By
Stuart Finlayson
Choosing
the perfect location for your business is not easy. STUART FINLAYSON
offers insights into finding the right site.
Choosing
a location is more a science than a lottery. It's one of the most
important decisions you will make when setting up a retail business.
And yet,
many business owners don't do comprehensive analysis of a location
before choosing it. The study of demographics can help to avoid
leasing in a busy area only to find that your shop is empty because
the type of shoppers the area attracts are not interested in what
you are offering.
There are
many factors to consider. After all, you may end up being locked
into a long-term lease, so the result of an inappropriate choice
can be financially ruinous. First, you must look at your market
as a whole. Are businesses, offering similar services or products
in that area, making money? Look at the competitors who are making
a success of their business to find out what you can learn from
them. You must also ask yourself if you can deliver a similar
level of service or a similar product at a competitive price because
if you can't, you will not succeed. To some degree, you must also
be able to assess from current trends, how your market is going
to develop in the future so that you won't get left behind.
You must
also figure out who your potential customers are so you can set
yourself up in an area that has the largest concentration of your
target market, or in an area that will draw that target market.
Rather than generalising your market with a label such as 'professional
woman', break that group down into sub-groups by age, car ownership,
income, marital status, dependants, and so on, so you can more
easily identify which socio-economic bracket the majority of your
potential customers are in. You can then choose a location that
will naturally attract those target customers.
Lateral
Research
Once you
have identified a 'right' area, you must then gather as many facts
as you can about the area and its inhabitants. By assessing the
demographic make-up of an area you can see at a glance what proportion
of the community fits into your idea of who is likely to visit
the store. Examine the number of competitors as well as the people
who live in this area.
Mark Boon,
director of Retail Locations, a company that helps retailers identify
optimum locations, points out that businesses too often choose
their location for the wrong reasons, without any regard to its
potential. "Often, people see a shop, fall in love with it, and
think it would be a good place to set up without giving due thought
to what figures the shop is likely to return, or without looking
at the competition or retail mix of the area." The competition
must be factored into any decision you make on a location, as
an area is only going to be able to sustain so many hairdressers
or newsagents before reaching saturation point, and, of course,
the more competition there is nearby, the more it eats into your
potential profits.
Even if after
reviewing the competition you decide that there is still money
to be made, don't decide there and then. To further define your
area, look at the retail mix. Is there a common thread running
through the other outlets in the area? For example, if you are
trading in the central business district (CBD), it is unlikely
that bulky items will sell well, as customers are likely to have
to lug such items much further to their car than they would outside
the CBD shopping centre. This is one of the reasons why most furniture
retailers locate out of the town centre.
Three Options
For retail
businesses, there are essentially three types of location - the
CBD, the strip location, and the shopping centre.Each has merits
and negative aspects, and it is important to examine how they
stack up against what you need in order to run your business successfully.
-
Central business district. The initial appeal of a
CBD is obvious, i.e., the large concentration of people. When
looking to locate in the CBD, this must be counter-balanced by
the fact that your opening hours are usually restricted, and large
parts of the CBD tend to be empty at night, which creates safety
concerns. There are also likely to be lulls in trade during the
day outside the peaks of the morning, evening and lunchtime rush
hours. Such areas are popular during weekends and holidays, which
goes some way to compensating for weekday lulls and night-time
inactivity.
-
Strip location. These are generally the main focal
point of their catchment area. They tend to feature a small supermarket,
newsagent, post office, hairdresser and take-away food outlets.
Because of the footfall these type of shops generate, other retailers,
such as clothing outlets, bookshops and jewellers, can set up
in areas where they could not otherwise operate as a stand-alone
concern.
There are
several things to look out for when assessing the merits of a
particular strip. Is it easily accessible? Is there adequate car
parking? Will the other outlets complement or compete with you?
Does the strip look prosperous? Does the strip look like it has
been revamped in recent times, or is it in need of refurbishment?
Other things to look out for include empty units - are there a
number of them and how long have they been empty? Find out if
there are any road development plans, as a new road can take business
away from the area. It's a good idea to locate your business on
either end of the strip location as this gives your business greater
visibility. Alternatively, if there is a supermarket in the strip,
this is usually the main focal point of the area, so it is good
to be positioned next to it to capitalise on the passing trade
it generates.
Mark Boon
suggests the supermarket is also a good place to look to determine
the viability of the strip. "A good indication of the supermarket's
turnover is the number of active checkouts, but also examine the
sell-by dates on products. Since the oldest product is normally
at the front, it is often easy to estimate the through-put of
customers and hence the drawing power of the strip location."
-
Shopping centres. As with the other potential locations
we have looked at, locating in a shopping centre has both good
points and bad.
The most
obvious plus is the sheer volume of customers they attract.
The marketing
power you enjoy is also that much greater with the combined resources
of the centre's units. Negative aspects can be high rents, restrictions
imposed on the unit by the centre management, centre opening hours
that may be insufficient for your needs, or your business may
get lost in the vastness of the centre.
When considering
locating in a shopping centre it is essential, as with locating
in a strip, to assess the level of trade the centre attracts.
Is the centre
the biggest draw in its catchment area, or is there a bigger and
better centre nearby? Again, the number of vacant shops, and the
length of time they have remained vacant, provides a useful indicator
of the centre's retail health.
The position
of your unit within the centre can be pivotal to its success.
Dead-end corridors and other areas outside the main stream should
be avoided. Ideal spots include units close to anchor stores and
areas that enjoy a heavy through-traffic of customers.
Second
Best
Don't settle
for second best. While some may argue that the lower turnover
generated from a poor location can be offset against the lower
rent, what you are actually doing is leaving the prime position
open to a competitor who will take business away from you.
Identify
shops that complement yours and appeal to the same demographic
so you can benefit from footfall. A prime example of how this
tactic works is with real estate agents. It is no coincidence
that real estate agents tend to locate near each other. They benefit
from each other's traffic, as people will tend to visit each agent
if there are several positioned in the same street. And if anyone
knows about positioning it is real estate agents!
* Stuart
Finlayson is a journalist at Loyalty Australasia. He can be contacted
at stuart@loyaltyaust.com.au
