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Rem 6
Rem 6
STORE LOCATION
Objectives:
Role of location in retail business Delineate the process of deciding location Understand Trading Identification Process Area and Site
DISCUSSION QUESTIONS
1. What factors do retailers consider when evaluating an area of the country to locate stores? 2. What retail locations are best for departmental stores, consumer electronics, category killers, specialty apparel stores and warehouse stores?
Good location may let a retailer succeed even if its strategic mix is mediocre
A store inherits a lot of its character from its location
Location Mapping: While planning the location strategy, it is imperative to map the locations so that the extent of each stores location reach is well defined Location Parameters: Necessary to define the store location identification parameters in a format and see if the desired attributes are available
Evaluate alternate geographic (trading) areas in terms of potential characteristics of residents, offices, commercial settlements, and existing retailers Determine what type of sites are desirable from the three basic location formats: isolated, unplanned district, or planned centre Select the general location of the store Evaluate specific alternate store sites
Constitution
Travelling Limits/ Barriers Natural Yes Competition No Profile Shopper Profile Size
List Size List Value Physical Psychological Growth of market Clearly differentiated Demographic Enough for Growth/ Others to survive
Type of Site
Economies of Scale
Legal Aspects
Geographic Area
SU
Selection of city
Site decision
Size of the citys trading area Population and growth trends Purchasing power and its distribution Trade potential Number, size quality of completion
Customer attraction of shopping district Quantitative and qualitative nature of competition Availability of access route Nature of zoning regulation Direction of the area expansion
Adequacy and potential traffic Complementary nature of adjacent store Adequacy of parking
CB
areas can be divided into three zones: Primary zone - the highest density of customers to population and the highest per capita sales Secondary zone - generating about 20 percent of a stores sales Tertiary zone - includes some out shoppers who are willing to travel greater distances to patronize certain stores.
Grocery Apparel
3 km
2.43 km 1.86 km
1 km
1.92 km
Cosmetics Jewelry 4 km
2.14 km 1.88 km
5 km
2.54 km
1.51km
Books
Music
1.5 km
3.26 km 4.6 km
Transportation network, banking facilities and other support services play an important role in the development of retail in a given area Physical barriers, such as toll bridges, poor roads, high traffic, railway crossings, one way streets, would reduce the size and determine the shape of the trading areas Economic barriers (difference in sales tax between towns) also affect the size and shape of trading areas Economic prosperity eg. Bangalore is a big retailing hub Customers also consider psychological barriers such as avoidance of locations due to racial, religious causes
Location (Margin Free Market): Kerala based retail chain specializing in grocery and toiletry product Target audience middle & lower middle class consumers. Deposit paid by card holders 250 stores in small town of Kerala First retailer to cross Rs, 500 cr turn over (USD 4 mln.) Unable to venture to North India because of steep real estate costs. Location (Nilgiris): Bangalore based retail chain specializing in bakery and dairy products Beginning to look for franchisees in Delhi, Mumbai, and Kolkata Right location and right partners absolutely essential for the success of venture. Zoning (McDonals): Located on the outskirts of Delhi- Ludhiana highway Destination location for consumers and highway travelers Check post established just before McDonald store to comply with new municipal order Every vehicle passing through from Ludhiana have to now pay tax using highway before reaching McDonald Adversely affected business
Knowledge about an areas population characteristics can be gained from reports of organizations like Central Statistical Organization of India, NCAER, A.C Nielsen and IMRB.
Type of Site
Competition
Economies of Scale
Shopper Profile
Legal Aspects
Geographic Area
SU
A.
B.
C.
Economies of scale: Retailers generally do not choose on the basis of best locations but for multiple locations. This enables them to achieve economies of scale in promotion and distribution (Subhiksha makes direct purchases). Legal aspects of the site: Zoning, rent, tenancy laws, taxation, sales tax rate across states, Value-Added Taxation (VAT).
Determine current trade area Define primary, secondary and tertiary zone based on density of customers Match current store location with potential new store location
ANALOGUE MODEL
AI Est. HH (000) A1 A2 B1 B2 C D 180 , 000 1.0 1.7 2.5 2.4 6.3 7.0 Ahm. 833 4.1 8.5 10.8 9.8 20.9 24.8 Bang. 1173 6.5 7.0 7.2 7.9 26.0 22.5 Chen. 1369 7.3 6.0 8.7 7.7 24.7 22.9 Kolkata Delhi 2625 4.4 4.7 10.0 7.6 17.7 26.2 2666 8.4 8.6 12.0 8.8 21.9 19.5 Mum. 3522 4.4 5.4 9.1 7.5 28.3 24.5 Hyd. 1021 5.1 10.2 8.8 7.0 20.7 18.6 Pune 802 6.1 6.0 9.0 5,8 25.3 23.5
E1 E2
Up to Rs.3k 3k 6k 6k 10k
3.4 5.5
77.7 16.2 4.0
8.9 12.2
47.4 30.3 12.4
8.8 14.2
50.9 33.3 9.9
13.2 9.6
53.7 26.4 11.6
13.4 16.0
54.5 29.7 9.9
7.9 12.8
33.2 35.0 19.4
10.8 9.9
38.6 41.7 13.2
8.2 21.3
46.4 29.0 12.8
9.8 14.5
46.8 32.6 10.1
1000 789
16368
12791
55.7
100
46.2%
100%
3.
4. 5. 6. 7. 8. 9. 10.
Kolkata
Chennai Hyderabad Bangalore Ahmedabad Pune Surat Nagpur
West Bengal
Tamil Nadu A.P Karnataka Gujarat Maharashtra Gujarat Maharashtra
613
363 258 254 220 206 124 104
13216
6424 5533 5586 4519 3755 2811 2123
74.5
43.9 37.6 48.2 30.9 11.5 17.5 5.8
66.9%
34.7% 30.2% 41.3% 27.7% 10.6% 17.2% 5.9%
REILLYS LAW
(The degree of attraction between 2 objects is based on the size of the object and the distance between them)
LOCALITY - A POPULATION 90,000 d D ab =
15 KM
STORE
1 + Pb/ Pa
20
D ab= Limit of location As trading area along the road to location B d= Distance along a major roadway between A & B P a = Population of location A P b = Population of location B
D ab =
= 15 km Limitations: 1 + (10,000/ 90,000) 1. Distance is measured by major thoroughfares and does not involve cross streets 2. Travel time does not necessarily reflect just distance travelled 3. Actual distance may not correspond with peoples actual perception of distance
P ij =
S j T ij
Step 1:
Determine the probability that a student in this university will shop at University Plaza. Using the formula for the Huffs model and data for the centres,
P ij = Step 2:
5000 3
= 0.51
6,200 customers x 150 = Rs. 9,30,000/Similarly the forecasted sales for Bookshelf is Rs. 65,720/- and that for Kitab Kendra is Rs. 8,21,5000/-. Therefore the total forecasted book sales for the entire trade is Rs. 18,17,220/-
8000
POPULATION
6000
4000
2000
Regression approach
Best when multiple variables are expected to explain sales
Methods may be applied to on-line stores as well, though accessibility to such stores is unlimited and shoppers from across the world can buy.
Objective function: Minimize total travel distance Allocation rule: Travel to nearest centre. Comments: Assumes negative linear relationship between distance and utilization. Ignores competitive locations.
Objective function: Maximize demand within proximal areas of outlets belonging to the firm. Allocation rule: Travel to nearest outlet. Comments: Consider location of competitive outlets. Locates in interstitial sites between proximal areas of existing outlets. Objective function: Maximize expected market share or profit. Allocation rule: Based on spatial-interaction- model. Comments: Considers trade-off between distance and non-distance factors. Allocates fixed demand among outlets based on spatialinteraction- model.
Spatial-interaction-based models