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Chapter 7. Location. Location, Location, Location. Important because? Prime consideration for customer’s choice Big sustainable competitive advantage 3 types of Location Shopping Center City or Town Location Freestanding Location. Shopping Centers.

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Chapter 7

Chapter 7

Location


Location location location
Location, Location, Location

  • Important because?

    • Prime consideration for customer’s choice

    • Big sustainable competitive advantage

  • 3 types of Location

    • Shopping Center

    • City or Town Location

    • Freestanding Location


Shopping centers
Shopping Centers

  • Group of retail and other commercial establishments that is planned, developed, owned, and managed as a single property

    • Strip Centers – parking directly in front of stores, open canopies may connect stores but no enclosed walkways.

    • Malls – enclosed, climate-controlled walkways,


Strip shopping centers
Strip Shopping Centers

Traditional – designed to provide convenient shopping for daily shopping within a neighborhood

Power Centers – bigger with more anchor stores. May have freestanding anchors. Few small specially tenants. May be located near malls


Shopping malls
Shopping Malls

  • Advantages

    • Entertainment

    • Tenant mix can be planned

    • Controlled external environment

  • Disadvantages

    • Higher rent

    • Lack of control over operations (hours,displays)

    • Intense competition with centers


Shopping malls1
Shopping Malls

  • Problems malls are facing

    • Increased competition from alternative locations

    • Shoppers are looking for value alternatives

    • Buildings are getting old

  • What malls are doing

    • Renting to nontrad tenants (dr offices, chapels,,,)

    • Focusing on entertainment

    • Demalling


Types of shopping malls
Types of Shopping Malls

  • Regional Centers

    • General merchandise mostly apparel

    • Anchored by department and discount stores

  • Superregional Centers

    • Mall of America

    • Bigger in every way

  • Lifestyle Centers

    • Outdoor traditional streetscape layout

    • Sit-down restaurants and a variety of retailers (no discount stores)


Types of malls cont
Types of Malls cont.

  • Fashion/Specialty Centers

    • Similar to lifestyle centers

    • Upscale apparel, boutiques, and gift shops

    • Located in high income trade areas

  • Outlet Centers

    • Consist mostly of manufacturers stores sell their brands supposedly at a discount

    • Strip configuration – enclosed mall – village cluster

    • Located away from regional centers often in touristy areas


Types of malls cont1
Types of Malls Cont.

  • Theme/Festival Centers

    • Center that have unified themes (architectural design and even merchandise

    • Tourists appeal – Often located in places of historical interest

    • No large stores

  • Merchandise Kiosks

    • Offer limited merchandise assortment

    • Relatively inexpensive, short term leases, often seasonal



City or town locations
City or Town Locations

  • These locations are typically unplanned, have multiple owners, and have access from the street

  • Central Business Districts (CBD)

    • Inner-City Locations

    • Main Street Locations


City or town locations1
City or Town Locations

  • CBD – is the traditional downtown business area in a city or town.

    • Declining in popularity

      • High crime rates, urban decay, weather

      • Lack of planning, limited parking

  • Inner-city Locations – high-density urban area populated primarily by ethnic groups

    • High profit potential but must culturally sensitive and involved in the community, customized assortment


City or town locations2
City or Town Locations

  • Main Street Locations

    • CBD located in the traditional shopping area of smaller towns or secondary business district in suburb

    • Cost are generally lower along with traffic

    • Generally smaller overall selection


Redevelopment efforts in city and town locations
Redevelopment Efforts in City and Town Locations

  • Many are undergoing gentrification (the process of renewing and rebuilding buildings)

  • Malls declining

  • Occupancy cost lower

  • Higher profits due to lower competition and stable customer base

  • Cities often provide incentives


Freestanding
Freestanding

  • Retail location that’s not connected to other retailers

  • Large space requirements

  • Advantages

    • Greater visibility

    • Lower rents

    • Ample parking

    • No direct competition

    • Few restrictions on signs, hours, or merchandise


Freestanding1
Freestanding

  • Disadvantages

    • Lack of synergy with other stores

    • Must be a destination

      • Offer special merchandise, price, promotion, or services


Other retail location
Other Retail Location

  • MXD’s (Mixed-Use Developments) – combine several different uses in one complexs

    • Airports

    • Resorts

    • Hospitals

    • Store within a Store


Chapter 7

Location CBD Strip Shopping Free

Issues Center Mall Standing

Security - - + -

Long, uniform - + + +

hours of

operation

Planned - - + -

shopping

area/balanced

tenant mix

Parking - + - +

Occupancy ? + - +

costs

(e.g. rent)

Relative Advantages of Major Retail Locations


Chapter 7

Location City Strip Shopping Free

Issues Center Mall Standing

Pedestrian + - + -

traffic

Landlord + + - +

control

Strong + + - +

competition

Tax ? ???

incentives

Relative Advantages of Major Retail Locations


Department store location strategy
Department store location strategy

  • Usually located in CBD and in regional and superregional shopping centers

  • These formats draw a large number of people

  • Shopping Goods


Specialty apparel stores
Specialty Apparel Stores

  • Thrive in CBD’s Main Street locations, and most types of malls

  • These location draw large numbers and offer entertainment and recreation

  • These location facilitate comparison shopping

  • Specialty goods


Category specialist
Category Specialist

  • Found in Power Centers or in Freestanding location

    • Helps keeps cost down

    • Good parking (large items)

    • Destination store


Grocery stores
Grocery Stores

  • Strip Centers

    • Lower costs

    • Less customer travel time

    • Carry convenience goods

  • Wholesale clubs use freestanding

    • People are willing to travel for savings


Terms of occupancy
Terms of Occupancy

  • Types of Lease

    • Percentage lease

    • Fixed-rate


Percentage lease
Percentage Lease

  • Specified min and max

    • Maximum – Retailer pays % of sales up to a maximum point

    • Minimum – Retailer pays a minimum amount no matter how lows sale go

  • Sliding Scale

    • %/sale amount decreases as sales go up

      • 4% for first $200,000 and 3% for sales> $200,000


Fixed rate lease
Fixed-Rate Lease

  • Retailer pays fixed amount monthly rent for the life of the lease

    • Graduated Lease – first 3 years $1,000 per month Next 5 years $1,250

    • Maintenance increase recoupment lease– Allows landlord to increase rent if expenses increase beyond a certain point

    • Net Lease – Retailer pays all maintenance and utilities


Terms of the lease
Terms of the Lease

  • Prohibited use clause – No leasing to tenants that take up parking but don’t bring in shoppers (bowling alley)

  • Exclusive use clause – can’t lease to retailers selling competing products

    • Can limit outparcels (banks or fast food) in the parking lot

    • Can specify that the lease release of a complimentary business leaves the shopping center


Terms of the lease1
Terms of the Lease

  • Escape Clause

    • Retailer can terminate its lease if sales don’t reach a certain level after a time


Legal considerations
Legal Considerations

  • Environmental Issues

    • Retailer can buy insurance to protect against these risk or write responsibility to landlord in the lease

  • Zoning and building codes

  • Signs

  • Licensing Requirements – liquor license