UNIT_II_ Operations Of A Retail Business

• Store location
• Choice of store location
• Impacting Factors for store location
• Market area analysis –
• Trade area analysis –
• Rating Plan method -
• Site evaluation
 Choosing a retail location
• The selection of the store site can be
- a systematic process or a nonsystematic process,
- which is based on “gut feeling” or “environmental observation” or
- an imitation of competitors (or near-competitors).
• On the other hand, it may be a systematic process, which would be based on
certain parameters and steps to be followed.
Choosing a retail (Store)location
• In this section we will look at the systematic process to be followed
which would start with the retailer first addressing the question on
---where to locate the retail store, or
----the region that he wants to locate the store.
• This may be a region in :
---a city,
---a state or
---an international market that he wishes to tap.
Steps Involved in Choosing A Retail Location

o1. Identify the market in which to locate the store.

o2. Evaluate the demand and supply within that market, i.e.,
determine the market potential or the market size.
o3. Estimate the number of shops that would be required to serve the
market.
o4. Identify the most attractive sites.
o5. Select the best site available.
Steps Involved in Choosing A Retail Location

Step-1 Market Identification

o The first step in arriving at a decision on retail location is: to identify
the markets attractive to a retailer.
oThis is important as retailer needs to understand the market well
especially in a country like India, where every region has its own
peculiarities (uniqueness) and needs.
oSimilarly, this is also important in case of an international expansion.
oThe characteristics of the markets of Europe are different from those
of America and the Far East.
Steps Involved in Choosing A Retail Location
Step-2 Determination of the Market Potential
oDemographic features of the population
oCharacteristics of the households in the area
oCompetition and compatibility
oLaws and regulations
oTrade area analysis
Step-2 Determination of the Market Potential
Factors Affecting the Choice of A Market
Demographics of Competition
Population and Area

Trade Area Analysis

Laws and Regulation
Step-2 Determination of the Market Potential

Types of Trade Areas

 What and Why Trade AREA ANALYSIS
• An integral part of determining the market potential is the analysis of the trade areas.
• A trade area is the geographic area that generates the majority of the customers for the store.
• Knowing the boundaries of the trade area helps the retailer estimate the number of potential customers
that may patronage the store.
• knowing the trade area allows for demographic and lifestyle information to be gathered from a variety of
public and private sources.
• provides insight into the people in the trade area and eventually will allow consumer demand for products
and services to be calculated.
• Therefore, defining the trade area is an important step in market analysis.
What and Why trade Area analysis
• An area often extends beyond the municipal boundaries of a town or
city.
• However, it is necessary to understand that trade areas can vary
depending on factors like the type of products/ services sold, or the
different market segments of customers.
• An understanding of it , also gives key inputs to the retailer for the
promotional and communication strategies to be adopted by the
firm.
• The potential of the trade area is also a key factor that helps
determine the number of stores that can be located in the area.
Factors Affecting the Choice of Store Site ( Step 3 &4)
oTraffic: refers to both pedestrian and vehicular traffic ; that passes the
site is an important determinant of the potential sales that can be
generated from that store.
oAccessibility of the market ( AOM) is also a key factor: AOM is
defined in terms of availability of public transport and road/local
train connections to reach the market.
oAmenities available: Depending on the type of product to be retailed,
facilities like free and ample parking become important.

oContinued…
Factors Affecting the Choice of Store Site
oTo buy or to lease: An important factor to be considered before
taking the decision on the site is the decision to buy the store or to
lease it.
o If the store is to be leased, then terms of lease will have to be studied
carefully.
oThe length of the lease period should not be too long or too short.
oThe Product Mix offered: The kind of product mix to be offered by
the retailer also affects his choice of location.
Checklist for A Store Location
 Rating Plan method –
Method of Rating Plan

• In this method, the rating is given to different factors that influence the plant location
decisions. This rating is based on the management’s perception. Once all factors have
been given rating, then the location obtaining the highest rating is considered for
locating a manufacturing unit.

• For example, a car manufacturing company wants to start its manufacturing unit in
India. For this, it selects four appropriate cities i.e. Noida, Gurgaon, Chandigarh, and
Jaipur. To choose the best location for its manufacturing plant, the company adopts a
rating plan method according to its business requirements. For this, the company made
a list of important factors of its business requirement. The same is shown in the table
given below:
Example : 1
Interpretation of Rating Plan Method Example
• The manufacturing company further allotted proportional values for each
factor in the form of percentage as per the Rating plan method. The above
table shows the approach of a rating plan that the car manufacturing
company has used.
• Once the rating is given to each factor and for each city (as shown in the
above table), then, the rating of Noida comes to the maximum one i.e. 95
out of 100. So, accordingly, the company has selected the Noida location for
establishing its manufacturing plant.
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