Retailing Strategy

Retail Market and Financial Strategy Chapter 5, 6 Human Resource Management Chapter 9

Retail Locations Chapter 7 Site Locations Chapter 8 Information and Distribution Systems Chapter 10

Customer Relationship Management Chapter 11

Assignment 1
Individual Choose a retail type (i.e. Specialty Store, Convenience, Department Store, etc.) Name your store (i.e. My Shop, More Food, Malee-Mart) Choose a secondary channel (besides B+M) and explain your choice in one paragraph. (i.e. kiosk better than electronic because..) One typed page due July 5

What Are the Three Most Important Things in Retailing?

Location! Location! Location!

Retail Locations
Shopping Centers

Strip Shopping Centers

Shopping Malls City or Town Locations Inner City Main Street Free Standing Sites Other Location Opportunities

Types of Strip Shopping Centers

Traditional
Mom and Pop Local Merchants, Childrens Place, GapKids, Blockbuster Video

Power Centers
Target, Home Depot, Office Depot, PetsMart, Best Buy, Sports Authority, Toys R Us

Elements in Retail Mix

Location Strategy

Customer Service

Store Display And Design

Merchandise Assortment

Communication Mix

Pricing

Types of Shopping Malls

Regional Centers

Super regional Centers

Lifestyle Centers

Fashion/Specialty Centers
Outlet Centers

Theme/Festival Centers
Merchandise Kiosks

Problems Facing Regional Malls

Competition from Alternative, More Convenient Locations
Focus on Apparel Weak Apparel Sales

Aging
Demographic Shifts

The Most Expensive Shopping Streets in the World

Street Location New York City Cost / sq foot / year

Fifth Avenue (48th to 58th St.)

57th Street (5th Ave. to Madison Ave.) Oxford Street

$580

New York City

$500

London

$400 $375

Madison Avenue (57th New York City to 72nd St.) Ave. des Champs Elysee Paris

$360

Tradeoff Between Locations

There are relative advantages and disadvantages to consider with each location.

Rent Traffic

Relative Advantages of Major Retail Locations

Location
Issues Large size draws people to area

City

Strip
Center

Shopping
Mall

Free
Standing

People working/living in area provided source of customers

Source of entertainment/ recreation Protection against weather

+ +

Relative Advantages of Major Retail Locations

Location
Issues Security Long, uniform hours of operation Planned shopping area/balanced tenant mix Parking Occupancy costs (e.g. rent)

CBD

Strip
Center

Shopping
Mall

Free
Standing

+ -

+ + +

+ -

+ +

+ +

Relative Advantages of Major Retail Locations

Location Issues Pedestrian traffic Landlord City Strip Center Shopping Mall Free Standing

+ + +
?

+ +
?

+ ?

+ +
?

control
Strong competition Tax incentives

Other Retail Location Opportunities

Mixed Use Developments Airports Resorts Hospitals Store within a Store

Matching Location to Retail Strategy

Department Stores Regional Mall

Specialty Apparel Central Business District, Regional Malls Category Specialists Power Centers, Free Standing
Grocery Stores Strip Shopping Centers Drug Stores Stand Alone

Types of Leases
Percentage Fixed - Rate Percentage leases lease based on a % of sales. Retailers also typically pay a maintenance fee based on a percentage of their square footage of leased space. Most malls use some form of percentage lease.

Variations of Percentage Leases

Percentage lease with specified maximum percentage of sales up to a maximum amount.
Rewards retailer performance by allowing retailer to hold rent constant above a certain level of sales

Percentage lease with specified minimum retailer must pay a minimum rent no matter how low sales are.

Sliding scale - percentage of sales as rent

decreases as sales go up.

Fixed Rate Leases

Fixed Rate Leases - used by community and
neighborhood centers. -Retailer pays a fixed amount per month over the life of the lease.

-Not as popular as percentage leases

Graduated Lease - a variation of the fixed rate

lease
-Rent increases by a fixed amount over a specified period of time.

Percentage or Fixed Rate Leases

Maintenance-increase-recoupment lease - used with either a percentage or fixed rate lease. Rent increases if insurance, property taxes, or utility bills increase beyond a certain point. Net lease - retailer is responsible for all maintenance and utilities.

Prohibited Use Clause

Limits the landlord from leasing to certain tenants. Some tenants take up parking spaces and dont bring in shoppers: bowling alley, skating rink, meeting hall, dentist, or real estate office. Some tenants could harm the shopping centers wholesome image: bars, pool halls, game parlors, off-track betting establishments, massage parlors and pornography retailers.

Exclusive Use Clause

Prohibits the landlord from leasing to retailers selling competing merchandise
Specify no out parcels Specify if certain retailer leaves center, they can terminate lease.

Escape Clause
Allows the retailer to terminate its lease if sales dont reach a certain level after a specified number of years, or if a specific co-tenant in the center terminates its lease.

Other Legal Issues

Zoning and Building Codes
Zoning determines how a particular site can be used. Building codes determine the type of building, signs, size, type of parking lot, etc. that can be used

Signs
Restrictions on the use of signs can also impact a particular sites desirability

Licensing Requirements
Some areas may restrict or require a license for alcoholic beverages