Chapter 07 - Retail Locations

CHAPTER 7
RETAIL LOCATIONS

ANNOTATED OUTLINE INSTRUCTOR NOTES

 Store location is often the most important decision
made by a retailer.

 “What are the three most important things in

retailing?” “Location, location, location.”

 Store location is an important decision for a retailer

because (1) location is typically one of the most
influential considerations in a customer’s store
choice, (2) location decisions have strategic
importance because they can be used to develop a
sustainable competitive advantage, and (3) location
decisions are risky.

 Locations are hard to change because retailers

frequently have to either make substantial
investments to buy and develop real estate or
commit to long-term leases with developers.

I. Types of Locations LO 7-1 Describe the types of retail

locations.
 The two basic types of location are unplanned
(freestanding and urban sites) and planned (shopping See PPT 7-5
centers).
Discuss the importance of store
 Unplanned locations do not have any centralized location based on students'
management that determines what stores will be in a shopping preferences. For the
development, where the specific stores will be located, or following types of products, how
how they will be operated. far would they travel to reach a
store?
 In planned locations, a shopping center developer and/or 1. Eggs and milk
manager makes and enforces policies that govern store 2. Socks
operations, such as the hours that a store must be open. 3. Running shoes
4. Home theater system
 In the United States, about 47 percent of the gross
leasable square feet of retail space is in planned
locations, with the remainder in unplanned locations. Ask students to evaluate the best
Gross leasable area (GLA) is the real estate industry’s location in the area around the
term for the total floor area designed for the retailer’s university. What are the
occupancy and exclusive use. characteristics of the location
that make it so attractive?

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Chapter 07 - Retail Locations

 Many types of locations are available for retail stores –

each with their own strengths and weaknesses. Choosing
a particular location type involves evaluating a series of
trade-offs.
See PPT 7-8 and 7-9
 These trade-offs generally concern the cost of the
location versus its value to customers.

 Trade area is the geographic area encompassing most of

the customers who would patronize a specific site.

II. Unplanned Retail Locations LO 7-2 Review the types of

unplanned locations.
 Some retailers put their stores in unplanned locations. In
an unplanned location, there is no centralized
management to determine where specific stores are and
how they are operated.

A. Freestanding Sites

 A freestanding site is a retail location that's not

connected to other retailers, although many are located See PPT 7-11
near other freestanding stores or near a shopping center.
Retailers with large space requirements, such as
warehouse clubs and hypermarkets, are often Have the students visited a
freestanding. retailer in a freestanding site?
What made them travel to such a
 Outparcels, which are stores that are not connected to
retailer? What retailers are best
other stores in a shopping center but are located on the
suited for a freestanding site?
premises, typically in a parking area, are freestanding
locations that are popular for fast-food restaurants or
banks.

 These locations enable retailers to have a drive-through

window, dedicated parking, and clear visibility from the
street.

 Advantages of freestanding locations are greater

visibility, lower rents, ample parking, no direct
competition, greater convenience for customers, fewer
restrictions on signs, hours, or merchandise, and ease of
expansion.

 The most serious disadvantage is the lack of synergy with

other stores. A retailer in a freestanding location must be
a primary destination point for customers. It must offer
customers something special in terms of merchandise,
price, promotion, or services to get them into the store.

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Chapter 07 - Retail Locations

B. Urban Locations See PPT 7-12

 Some retailers are finding urban locations attractive,

particularly in cities that are redeveloping their
downtowns and surrounding urban areas.

 Urban areas offer three main types of locations: the

central business district, inner city, and gentrified
residential areas.

 In general, urban areas have low occupancy costs, and

locations in the central business districts often have high
pedestrian traffic.

 Many urban areas are going through a process of

gentrification – the renewal and rebuilding of offices,
housing, and retailers in deteriorating areas – coupled
with an influx of more affluent people that displaces the
former poorer residents.

 Redevelopment opportunities for retailers are also

emerging in so-called brownfields – former industrial
locations with a history of chemical pollutants, as
developers and investors give these areas serious
consideration for clean-up.

1. Central Business Districts

See PPT 7-13
 The central business district (CBD) is the traditional
downtown financial and business area in a city or town.
Ask students whether they shop
 Although CBD locations in the United States declined in in the CBD of the town/city in
popularity among retailers and their customers for years, which they live. Ask them in
many are experiencing revival as they become gentrified, which city(s) they like to shop in
drawing in new residents and retailers. the CBD. Why? If they were
going to open a shop, would they
 Because shoplifting can be common, and parking is often consider a CBD location? Why or
limited, CBDs generally require retailers to hire security. why not?
 Shopping flow in the CBD may be slow on evenings and We would expect cities like San
weekends when area businesses are closed as parking Francisco, New York, London, and
problems and driving time discourage customers from Paris to be mentioned as great
driving in from the suburbs. “shopping cities.”

2. Inner City What are the various ethical

issues in retailers charging higher
 During the 1970s and 1980s, many U.S. and some margins in inner cities? What are
European cities experienced urban decay. Urban decay is the reasons retailers remain

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Chapter 07 - Retail Locations

the process of a previously functioning city, or part of a successful even though their
city, falling into disrepair. prices may be higher in inner
cities?
 The inner city in the United States refers to high-density
urban areas that have higher unemployment and lower See PPT 7-15
median incomes than the surrounding metropolitan area.
Some retailers have avoided opening stores in the inner
city because they believe it is riskier and achieves lower
returns than other areas. As a result, inner city consumers
often have to travel to the suburbs to shop, even for food
items. Many inner-city consumers face food deserts,
defined as areas that lack ready access to affordable fresh
fruits, vegetables, dairy, whole grains, and other healthful
foods, as might be provided by grocery stores or farmers’
markets.

 Retailing can play an important role in inner city

redevelopment activities by bringing needed services and
jobs to inner city residents, as well as property taxes to
support redevelopment efforts.

3. Gentrified Residential Areas

 The renewal and rebuilding of offices, housing, and
retailers in deteriorating areas—coupled with an influx of
more affluent people that displaces the former, lower-
income residents is known as the process of
gentrification.

C. Main Street
Ask students if national retailers
 Main Street is the traditional shopping area in smaller
have started to invade the “Main
towns, or a secondary business district in a suburb or
Street” in their neighborhoods.
within a larger city. Their occupancy costs are lower than
those of the primary CBD. They do not draw as many See PPT 7-14 for a comparison of
people and offer smaller overall selection through fewer CBDs and Main Street locations.
stores. Main Streets typically don't off the entertainment
and recreational activities available in the more
successful primary CBDs.

III. Shopping Centers and Planned Retail Locations LO 7-3 Analyze the characteristics
of the different types of shopping
 A shopping center is a group of retail and other centers.
commercial establishments that is planned, developed,
owned, and managed as a single property.

 By combining many stores at one location, the developer See PPT 7-16
attracts more consumers to the shopping center than if

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Chapter 07 - Retail Locations

the stores were at separate locations.

 Shopping center management maintains common

facilities (common area maintenance, or CAM) such as
the parking area and restrooms, and is responsible for
security, outdoor signage, and advertising for the center.
Shopping centers are generally managed by a shopping
center property management firm.

 Most shopping centers have at least one or two major

retailers, referred to as anchors.

 In strip shopping centers, supermarkets are typically the

anchors, whereas department stores traditionally anchor
enclosed shopping malls. Lifestyle centers may not have
anchors, while power centers are often made of
“anchors” exclusively.

A. Convenience, Neighborhood, and Community Shopping

Centers See PPT 7-18
 Convenience, neighborhood, and community shopping
Ask students for examples of
centers (also called strip shopping centers) are attached
neighborhood and community
rows of open-air stores, with onsite parking usually
shopping centers in the campus
located at the front of the stores.
area and discuss. What are the
 The primary advantages of these centers are that they pros and cons of these locations?
offer customers convenient locations and easy parking.
They also offer relatively low rents for retailers.

 The primary disadvantages are that there is no protection

from the weather. Strip centers also offer less
assortment and entertainment options for customers
than malls.

B. Power Centers

 A power center is a shopping center that is dominated by

several large anchors, including full-line discount stores,
See PPT 7-19
off-price stores, warehouse clubs, and category
specialists. Why would a smaller retailer
locate in a power center
 Unlike traditional strip centers, power centers often
anchored by full-line discount
include several freestanding (unconnected) anchors and
stores and off-price stores? What
only a minimum number of specialty tenants.
types of merchandise would
 Now many power centers are larger than regional malls likely be carried by the smaller
and have trade areas as large as regional malls. retailer?

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Chapter 07 - Retail Locations

 Power centers offer low occupancy costs and modest

levels of consumer convenience and vehicular and
pedestrian traffic.

C. Enclosed Shopping Malls

See PPT 7-20, 7-21
Ask students if they spend
 Shopping malls have several advantages over alternative more/less time in shopping malls
locations. than they did 5 years ago. [ It will
probably be less. Ask them why.]
 First, because of the many different types of stores, the
merchandise assortments available within those stores,
and the opportunity to combine shopping with
entertainment, shopping malls attract many shoppers Do students notice some
and have a large trade area. significant differences between
one shopping mall and another?
 Second, retailers and their customers don’t have to worry If so, what are these? [Prompt
about the weather. students on differences in types
of stores, overall ambience and
 Third, malls offer retailers a strong level of homogeneous environment of the shopping
operations with the other stores, such as uniform hours mall, general levels of service
of operation. through the various stores in the
shopping mall, etc.]
 Although shopping centers are an excellent site option for
many retailers, they have some disadvantages.

 First, mall occupancy costs are higher than those of strip

centers, freestanding sites, and most central business
districts.

 Second, some tenants may not like mall management’s

control of their operations. Managers can, for instance,
dictate store hours and window displays.

 Third, competition within shopping centers can be

intense.

 Fourth, freestanding locations, strip centers, and power

centers are more convenient because customers can park
in front of a store, go in, buy what they want, and go
about their other errands.

 Many malls were built over 50 years ago and appear

rundown and unappealing to shoppers.

 The consolidation in the department store sector has

decreased the number of potential anchor tenants and
diminished the drawing power of enclosed malls.

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Chapter 07 - Retail Locations

 Finally, the growing sales through the Internet channel is

cannibalizing sales in the store channel.

 One approach for dealing with aging malls is to tailor

their offerings to the markets that do exist today, for
example, immigrant populations.

D. Lifestyle Centers See PPTs 7-23

 Lifestyle centers are shopping centers with an open-air

configuration of specialty stores, entertainment, and
restaurants, with design ambience and amenities such as
fountains and street furniture.

 Lifestyle centers resemble the main streets in small

towns, where people stroll from store to store, have
lunch, sit for a while on a park bench talking to friends.
Thus, they cater to the “lifestyles” of consumers in their
trade areas.

 Due to the ease of parking, lifestyle centers are very

convenient for shoppers. But they typically have less
retail space than enclosed malls and thus smaller trade
areas, attracting fewer customers than enclosed malls.
Many are located near higher income areas so the higher
purchases per visit compensate for the fewer number of
shoppers.

E. Mixed-Use Developments

 Mixed-use developments (MXDs) combine several See PPT 7- 24

different uses in one complex, including retail, office,
hotels, residential, and other functions. They are
pedestrian-oriented and therefore facilitate a live-work-
play environment.

F. Outlet Centers See PPT 7-25

 Outlet centers are shopping centers that contain mostly

manufacturers’ and retailers’ outlets.
Ask students if they have been to
 Outlet centers have progressed from no-frills warehouses an outlet center. What types of
to well-designed buildings with landscaping, gardens, and products have they purchased
food courts that make them hard to distinguish from from such centers? Was the visit
more traditional shopping and lifestyle centers. an everyday shopping trip or part
of a vacation?
 Outlet centers are larger in size today than they were a

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Chapter 07 - Retail Locations

decade ago, with some outlets having more the one

million square feet.

 In the U.S. only two or three new outlet centers open

each year, yet outlet centers are becoming very popular
outside the U.S.

 Tourism is an important factor in generating traffic for

many outlet centers. Thus, many are in locations with
convenient interstate access and close to popular tourist
attractions.

G. Theme/Festival Centers See PPT 7-26

 Theme/festival centers are shopping centers that

typically employ a unifying theme that is carried out by
the individual shops in their architectural design, and to
an extent, in their merchandise. The biggest appeal of
these centers is to tourists.

 These centers typically contain tenants similar to

specialty centers, except there usually are no large
specialty stores or department stores.

H. Larger, Multiformat Developments See PPT 7-27

 New shopping center developments are combining

enclosed malls, lifestyle centers, and power centers.
Although centers of this type do not have an official
name, they may be referred to as omnicenters.

 Omnicenters represent a response to several trends in

retailing, including the desire of tenants to lower
common area maintenance charges by spreading the
costs among more tenants and function inside larger
developments that generate more pedestrian traffic and
longer shopping trips.

 In addition these centers reflect the growing tendency of

consumers to cross-shop, as well as the desire for time-
scarce consumers to participate in one-stop shopping.

IV. Nontraditonal Locations LO 7-4 Discuss nontraditional

retail locations.
 Pop-up stores, stores within a store, and kiosks are other
See PPT 7-28
location alternatives for many retailers.

A. Pop-Up Stores and Other Temporary Stores See PPT 7-29

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Chapter 07 - Retail Locations

 Pop-up stores are stores in temporary locations that

focus on new products or a limited group of products.

 . Retailers and manufacturers are opening pop-up stores

in vacant shopping centers. Pop-up stores are particularly
attractive to retailers with highly seasonal sales.

B. Store-within-a-Store See PPT 7-30

 Another nontraditional location for retailers is within

other, larger stores, known as store-within-a-store.
Retailers, particularly department stores, have
traditionally leased space to other retailers such as sellers
of fine jewelry or furs.

 Grocery stores have been experimenting with the store-

within-a-store concept for years with service providers
like banks, film processors, coffee bars, and medical
clinics.

C. Merchandise Kiosks See PPT 7-31

 Merchandise kiosks are small, temporary selling spaces

typically located in the walkways of enclosed malls,
Ask students which categories of
airports, college campuses, or office building lobbies.
merchandise are best suited for
 They usually have short-term leases and are often sale in merchandise kiosks.
operated seasonally. Discuss some of the merchandise
kiosks that students most
 Some are staffed and represent a miniature store or cart frequently see in the mall.
that could be easily moved. Others are twenty-first
century versions of a vending machine.

 For mall operators, kiosks are an opportunity to generate

rental income in otherwise vacant space and to offer a
broad assortment of merchandise for visitors. They also
can generate excitement leading to additional sales for
the entire mall.

LO 7-5 Match the locations to the

V. Location and Retail Strategy retailer’s strategy.
PPT 7-33 illustrates the need to
 Location type decisions need to be consistent with the
match the retailer’s strategy with
shopping behavior and size of the retailer’s target market
its location type.
and its positioning.

See PPT 7-34

A. Shopping Behavior of Consumers in Retailer’s Target Market

 A critical factor affecting the location consumers select to

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Chapter 07 - Retail Locations

visit is the shopping situation in which they are involved. Ask students how the nature of
the consumer’s shopping
 Three shopping situations are (1) convenience shopping, behavior will affect their
(2) comparison shopping, and (3) specialty shopping. preferred store location.

See PPT 7-35

1. Convenience Shopping

 When consumers are engaged in convenience shopping

situations, they are primarily concerned with minimizing Ask students where they are most
their effort to get the product or service they want. likely to purchase convenience
items such as soda, gum, and
 Stores selling primarily convenience goods usually locate
milk. Why do they select those
their stores close to where their customers are and make
particular locations?
it easy for them to park, find what they want, and go
about their other business.

2. Comparison Shopping See PPT 7-36

Ask students to discuss product
 Consumers involved in comparison shopping situations
categories they often comparison
have a general idea about the type of product or service
shop for. Where do they go to
they want, but they do not have a well-developed
compare? Describe the types of
preference for a brand, model, or specific retailer to
retailers they patronize for
patronize.
comparison shopping situations.
 Enclosed malls or shopping districts devoted to one type
of merchandise attract consumers by facilitating their
comparison shopping activities.

 Category specialists offer the same benefit of comparison

shopping as a collection of co-located specialty stores
because consumers can see almost all of the brands and
models in a particular product category.

 This comparison shopping makes category specialists

destination stores, places where consumers will go even
if it is inconvenient.

3. Specialty Shopping
 When consumers go specialty shopping, they know what Discuss specialty stores students
they want and will not accept a substitute. have been to. Would those stores
improve their business by being
 The retailer becomes a destination store. Thus,
more conveniently located? Why
consumers are willing to travel to an inconvenient
or why not?
location.
See PPT 7-37

B. Density of Target Market

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Chapter 07 - Retail Locations

 A factor that affects the retailer’s choice of location type

is the density of the retailer’s target market in relation to
the location. A good location has many people in the
target market who are drawn to it.

C. Uniqueness of Retail Offering

 Convenience of location is less important for retailers
with unique, differentiated offerings than for retailers
with an offering similar to other retailers.

 Customers will travel to wherever the store is located,

and its location will become a destination.

LO 7-6 Review the societal and

VI. Societal and Legal Considerations
legal considerations in selecting
 Societal and legal considerations often restrict where locations.
retailers can locate and operate their stores.

 Some restrictions reflect the general concern that many

communities have with urban sprawl, and more
specifically with the opening of big-box retail stores in
their communities.

 The legal issues that affect site decision include

environmental issues, zoning, building codes, signs, and
licensing requirements.

A. Urban Sprawl
 Urban sprawl is the increased expansion of residential
and shopping center development in suburban and rural
areas outside of their respective urban centers.

B. Opposition to Big-Box Retailers

 Retailers that operate big-box stores like Walmart,
Target, Costco, and Home Depot often meet with a great
deal of resistance when they plan to build a store in a
community.

 The opponents of the store openings argue that these

retailers sell merchandise at lower prices that drive local
retailers out of business; do not provide a living wage for
employees; hire part-time workers to avoid providing
health insurance benefits; and achieve their low prices by
manufacturing merchandise outside the United States,
thus contributing to the decline of U.S. jobs.

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Chapter 07 - Retail Locations

C. Zoning
 Local governments in the United States use zoning to
regulate land uses in specific areas to prevent any
interference with existing uses by residents or
businesses, as well as encourage the preservation of a
community’s sense of identity.

D. Building Codes See PPT 7-39 for a review of other

legal issues retailers must
 Building codes are legal restrictions that specify the type consider.
of building, signs, size and type of parking lot, etc. that
can be used at a particular location.

1. Signs

 Restrictions on the use of signs can impact a particular

site's desirability. Size and style may be restricted by
building codes, zoning ordinances, or even the shopping
center management.

2. Licensing Requirements

 Licensing requirements may vary in different parts of a

region. For instance, some Dallas neighborhoods are dry,
meaning no alcoholic beverages can be sold; in other
areas, only wine and beer can be sold.

VI. Summary

 Location decisions are particularly important because of

their high-cost, long-term commitment and impact on
customer patronage.

 Choosing a particular location type involves evaluating a

series of trade-offs including the occupancy costs of the
location, the pedestrian and vehicle traffic associated
with the location, the restrictions placed on store
operations by the property management, and the
convenience of the location for customers.

 Societal and legal considerations often restrict the

locations and operations of stand-alone stores and
shopping centers.

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Chapter 07 - Retail Locations

ANSWERS TO SELECT “GET OUT AND DO IT” QUESTIONS

2. INTERNET EXERCISE Go to the web page for Faneuil Hall Marketplace at:
www.faneuilhallmarketplace.com and the online site for CocoWalk at:
http://www.cocowalk.net. What kinds of centers are these? List their similarities and
differences. Who is the target market for each of these retail locations?
Faneuil Hall Marketplace – “It's the seat of American history and the site of one of America's
most famous shopping and dining experiences, Faneuil Hall Marketplace. For over 250 years,
the marketplace has played an integral role in the life of Boston's residents.”
Restaurants, shopping, history (close to the Freedom Trail) events, and entertainment. This
urban market place is located in Boston, Massachusetts and it attracts both locals and
tourist of all ages.
CocoWalk – “Miami’s ultimate destination for shopping, dining & entertainment. As the first
lifestyle center in Florida, CocoWalks’ unique grounds and buildings were carefully designed
to blend seamlessly into the surroundings of Coconut Grove, a bayside boating village known
for being eclectic, sometimes eccentric and always exciting.”
Shops, boutiques, a movie theater, restaurants, cafes, bars and live entertainment. This
center caters to Miami residents and international visitors with upscale shops and
sophisticated restaurants.
3. GO SHOPPING Go to your favorite shopping center, and analyze the tenant mx. Do the
tenants appear to complement one another? What changes would you make in the tenant
mix to increase the overall performance of the center?
Students’ answers will vary. Typically, in most shopping centers, the tenant mix is
complementary. Many retailers want to open locations close to their competitors, especially for
comparison shopping purposes. Ask students if there is a retailer that they would like to see in
their favorite shopping center that isn’t currently there now. What stores would they remove
from the shopping center to improve the overall quality of the shopping experience at the
shopping center?
4. GO SHOPPING Visit a lifestyle center. What tenants are found in this location? Describe the
population characteristics around this center. How far would people drive to shop at this
lifestyle center? What other types of retail locations does this lifestyle center compete with?
Students’ answers will vary. In most lifestyle centers, the tenants are going to be a mix of
higher-end specialty stores with a few smaller format department stores. Stores like Williams-
Sonoma and Restoration Hardware tend to locate in lifestyle centers. When describing the
population surrounding the center, it will likely be in a more affluent part of town versus other
shopping centers. Lifestyle centers typically compete with other lifestyle centers or regional
shopping malls, and in some instances, power centers.

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Chapter 07 - Retail Locations

5. INTERNET EXERCISE Go to the homepage of your favorite enclosed mall and describe the
mall in terms of the following characteristics: number of anchor stores, number and
categories of specialty stores, number of sit-down and quick service restaurants, and types of
entertainment offered. What are the strengths and weaknesses of this assortment of
retailers? What are the unique features of this particular mall?
Student answers will vary depending on the mall selected. Students should be able to
categorize the different retailers (anchor stores versus specialty stores, etc.). How much
entertainment does the mall provide? Does that appeal to students? Do students visit the
malls because of the stores or because of the supplementary services like dining and
entertainment?

6. GO SHOPPING Visit a power center that contains a Target, Staples, Dick’s Sporting Goods,
Home Depot, or other category specialists. What other retailers are in the same location?
How is this mix of stores beneficial to both shoppers and retailers?
Other retailers in this type of shopping center may include a food store, clothing stores such
as Old Navy, a book store, craft store, and possibly some quick service and family
restaurants. Students should consider how the retailers prefer low occupancy costs, high
traffic levels, and are trying to reach the same target customers. Shoppers enjoy the
convenience of easy parking and many retailers located together.
7. INTERNET EXERCISE Review the research summarized at
http://www.accessmagazine.org/articles/spring-2015/the-first-big-box-store-in-davis/. How
did Target opening a store in Davis, California, affect the town? Summarize the benefits and
harms. Are you surprised by the study findings? Why or why not?
The city’s General Plan deemed “warehouse style retailers … inappropriate given the
nature and scale of the Davis market” and restricted retail businesses outside downtown
to sizes appropriate for serving small neighborhoods rather than larger regions. The land
use code limited store sizes to 30,000 square feet, far less than the proposed 137,000 for
the Target store.
Impassioned Davis residents voiced concerns regarding Target’s arrival, including its
environmental, economic, fiscal, social, and cultural impacts. Some residents feared that
Target would harm local businesses and draw shoppers away from neighborhood
centers. Others argued that allowing Target to move into Davis would be a public
endorsement of big-box retail, a type of built form thought to be incompatible with the
city’s larger sustainability goals and town culture.
Supporters of the project argued that Davis residents already shopped at stores like
Target in other cities, and that a Davis Target would fill a retail need, keep sales tax
revenues within the city, and reduce driving.
Target finally opened in Davis in October 2009. The store added to the shopping options
available to residents, and it lowered overall greenhouse gas emissions without seriously

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Chapter 07 - Retail Locations

harming downtown. The new Target is popular with Davis residents: while just over 50
percent of voters supported the Target store, nearly 90 percent of respondents reported
having shopped there a year after its opening.
ANSWERS TO DISCUSSION QUESTIONS AND PROBLEMS

1. Why is store location such an important decision for retailers?

Location decisions are particularly important because of their high-cost, long-term

commitment and impact on customer patronage. Location is typically one of the most
influential considerations in a consumer’s store choice decision. Further, location decisions
have strategic importance because they can be used to develop a sustainable competitive
advantage.

2. Pick your favorite store. Describe the advantages and disadvantages of its current
location, given its store type and target market.

Students store choices will likely vary considerably. The store’s store type and target market
must be clearly defined. And then the location should give the store a competitive
advantage with the target market they have defined.
Store: Urban Outfitters
The target market for this store can be defined as young men and women from ages 16 to
25 that live in the city or want the urban look. The best location for this store would be in a
central business district. This is a traditional downtown business area in a city or a town.
The store will draw from the business activity of the downtown area. There is an inflow of
people from public transportation and a high level of pedestrian traffic.
Store: Gap
The primary target market segments for this store are men and women ranging from as
young as 15 to 40 years old looking for value in basic clothing. The best location for this
store would be in a shopping center, particularly a mall. A shopping center consists of a
group of retail and other commercial establishments that is planned, developed, owned, and
managed as a single property. A mall focuses on pedestrians and gains its advantage
because it can have a set of stores that carry similar merchandise assortments. The target
market looking for basics, can shop at the Gap and also shop at complementary stores
nearby. This allows the target market to have a one-stop shopping experience.
Store: Verizon
The target market segments of Verizon are men and women ages 18 and up looking for a
cellular phone for convenience and safety. A great location for Verizon would be a kiosk. A
kiosk is located in mall common areas, is stationary, and has many conveniences of a store

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Chapter 07 - Retail Locations

such as telephones, electricity, and moveable shelves. Advantages of these selling spaces
are the prime mall locations, the relative inexpensiveness, and the short-term leases
available, which reduce the owner’s risk. This is a perfect location for a Verizon store
because the items are very small and require little shelf space. A customer looking to get a
phone does not need a lot of frills, but instead wants the information and the phone at a
convenient location. Also this location will appeal to their target market. As they walk down
the mall they may be induced to purchase without previous planning.

3. Home Depot typically locates in either a power center or a freestanding site. What are the
strengths of each location for this home improvement retailer?

The tenant mix of a power center lends itself to attracting customers who would want to
shop at Home Depot. Home Depot will also benefit from this location due to increased traffic
flow of customers who will shop at a power center.
Home Depot will benefit from a freestanding location due to probable lower rent, abundant
parking, lack of direct competition, and the ability to design and operate the store with few
or no restrictions.

4. As a consultant to 7-Eleven convenience stores, American Eagle Outfitters, and Porsche of

America, what would you say is the single most important factor in choosing a site for
these three very different types of stores?

The most important criterion that is common to all types of stores is a location that attracts
the right segment of consumers. However, since the segments targeted are different and
the merchandise/services offered are also different, these differences would also affect the
location decision for each of the retailers. For 7-Eleven, consumers who are shopping for
convenience products – food as well as nonfood items – are the primary target. Since these
consumers do not wish to travel far and are willing to pay a slightly higher price as compared
to grocery stores, the best locations for 7-Eleven stores are smaller, neighborhood strip
centers. For American Eagle Outfitters, the CBDs, Main Street, or enclosed malls may attract
their target consumers, while for Porsche of America, upscale commercial neighborhoods –
typically a commercial avenue further away from downtown – will likely appeal to their
target customers.

5. Retailers are locating in urban areas that have suffered decay. As a result, these areas are
rejuvenating, a process known as gentrification. Some people have questioned the ethical
and social ramifications of this process. Discuss the benefits and detriments of
gentrification.

The benefits of gentrification include the redevelopment of urban areas that are in a state of
decay. Usually, these areas would continue to decay if it weren’t for the interested retailers.
Some retail developers argue that gentrification projects have positive effects on fighting
crime and drugs. Gentrification also allows retailers to develop buildings that would be
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Education.
Chapter 07 - Retail Locations

financially impossible to duplicate in today’s market. These structures often have significant
historical value. Finally, retail gentrification promotes the development of projects such as
housing and offices. This allows whole neighborhoods to make a comeback.
Gentrification may negatively impact the historical and/or cultural makeup of an area. In
addition, gentrification may be so successful that neighboring properties may increase in
value to the point that existing tenants may not be able to afford the higher rents and/or
taxes. This is especially controversial in terms of displacement of lower income individuals
and families. Gentrification projects are often highly speculative due to the expensive
financing and high risks usually associated with projects of this kind. When financing is a
problem, a project may have to be temporarily stopped or abandoned before completion,
which results in further accelerating decay of empty buildings and an uncertain future for
existing businesses and people.

6. Staples and Office Depot/OfficeMax all have strong multichannel strategies. How do
competition and the Internet affect their strategies for locating stores?

Since all three stores sell mostly standardized and easily specified office supplies, the
products stocked by them can be conveniently and easily sold through the Internet. The
primary target markets for this type of retail outlets are small office/home office businesses.
The Internet enables these firms to target medium and large firms as well. At the same time,
the Internet is also an opportunity to target customers far removed from their primary
concentration areas (Southeast U.S. for Office Depot and Northeast U.S. for Staples) without
incurring the additional costs of each store location in markets where consumers may be
sparse. While it does cost a tremendous amount of capital to set up and successfully operate
an Internet site, the costs of the site are spread to a wider target market and trading area as
compared to the costs of setting up individual stores in multiple locations. So the Internet
enables these firms to optimize on marketing efforts to various target markets as well as the
costs of setting up new stores in locations that may not generate sufficient traffic. Since
these three competitors offer similar merchandise, it is important to offer some type of
rewards program to build store loyalty. Another way to differentiate in this industry is to
offer unique customer services such as delivery, printing, and computer support.

7. In many malls, quick-service food retailers are located together in an area known as a
food court. What are the advantages and disadvantages of this location for the food
retailers?

Mall food courts allow customers to find the quick-service food retailers in the center of the
shopping mall. Since food courts usually have public seating in one area within the food
court, each quick-service food retailer does not have to provide a separate seating room for
customers. The common area charges associated with these kinds of arrangements are
significantly less than if each retailer provided a separate seating area. This arrangement
enables the retailers to lease a smaller amount of expensive space. Finally, food courts
provide a variety of alternatives therefore creating a synergy that attracts a larger group of
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Education.
Chapter 07 - Retail Locations

potential customers. Groups of potential customers, such as families, can patronize a variety
of quick-service food retailers at one time.
In terms of disadvantages, food courts require the quick-service food retailers to be located
next to each other, thus making the immediate environment extremely competitive. In
addition, since malls with food courts usually insist that the retailers locate within the food
court, there is no opportunity to try to locate to a better position within the mall. Also, food
courts tend to have limited space, therefore creating less flexibility in store design and
expansion.

8. Why would a Payless ShoeSource store locate in a neighborhood shopping center instead
of a regional shopping mall?

A Payless Shoe Source might locate in a neighborhood shopping center because these
centers offer customers convenient locations and easy parking, and offer retailers relatively
lower rents than regional shopping centers. This may enable Payless to offer lower prices
than a store offering comparable merchandise at the mall, and may also serve to offset the
opportunity cost of being located in a lower traffic location.

9. How does the mall near you home or university combine the shopping and entertainment
experience?

Answers here will vary widely. Students may describe efforts at traditional shopping centers,
such as special promotions, food courts, holiday events, or music/video offerings. Others
may respond with entertainment features typically found at lifestyle centers, including
concerts and events, more restaurants and clubs, and recreation centers.

10. Consider a big city that has invested in an urban renaissance. What components of the
gentrification project attract both local residents and visiting tourists to spend time
shopping, eating, and sightseeing in this location?

Local residents will likely be attracted to the convenience of retailers located in or nearby
their neighborhoods, along with the needed services, jobs, enhanced safety, visibility, and
choices among retailers that would accompany the gentrification project. Visiting tourists
may be more attracted to the historical significance and unique entertainment elements
built into the project.

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Chapter 07 - Retail Locations

CONNECT ACTIVITIES FOR CHAPTER 7

Activity Title Activity Type(s) Topic Learning Objective(s)

Retail Locations Drag and Drop; Types of Retail 7-1 Describe the types
Matching (accessible Locations of retail locations
version) available to retailers.

7-4 Discuss
nontraditional retail
locations.
Ted's Taqueria - Decision Generator Types of Retail 7-1 Describe the types
Evaluating Retail Locations of retail locations
Locations available to retailers.
7-4 Discuss
nontraditional retail
locations.
Legal Restrictions for Click and Drag; Types of Retail 7-6 Review the
Retailers Matching (accessible Locations societal and legal
version) considerations in
selecting locations.
Consumer Shopping Click and Drag; What Is a Retail 7-5 Match the
Behavior Matching (accessible Strategy? locations to the
version) retailer’s strategy.

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Education.