retail management has to put in its best
team for assessing site selection process so as to avoid all the subsequent hassles faced
in store operation and management.
60
 Store Site Selection
3.2 TYPES OF LOCATIONS
Generally one can identify three types of locations as explained by Berman B and
Evans R J in their book ‘Retail Management–A strategic Approach’. There are isolated
store, unplanned business district, and planned shopping centre. Each type of location
has certain attributes like composition of competing retail stores, availability of parking
space, nearness to office areas or residential locations, and other relevant factors. Let
us look at each of these types for better understanding of their location specific attributes.

3.2.1 Isolated Store

An isolated store is a stand-alone retail outlet, which is either located on a highway or a
street. It being a stand-alone store naturally it has no competition from adjacent stores
selling same products or any other types of products which can share customer traffic.

Source: http://www.mukeshassociates.com/retail-outlet-ibp.html
Figure 3.1: Highway Petroleum Retail Outlet

Advantages
The advantages can be listed as follows for such type of stores:
● There is no competition from any type of stores in its close proximity.
● Being the only store in an isolated area it has relatively low rental costs.
● The store has the flexibility in organizing interiors of the store as there is lesser
space constraint.
● Isolated stores are good for selling one-stop shopping items like grocery and food
items or convenience items. The retailer is able to make the most of the available
space by keeping all the items that can go in a single purchase basket.
● The store due to its isolated location is able to attract the attention of road traffic
due to higher visibility an account of its roadside location.
● The facilities can be modified to suit the need of the target consumers as well as
that of the store due to lower space constraint issues.
● Parking is not a problem, os this was one of the main reasons for putting up the
store in an isolated location.
● Cost reductions are possible due to low rentals thereby leading to lower prices.

Disadvantages
There are also disadvantages which can be listed as follows:
● It is difficult to attract customers in the initial phase due to its location and being
61
unknown to larger customer groups.
Retail Operations and ● It has the disadvantage of being located in an isolated spot, where customers may
Store Management-II
not like to travel very often.
● Many customers do not want to settle on their choice in the first instance itself and
want to scout for more retail outlets to check on the variety and prices before they
decide on their purchase decision.
● The advertising expenses for an isolated store would be high atleast till it becomes
well known spot among its target customers.
● Common expenses like common premises lighting, security, facility maintenance,
and garbage collection are not shared by other stores in the nearby vicinity as it
normally happens for business or high street locations.
● Since the spot is in an isolated location the store has to be constructed from the
scratch as no ready possession will be possible on rental basis.
● Generally as a rule unplanned business streets and planned shopping centres are
very much popular among consumers; such locations generate a large share of the
retail sales.
Generally large store formats like Wal-Mart supercenters, which sell all kinds of items
right from stationery to apparels at the most competitive prices are well suited for isolated
locations. Similarly in the Indian scenario we have Big Bazaar, Sabka Bazar, Big Apple,
Six Ten, 365 days, Reliance Trend, More, Spencer and Hyper-city stores which sell a
big range of convenience items along with groceries at competitive prices are well
suited for an isolated location store. A small specialty store will face lot of difficulty in
developing a customer base that is willing to travel to a store that does not keep a large
assortment of products nor have a strong image for merchandise range or competitive
pricing.

3.2.2 Unplanned Business District

The unplanned business district by its name itself suggest that the stores are located in
a particular location just by chance without any plan, because the store thinks that it is
the best location for them from business point of view. For example there may be group
of stores which sell ladies apparel only like Biba, Rituwear, Madame, Stelitos, Kins etc.
thereby forming an attraction for consumers of ladies apparels who are so much keen to
check on varieties.
As explained by Berman Barry and Evans R Joel, ‘Retail Management – A Strategic
Approach’, 10th edn., ch 10 pp 293-297, Pearson Education Inc, New delhi, 2008, there
are four types of unplanned business districts viz. central business district, secondary
business district, neighbourhood business district, and string.

Source: http://buyousef.net/category/freshly-pressed
62 Figure 3.2: Lake District (Cumbria)
1. Central Business District Store Site Selection

A central business district (CBD) is generally a hub of retail stores in a particular location
of the city. In foreign countries it is usually a downtown location. The CBD is that
location where there is a good density of office buildings and the stores. In Mumbai one
can identify such locations as Lower Parel area, Worli and Dadar; all these locations
are in central Mumbai area and has a high level of pedestrian and vehicular traffic. In
Delhi one can find Connaught place is like a CBD area. Lots of CBD are also coming
up in Gurgaon & Greater Noida.
The main area constituting CBD is no more than a square mile, with many cultural and
entertainment facilities located in and around it (this is particularly applicable for Dadar
and Connaught place). The CBD generally has atleast one large departmental store
along with specialty and convenience stores. There is no pre-defined setting in the
opening of stores, which generally have a long history (the store location and ownership
may pass from one generation to another), retail trend that exist during a particular time
(for example the store may change from selling textile fabrics to ready-mades) and
availability of space in the vicinity.

Source: Country Inn & Suites By Carlson, Sahibabad

Figure 3.3: Building of CBD
Some of the strengths of CBD are as follows:
● Easy access to public transport facilities;
● There are variety of stores in different formats and offering different positioning
base for the same product category, like high price end to lower price end or highly
fashionable to regular collection;
● There is usually good variety and range available;
● Wide range of prices are available within a given product category;
● Even wide range of services are available right from air travel booking to agencies
offering tour packages, transport, hotel bookings, insurance and so on;
● CBDs are close to commercial offices and cultural and entertainment facilities;

63
Retail Operations and ● There is a high concentration of pedestrian traffic – which is true for central locations
Store Management-II
like Dadar and Connaught Place. Some of new examples of CBDs are at Greater
Noida in a name of New Cannought Place.
But there are also weaknesses, which need to be kept in mind for a CBD location,
which can be enumerated as below:
● There is always inadequate parking facility.
● There is usually traffic congestions on the main roads.
● Travel time is high for those who have to come from suburbs.
● Central cities have become synonymous with low positioned areas and hence, are
not much favoured by customers belonging to higher strata of society.
● The condition of buildings located in CBD area are not in good shape due to their
existence since old times, thus constraining the overall appearance of the stores
located in such buildings. Also roads and other facilities are not of a good standard
as compared to newer locations in suburbs.
● Due to the constraints of expansion of sites, the rent in such locations are very
high.
● Sometime due to space constraints and area limitations only certain product
categories are available in CBD areas thereby creating discontinuity of complete
product range.
● Due to space constraints some of the big departmental stores may decide to open
bigger stores with much wider collection in a new suburban district.
The CBDs still remain a major retailing force, inspite of the share of such centres in the
overall retail sales going down as compared to that of planned shopping centres. The
drop is also due to shifting of residential population as well as offices to suburbs – due to
better planned shopping facilities as well as commercial and residential facilities made
available at better rentals or cost.
According to one retail location expert “a superior CBD embodies a character, look,
flavour, and heritage that are not found in other locations, especially in the surrounding
region. Why would a person choose a down town as a destination with so many other
alternatives available? The answer is a strong sense of the place, a characteristic rarely
associated with malls, bigger retailers or suburban commercial areas.”

2. Secondary Business District

After discussing about CBD in detail in our preceding head, let us discuss SBD in more
elaborative manner.
A secondary business district (SBD) is an unplanned shopping area which are usually
located close to major road junctions – where there is an intersection of roads or signals.
Every major city will have many SBDs which mainly cater to population and residential
areas in and around the location. Such locations will have a small branch of a big
departmental store or a branch of a discount store with many other small retailers located
in and around.
Such SBDs are seen in and around Mumbai and its suburban areas particularly near-by
western and central railway stations. SBDs do carry goods and services similar to those
of CBD areas, but the stores being smaller they carry lower width and depth of
merchandise assortment.

64
 Store Site Selection

Source: Image Courtesy Photo Credit: Ramir Borja

Figure 3.4: Sparkling Facade of its SBD
Singapore prides itself in being the best place for business in Asia, underneath the sparkling
facade of its Central Business District and well-dressed, well-spoken and good-looking
frontline representative’s lays fundamental practices - things just aren’t right. The products
sold in SBDs are more of convenience type.
The advantages of SBDs are:
● Access to public transport; and
● Close to road allowing for quick exit to one’s location;
● Less crowds than CBDs;
● Better service from store due to size of the stores being smaller;
● Located close to residential areas;
The SBDs major disadvantages are:
There are no complete offerings. If someone wants to buy pharmaceutical products he
may not be able to find one among the clutter of apparel stores.
Due to location at traffic signals and intersection of roads there could be traffic congestions,
but not as much as that in CBD areas. Some parks difficulties are:
● Not many chain stores in SBD areas.
● But the weaknesses listed above are not as big as those for CBD locations, and
hence, the business of these locations is more stable than that of CBDs.
3. Neighborhood Business District
Again neighborhood business district (NBD) is an unplanned shopping area that serves
the convenience and service needs of a single residential area. The NBD will comprise
several small stores catering to laundry and pressing services, a stationery store,
pharmaceutical store, a barber shop, kirana stores, liquor stores, small garment and
textile store, small size restaurants and bars, etc. There could be super-market store
selling grocery, food, and convenience items. NBDs are found in every residential colonies
and areas situated on the main streets of the residential areas.
An NBD offers convenient location, store hours that suit the local population, sufficient
parking facility, familiar atmosphere. The major weaknesses of NBD could be limited
65
Retail Operations and assortment of merchandise; only select services possible, prices may not be very
Store Management-II
competitive due to non-existence of competition as compared to that is available in
CBD and SBD areas.

4. String
A string is also an unplanned shopping area which consists of group of retail stores
selling the same product-line. These stores will be generally located next to each other
along a street or main road. Probably with the success of an isolated store, many others
want to open stores selling similar product lines to cash in on the shoppers flow into the
area.
For example, furniture stores, hardware stores, sanitary/bathroom fitting stores, apparel
stores, motor garages, etc.

Source: http://www.ips-albania.com/furniture-stores-on-long-island
Figure 3.5: Furniture Stores
The above figure shows about furniture stores.
A string location has advantages of lower rent, better visibility from the roads/streets,
availability of space for expansion of the store, and lower operating expenses. The
disadvantages are lower product variety, higher advertising costs, extra travel for
consumers interested in the concerned products, and have to build the store premises
from scratch. But there are other common advantages that can be shared by the stores
located on the same street like common lighting in the vicinity, security arrangement,
general maintenance of the street, and the greatest advantage is drawing more consumers
to the location; thus increasing the consumer traffic to individual store.

3.2.3 Planned Shopping Centre

Berman Barry and Evans R Joel had explained in his book about ‘Retail Management –
A Strategic Approach’, 10th Eedn., Ch 10 pp 298-303, Pearson Education Inc, New
Delhi, 2008 that a planned shopping centre consists of a group of architecturally unified
66 commercial establishments on a site that is centrally owned or managed, designed and
operated as a unit, based on balanced tenancy, and accompanied by parking facilities. Store Site Selection

In India one can identify cities, where in a limited manner the planned shopping centre
technique is followed, like New Mumbai (Vashi), Chandigarh and Gandhinagar, where
the shopping sites are identified well in advance as per the overall city plan and the
stores have to follow certain norms with respect to maintaining certain ambience and
standard. The location, size and mix of stores are related to the trading area served.

Source: Adapted From the URL http://www.dlf.in/dlf/wcm/connect/retail/Retail/Retail/

Projects/Malls+-+Lease/DLF+Promenade+Vasant+Kunj,+New+Delhi dated 15th Feb, 2012
Figure 3.6: Shopping Center at DLF Promenade Vasant Kunj, Delhi
Thoughtfully conceived by the renowned architect Mohit Gujral, ‘Promenade’, DLF
Place, Vasant Kunj, is set to become one of the Delhi’s premier architectural and
commercial landmarks, creating an environment of great ambience and high energy.
Spread over a total lettable area of 450,000 square feet, the Promenade will have three
floors — the ground and upper ground floor for retail and the first floor entirely dedicated
to entertainment. DT cinemas – the multiplex with 7 screens, will be the largest cinema
complex in Delhi and surrounding areas. One hundred and twenty retailers have already
signed up for the space.
The true planned shopping centres work with the idea of balanced tenancy which ensures
sufficient number of stores with a suitable mix of product groups that will complement
each other by providing completeness to the product offerings in terms of range, quality,
and prices. To ensure balanced tenancy the management of such a centre specifies the
space to be allocated to each type of product group and the number of retail outlets that
will represent each product group. It may even put limitations on the number of product-
lines that can be carried by each store, and also specifies the type of firms that can own
the stores. In a well-managed shopping centre the aim is to run the show in a co-
ordinated and well balanced manner thereby achieving co-operation and growth of its
tenants.
67
Retail Operations and The planned shopping centers have much important strength; some of them are as
Store Management-II
follows:
● Based on the long range plan the assortment offered by stores is almost complete
covering all aspects of the range.
● It serves one stop family shopping experience.
● Supported by a strong suburban population.
● Stores have a very good co-operative attitude and there is sharing of common costs.
● The shopping centre has a unified and distinct image because of its well-co-ordinated
look and feel.
● Due to complementary nature of the product range presented by the stores, each
store is able to attract good walk-in traffic of consumers.
● There is good provision for parking due to proper planning.
● Access to highways and other main roads is made easy.
● Due to complete assortment of goods being available and other facilities such
centres being preferred over city shopping.
● Generally the rents are lower as compared to CBDs.
● Both the open type (shopping area off-limit to vehicles) and the closed type (all
stores in a temperature controlled facility, and also off-limit to vehicles) of malls
are popular.
The limitations of planned shopping centres are as follows:
● There are regulations on the space utilization as well as working hours.
● The rents are higher than that of an isolated store location.
● Each store has to follow rules and regulations about the type of products/product-
lines that can be sold from a store.
● There could be many malls in the same trading area, catering to a similar target
audience.
● Due to sameness of every mall in terms of look and facility the consumer may feel
boredom with shopping activity.
● Generally such shopping centres are dominated by large anchor stores.
● Some shopping centres/malls’ facilities are aging as they have been in existence
for a longer period.
There are three types of planned shopping centres viz. Regional, Community, and
Neighborhood.

68 Figure 3.7: Types of planned shopping centres

In India the mall culture or the planned shopping centres of different formats and Store Site Selection
characteristics are yet to take deep roots, the way one see them in US or European
countries; while in metro and mini-metros one see the mall culture well entrenched, in
other types of cities the culture has just made inroad and will take some time to develop
into a fully evolved one as being explained in the section below. The brief description of
each of these planned shopping centres, which are seen in developed countries, is given
below for students’ better understanding:

1. Regional Shopping Centre

It is a large planned shopping facility, which could be open or closed type. It caters to
people who work or live up to a 30 minute drive away. The size of the market it caters
to is about 100000+. On an average the driving time to the mall/shopping centre is about
20 minutes. Normally a regional shopping centre has about one to two huge departmental
stores, each with a minimum size of 100000 square feet, besides there are about 100 to
more than 150 small retail outlets.
The new trend is for setting up megamalls, with huge shopping area –almost 1 million
square feet of retail space with multiple anchor stores and several hundreds of specialty
stores accompanied by food court and entertainment facilities. These groups of stores
offer a very wide and deep assortment of different product categories that shoppers are
always on the lookout. The idea is to make the customer carry a full basket of intended
as well as unintended purchase of merchandise, as well as any other services required.
The customer is able to make the visit as one stop family shopping experience. Some
regional shopping centres have turned into social, cultural, and vocational centres for an
entire suburban area. These centres have become meeting places for younger lots as
well as a place for entertainments and events. An average visitor spends about an hour
or more at a regional shopping centre.

2. Community Shopping Centre

These are shopping centres which are moderate sized with a medium sized department
store or discount store or a category killer store along with many small sized stores.
Community shopping centre usually offers moderate assortment of shopping and
convenience goods and services to consumers from the nearby residential areas. It
caters to about 50000 to 100000 people, who live or work within a 10 to 20 minute drive.
These are better planned shopping centres as compared to neighbourhood shopping
centres from long term point of view. As in regional shopping centres the balanced
tenancy is enforced. Usually the promotions are done jointly by all stores in the shopping
centre. The composition of the stores and their ambience along with the ambience of
the shopping centre is duly maintained as per the defined goal.
There are two noteworthy types of community shopping centres viz. Power centre and
the Lifestyle centre. Power centre is a shopping location with about half a dozen of
category killer stores or several complementary stores specializing in one product
category; occupying 200000 to 400000 square feet of shopping space and located on a
major highway or road intersection.
A lifestyle centre is usually an open-air shopping site. It devotes about more than 150000
to 500000 square feet of retail space to premium and well-known specialty stores selling
upscale product-lines and brands. The focus of this kind of shopping centre is on lifestyle
product categories like apparel, home products, books and music along with restaurants.

69
Retail Operations and 3. Neighbourhood Shopping centre
Store Management-II
This is a planned shopping centre with the main anchor being a super market or a drug
store. The other stores include a laundry, a bakery, a stationery store, a dry cleaner,
beauty parlour, barber shop, a liquor store, a hardware store, a restaurant, etc.

Source: Javed Habib

Figure 3.8: Barber Shop
The above Barber’s shop gives a clear view about hair & beauty salon which caters the
elite class.
Jawed Habib is one of the leading hair & beauty salon chains in India. The company
currently operates a total of 284 outlets across 21 states and 74 cities in the country. The
company is promoted by Jawed Habib, a renowned Hair Expert who started the company
with a vision to provide quality hair styling and beauty services to the wider populace of
the country. With his passion and relentless efforts, he has established an effective
system which is self sufficient in terms of providing quality services to clients all across.
It occupies about 30000 to 100000 square feet of shopping area and the focus of such
shopping centres is convenience oriented goods and services. It caters to 5000 to 50000
people working or living nearby, who are not more than 15 minute drive away.

Source: The great India Mall

Figure 3.9: Building Great India Mall
70
The Great Indian Mall is crowded with people of all ages, sizes, shapes and genders. Store Site Selection
Kids who ought to be playing street cricket wearing Bata slippers can be found hanging
out at the gaming arcade wearing Nike sneakers. There are old people sitting in one
corner because they are either too tired to walk or just not amused. The fairly rich shop
almost every weekend but the other 95% just dress well and show up because they
have nowhere else to go and nothing better to do.
It is usually arranged in a strip and in the initial phase the tenancy is more balanced,
which may get disturbed over a period of time as new tenants may not face the initial
restrictions. In US neighbourhood shopping centres account for more than 60 per cent
of the shopping centres.

3.3 THE CHOICE OF A GENERAL LOCATION

In order to finalize a general location, the retailer first has to decide on the locational
format of the store planned. It must decide whether it wants to go for an isolated store
or unplanned district store or planned centre store. The final choice is dependent upon
the advantages and disadvantages presented by each locational format which are
evaluated in the context of retail firm’s long term strategy.
Once, the locational format is decided then the retail firm must choose a broadly defined
site. The retail firm will have to decide on two aspects. First of all the firm will have to
determine the specific kind of isolated store or unplanned district or planned shopping
centre. For finalizing on an isolated store it must decide whether it want to be on a
highway or side street. In case of an unplanned business district the retail firm will have
to decide whether it wants to be in CBD or SBD or NBD or in a string.
A retailer who wants to be in a planned shopping centre will have to choose a regional
shopping centre or community shopping centre or neighbourhood shopping centre; further
it may have to decide on the derivative forms like megamall or power centre or lifestyle
centre.
Secondly, a retail firm will have to decide on general store placement. For an isolated
store it means picking a specific highway or side street. For an unplanned business
district or planned shopping centre, it means picking a specific area or district – for
example a downtown area or central area or suburban district. So in this step the retail
firm is finalizing on the general location for opening a store. The factors to be considered
in assessing and choosing a general location and a specific site within that location are
discussed in detail in the next section, as most of the strategic decisions to be taken are
common for these two steps.

Check Your Progress-A

1. Briefly comment on the following statements.
a) A retailer needs to evaluate every probable location and specific site.
............................................................................................................
............................................................................................................
............................................................................................................
b) It is difficult to attract customers in the initial phase due to its location.
............................................................................................................
............................................................................................................
............................................................................................................ 71
Retail Operations and
Store Management-II c) A string location has advantages of lower rent, better visibility.
............................................................................................................
............................................................................................................
............................................................................................................
d) The true planned shopping centers work with the idea of balanced tenancy.
............................................................................................................
............................................................................................................
............................................................................................................
e) In a well-managed shopping centre the aim is to run the show in a co-
ordinated and well balanced manner.
............................................................................................................
............................................................................................................
............................................................................................................
2. Fill in the blanks with the appropriate word given in the brackets
a) A secondary business district is ___________ shopping area.
(Unplanned / Planned)
b) Retailer _________ has to decide on the locational format of the store
planned. (Firstly / Secondly)
c) Shopping centers account for more than _____ % of the shopping centers.
(60 / 80)
3. State whether the following statements are True or False
a) A central business district (CBD) is generally a hub of retail stores in a
particular location of the city.
b) CBD still remains a minute retailing force, in spite of the share of such
centers.
c) An NBD offers convenient location.
4. Distinguish between the following:
a) Regional Shopping Center vs. Community Shopping Center
b) CBD vs. NBD
c) Community Shopping Centre vs. Neighbourhood Shopping Centre

3.4 LOCATION AND SITE EVALUATION

A retail firm has to follow some specific processes while evaluating a general location
and the specific sites contained within such general location. It is natural that different
retailers will have different needs for locating their stores; hence, a location which may
be rated high on certain attributes may not be rated same by another retail firm. For
example a lifestyle branded retailer would have different requirement in terms of both
the general location and the specific site within such general location as compared to
that of a convenience store.

72
The lifestyle branded retailer would give more weightage to heavy pedestrian traffic, Store Site Selection
proximity to major departmental store and other specialty stores; whereas the
convenience store would give more weightage to ample parking space, heavy vehicular
traffic – so that possibility of customers taking time out to drive in the store’s parking lot
is higher, it need not be in the vicinity of other stores. Thus, the convenience store has
very different locational and site specific needs as compared to a lifestyle branded
store.
Tables 3.1 provides a checklist on attributes that need to be evaluated both for general
location and specific site. A retailer needs to evaluate every probable location and specific
site on all the attributes for arriving at an overall rating for the location as well as for the
specific site.
Table 3.1: A General Location and Site Evaluation Checklist

General Location Attributes/Criteria Rating Weights Weighted

rating
Pedestrian traffic Number of people
Type of people
Vehicular traffic Number of vehicles
Type of vehicles
Traffic congestion
Parking facilities Number and quality of parking spots
Distance to store of the parking spots
Availability of employee parking
Transportation Availability of mass transport
Access from major highways
Ease of access to delivery trucks
Store composition Number and size of stores
competitiveness
Affinity
Retail balance
Specific Site Visibility
Possibility of common promotions
Placement in the location
Size and shape of the lot
Size and shape of the building
Condition and age of the lot and building
Terms of occupancy Ownership or leasing term
Operation and maintenance costs
Sharing of common expenses related to
maintenance of the site and security
Taxes Zoning restrictions
Voluntary regulations
Overall Rating General location
Specific site
The retailer will give rating on each of the attributes listed in the above table, on a scale of
1 to 10; 1 being excellent and 10 being poor.
Source: Adapted from ‘Retail Management – A Strategic Approach’, Berman Barry and Evans
R Joel, 10th edn., ch 10 pp 305, Pearson Education Inc., New Delhi, 2008.

In the above table there is provision for weightages which provide for weighted ratings.
The advantage of weights is to provide for the importance given by a retailer to certain
attributes as compared to another retailer for whom some other attributes may be more
73
Retail Operations and important. You may take the example of a lifestyle branded store versus the convenience
Store Management-II
store, as discussed earlier, to check on the result of the weighted ratings on their individual
choice of location and specific site. The weights help each type of retailer with his
specific needs to evaluate the location and site on all the above attributes by giving
weights that will match the needs in terms of their importance or priority.
The total of weights should be 1 or 100% when distributed among all the attributes given
in the above table. One can also distribute 100% weights among the attributes for location
and another 100% weights can be distributed among the attributes for evaluation of
specific site.
Selection of sites by Indian retail firms: The diagram shown below provides a flow
diagram for site selection by major retail chains like Shoppers-stop and Pantaloon. The
diagram indicates that the process followed by Indian retail firms is almost similar to the
one followed by international retail firms.

Objectives
(a) Determine size and
share of the market
(b) Prepare a master plan
(c) Decide on merchandise
mix and assortment
(d) Other strategic issues

▲
▲ Matching to objectives,
location selected from metros,
mini metros or class A cities

Business plan decides stores

size and merchandise mix
Retail Store Location
Decide on store location based on market segments that can be
best catered to - segments like SEC A1 or A or B are identified as
per strategic needs
Local municipal corporation authorities
are contacted for clear title of property
▲

Cost factor
Quotations from
Real Estate Agents are
Obtained and cost is worked out

Figure 3.9: How shopper’s stop, Pantaloons, Westside decide on location and site selection

3.5 DECISION PROCESS FOR SITE SELECTION

Once the retailer has finalized on the general location and the best available sites in a
location, the retailer is ready for the final decision on the best site location.
You have seen in the above section how the retailer can go about evaluating and assessing
the best location and site; but retailers are well advised to use the assistance of a real
estate professional in this stage. Even if the retailer’s internal team has done all the
assessment till this point, the assistance of a real estate professional is still essential.
Patrick M Dunne et al., ‘Retailing’, 4th edn., ch.7 pp 259, South Western – Thomson
74 Learning Inc. USA, 2002, it is said that the retailer should always attempt for a 100 per
cent perfect location for its store. “A 100 per cent location is a location where there is Store Site Selection
no better use for the site than the retail store that is being planned.” Though there is no
sure answer for finding the 100% location, however, there is a general agreement among
experts on the type of factors the retailer should consider in evaluating sites. Figure 3.10
shows the important factors to be considered for selection of a site.

Figure 3.10: Factors for selection of site

1. Nature of Site
When dealing with a specific site one must necessarily give consideration on the following
aspects like:

Figure 3.11: Nature of Site

75
Retail Operations and It is important that the specific site should be visible easily. Particularly site on a major
Store Management-II
road or near the entrance of a mall will have higher visibility than any other site. Higher
visibility helps the store in creating immediate invite to the new consumers and also
builds faster awareness.
Right placement of the store in a given location is another important aspect needs to be
noted by a retailer. For example, a corner location in a shopping area which is at the
intersection of two roads or streets is the most visible location both for the pedestrians
as well as to vehicular traffic. Generally such sites are very costly, not only due to high
visibility but such sites also offer more window display area and multiple entrances to
customers. Many restaurants, cafes and lifestyle brands prefer such locations.
Convenience stores prefer side of the street location for better visibility and quick access
to customers.
A retailer needs to check on the size and shape of the building, for a departmental store
sufficient space is required and preferably a square shaped store as compared to the
space and size for a small apparel brand. The building in which the store is to be located
needs to have proper arrangement for parking, walkways, wash-rooms, etc.
The condition and aging of the site and the building must also be studied by the retailer.
An old building will naturally create problem if there are any leakages or redevelopment
issues are involved. Similarly, for a site if it has not been maintained properly by the
earlier tenant will raise the innovation and repair cost for the new tenant.
The retailer needs to check on the history of ownership of the building in case it is to be
located in a building, to ensure that there are no whatsoever hassles after the possession
of the site in the concerned building. Similarly the store-site must be checked on its
history of previous owners or tenants, just to ensure that the place do not have any
inherent drawbacks, which are not known from external appearance. Retailer need to
be careful about the mix of neighbours and the tenancy balance.

2. Traffic Characteristics
The retailer has to carefully study the characteristic of the traffic flow; both the pedestrian
type and the vehicular type. If the pedestrian and the vehicular traffic is of the right type
then it surely is a good determinant of potential sales. For example if a retailer of premium
branded apparel is considering two alternative sites. One site is in a CBD area, while
the other one is located in SBD area with group of specialty stores, close to an exclusive
residential area. The CBD site will generate more traffic in and around the store, but not
of the right type as buyers of premium brand generally prefer to visit exclusive and less
crowded locations; the SBD will be able to attract traffic of the right kind because of its
closeness to specialty stores and exclusive residential area.
The retailer needs to assess the availability of parking space, which is the most essential
part related to vehicular traffic. The availability of parking space tempts the regular
passers-by to make a quick or planned visit for completing their purchases. As a thumb
rule shopping centre estimate that there should be atleast five spaces for every 1000
square feet of selling space in medium sized shopping centres and ten parking spaces
for every 1000 square feet of selling space in a large shopping centre.
Another important factor needs to be considered by a retailer is the ease with which the
consumers can reach the store site. The availability of public transport facilities also
help in easy accessibility. Besides, the retailer needs to check on condition of the roads
leading to the store site; is it on a one way street; heavy road traffic causing congestions,
limiting accessibility to the site; limitation of crossings to the main road causing public to
take a long detour. It must be remembered that customers try to avoid heavy congested
76
roads and shopping areas and prefer other alternative locations that minimize travel/ Store Site Selection
driving time and other problems.

3. Type of Neighbours
It is important for a retail store to give consideration to type of neighbouring retail outlets
that surround the retail store. If these outlets are of similar types or are compatible with
each other then it normally help the retail store in generating good traffic to the store.
For example, if a kids apparel store is to be opened and there are two alternative sites
available. In one site the neighbouring outlets belonged to a toy store, Archie’s gift store
and ladies routine/regular items store. At the other site the neighbours were adult inner-
wear store, a Gym store, and sports store. Naturally the retailer will find the first option
best as the type of customers who would walk-in at other stores are compatible for the
purchase of kids-wear and vice-a-versa. Thus, the overall traffic to the location would
increase benefitting all the compatible stores in that location. Therefore, it will be seen
that a particular street will have group of hardware stores or group of shoe stores or
group of electrical hardware, material/plumbing hardware, tiles, and plywood stores –
each complementing the other stores.
Clustering of stores selling similar or compatible product lines is an old concept and still
holds good for attracting crowd of interested consumers to the store. It also benefits the
consumers as he has a choice to check on the collection and the prices available before
deciding on the purchase.

4. Terms of Purchase or Lease

The lease terms become an important factor of consideration once all the rest of the
factors have been evaluated and finalized. The retailer needs to consider following
aspects of the lease term, before finalizing on them:
Review the length of the lease term: It can be either very long or very short. If it is very
long then the retailer is forced to continue with the lease of the site and pay the due
rentals, even when the site is not generating enough profits or margins for payment of
operational expenses. And, if the retailer still decides to leave the property then, most
probably, the retailer has to lose on the deposit amount or pay certain penalties. If the
lease is too short then retailer is not able to gain on the advantage of capitalizing on the
consumer base it has already created or is forced to pay very high rentals as per the
latest trend and on revised terms of business, which may affect its operating cost of the
store.
The exclusivity clause: Whether the retailer will be the only store that would sell the
concerned product line or there will be more stores selling similar product lines. Though
to some extent, as we discussed in the earlier section, similar stores located in the
vicinity or next to each other in a shopping centre does help in generating business; but
if the balance is not maintained and the number of stores selling same product lines go
beyond certain limit, then it generates cut throat competition which ultimately make the
stores selling similar merchandise unprofitable.
The guaranteed traffic rate: If the traffic rate falls down then the retailer is given the
benefit of appropriate rent reduction. This is very useful clause, particularly during
recessionary times, as it happened during the year 2008-09, when traffic rate fell down
tremendously and forced many retailers to close down their operations in shopping centres/
malls, ultimately forcing the mall management to revise rentals for their key players.
Anchor clause: It allows for rental reduction if an anchor store fails to open on the
targeted time or when the store opens. This is another useful clause for a retail firm as
it protects its interest. Many a time it is observed that the store start its operation but the 77
Retail Operations and anchor store is not started, thereby the store losing on the traffic to the mall, which
Store Management-II
generally is attracted by the anchor store. The store is thus forced to pay rentals inspite
of the lower traffic to the mall or shopping centre.
Lease arrangement are generally made with either the tenant paying a fixed amount of
rent per month along with one-time payment of security deposit amount; or the tenant
has to pay a fixed percentage of sales revenue generated per month as commission,
with a clause guaranteeing minimum rent payment in case the rent payable falls below
the minimum guaranteed amount.
Generally, when a retailer decides on a site location in a shopping centre or mall it has to
work on a lease term. In the case of stand-alone shop it is possible for the retailer to
make outright purchase of the concerned property or the plot and then construct the
store premises. Normally small stores located in small shopping centres or stores located
in an inexpensive location will go for ownership. While finalizing on the purchase of
property the retailer needs to consider the following aspects:
● Whether to construct a new building or buy an existing one;
● Purchase price and the maintenance cost;
● Zoning restrictions as specified by the municipal corporation or district authorities
- on the type of business, open space to be kept around the property, construction
rules, etc.
● The age and condition of existing facilities;
● The adaptability of existing facilities – in case the store wants to expand its existing
product-lines or change of product lines; and
● The time to erect a new facility.
Majority of stores in central business area, and regional shopping centre are leased due
to high investment for ownership. It is observed that leasing minimizes the initial investment,
reduces the risk in case the retailer wants to change business or withdraw from retail
business, and allows access to prime locations, helps in building immediate traffic to the
store, no long term commitment. Retailer is able to invest the money in other aspect of
retail business or opening of more stores by entering into lease arrangement. The retailer
who accepts lease terms also have to agree on limitations on operating flexibility, restriction
on subletting and selling the business, possible nonrenewal problems, rent increases, and
not gaining any advantage from rising real estate values.

5. Expected Profitability
The last step in the evaluation of site is to develop an expected return on asset for each
of the possible sites. For doing this analysis the retailer needs to work on three crucial
variables: net profit margin; asset turnover; and return on asset for each of the identified
sites.
For working on return on asset the retailer must estimate the three factors: total sales,
total assets, and net profit. Each of these factors may vary depending on the site location,
for example sales estimate for a CBD site will be different than that for a neighbourhood
site, similarly the asset required for CBD site will vary from that required for SBD site
– also if the terms are on lease basis or ownership.
Finally net profit estimates will vary too depending on the site location, not only because
of varying sales amount but also due to different operating expenses – the salary and
wages payable in CBD location will be much higher as compared to that payable in an
isolated location or in a neighbourhood location.
78
Once, the retailer has assessed these three factors viz. sales turnover, total asset Store Site Selection
requirement, and net profitability the retailer then can find the return on asset, which is
the ultimate goal of any business – to achieve the best return on its investment.
The formula to be used for finding percentage return on asset is as shown here below:

Return on Asset = Net Profit ÷ Total Asset

Check Your Progress-B

1. Briefly comment on the following statements.
a) Lifestyle branded retailer would give more weightage to heavy pedestrian
traffic.
............................................................................................................
............................................................................................................
............................................................................................................
b) Higher visibility helps the store in creating immediate invite to the new
consumers.
............................................................................................................
............................................................................................................
............................................................................................................
2. Fill in the blanks with the appropriate word given in the brackets
a) Majority of stores in central business area, and regional shopping centre are
leased due to ________ investment. (High / Low)
b) ________ placement of the store in a given location is another important
aspect needs to be noted by a retailer. (Right / Wrong)
c) _________building will naturally create problem if there are any leakages.
(New / Old)
3. State whether the following statements are True or False
a) A retailer needs to evaluate every probable location and specific site on all
the attributes.
b) Right placement of the store in a given location is another important aspect
needs to be noted by a retailer.
c) Retailer needs not to be careful about the mix of neighbours and the tenancy
balance.

3.6 LET US SUM UP

● It is self-explanatory from the unit that location and store site selection plays a vital
role in finding out an appropriate location. So choosing to locate the retail business
will have a major impact on everything the retail store does.
● The difference between selecting the wrong location and the right site could be the
difference between business failure and success.
● Community shopping centre usually offers moderate assortment of shopping and
convenience goods and services to consumers from the nearby residential areas. 79
Retail Operations and ● A retailer who wants to be in a planned shopping centre will have to choose a
Store Management-II regional shopping centre or community shopping centre or neighbourhood shopping
centre; further it may have to decide on the derivative forms like megamall or
power centre or lifestyle centre.
● A retail firm has to follow some specific processes while evaluating a general
location and the specific sites contained within such general location. Before choosing
a retail store location, define how one sees your business, both now and in the
future.

3.7 KEYWORDS
Central Business District : A central business district (CBD) is generally a
hub of retail stores in a particular location of the
city. In foreign countries it is usually a downtown
location. The CBD is that location where there is
a good density of office buildings and the stores.
Secondary Business District : A secondary business district (SBD) is an
unplanned shopping area which is usually located
close to major road junctions – where there is an
intersection of roads or signals.
Neighborhood Business : Neighborhood business district (NBD) is an
District unplanned shopping area that serves the
convenience and service needs of a single
residential area. The NBD will comprise several
small stores catering to laundry and pressing
services, a stationery store, pharmaceutical store,
a barber shop, kirana stores, liquor stores, small
garment and textile store, small size restaurants
and bars, etc.
String : A string is also an unplanned shopping area which
consists of group of retail stores selling the same
product-line. These stores will be generally located
next to each other along a street or main road.
The Planned Shopping Centre : A planned shopping centre consists of a group of
architecturally unified commercial establishments
on a site that is centrally owned or managed,
designed and operated as a unit, based on balanced
tenancy, and accompanied by parking facilities.
Regional Shopping Centre : It is a large planned shopping facility, which could
be open or closed type. It caters to people who
work or live up to a 30 minute drive away. The
size of the market it caters to is about 100000+.
Community Shopping Centre : These are shopping centres which are moderate
sized with a medium sized department store or
discount store or a category killer store along with
many small sized stores. Community shopping
centre usually offers moderate assortment of
shopping and convenience goods and services to
consumers from the nearby residential areas.
80
Neighbourhood Shopping centre : This is a planned shopping centre with the main Store Site Selection
anchor being a super market or a drug store.

3.8 ANSWERS TO CHECK YOUR PROGRESS

Check Your Progress A

FIB
a) Unplanned b) firstly c) 60
T&F
a) True b) False c) True

Check your Progress B

FIB
a) High b) Right c) New
T&F
a) True b) True c) False

3.9 TERMINAL QUESTIONS

1. “Community shopping centre usually offers moderate assortment of shopping and
convenience goods and services to consumers from the nearby residential areas.”
Explain and Elucidate
2. What do you mean by an isolated store? Is it necessary to have a store at highway
or a street?
3. How do you think that Cost reductions are possible due to low rentals thereby
leading to lower prices?
4. Explain CBD considered as a location where there is a good density of office
buildings.
5. What measure one can take to put CBDs close to commercial offices and cultural
and entertainment facilities?
6. Elucidate with the help of suitable example that how CBDs still remains a major
retailing force?
7. “Probably with the success of an isolated store, many others want to open stores
selling similar product lines to cash in on the shoppers flow into the area.” Explain
8. How do you think that A planned shopping centre consists of a group of
architecturally unified commercial establishments?

3.10 FURTHER READINGS

Books
● Sriram B Iyer “Retail Store Operations” –– The McGraw-Hill Companies, New
Delhi, 2010
● Reuben ray “Stores Management” –– Himalaya Publishing House, 2010
● M.N. Rudrabasavaraj “Dynamic Global Retailing Management” –– Himalaya 81
Publishing House, 2010
Retail Operations and ● D.P. Sharma “E-Retailing Principles and Practice” –– Himalaya Publishing House,
Store Management-II
2009

Journals
● Allan A (2009) Neighbourhood Shopping Centres in Lower Hutt (1989-2008), Lower
Hutt: Opus International Consultants
● Dravitzki V and Powell F (2008) ‘Survival or decline in local shopping: A Wellington
case study’, Presented at the International Cities Town Centres & Communities
Society Conference , Sydney Olympic Park, Sydney, 7-10 October
● Handy SL and Clifton KL (2001) ‘Evaluating neighborhood accessibility: possibilities
and practicalities’, Journal of Transportation and Statistics 4(2/3), 67-78
● Smith A and Sparks L (2000) ‘The role and function of the independent small shop:
The situation in Scotland’, The International Review of Retail, Distribution and
Consumer Research 10(2), 205-226

Websites and Online Resources

● http://books.google.co.in/books/about/The_central_business_district.html?id=
1oBdyEnUWq8C&redir_esc=y
● http://geography.about.com/od/urbaneconomicgeography/a/cbd.htm
● http://www.smh.com.au/business/retail-goes-upmarket-in-cbd-20100613-y619.html
● http://www.delhicapital.com/about-delhi/metro-city.html
● http://urbani-izziv.uirs.si/Portals/uizziv/papers/urbani-izziv-en-2010-21-01-001.pdf
● http://www.citeman.com/8392-retail-stores-in-part-of-business-district-and-
shopping-center.html

Activity

Find out the modality framed by the retailer on each of the attributes with relevance
to the ratings.
...........................................................................................................................
...........................................................................................................................
...........................................................................................................................
...........................................................................................................................
...........................................................................................................................
...........................................................................................................................
...........................................................................................................................

Note : These Terminal Questions/Check Your Progress/Activity will help you to

understand the unit better. Try to write answers for them. But do not submit
your answers to the University for Assessment. These are for your practice
only.

82