1. 1-Store Location
1.1. MARKET IDENTIFICATION
1.1.1. A retailer has to understand which market it wants to cater to considering market attractiveness.
1.2. ASSESSING THE MARKET POTENTIAL
1.2.1. A market's potential can be assessed by studying the demographic characteristics of the market (size, sex, education, rural-urban break-up, etc.)
1.2.1.1. This is further enlarged by studying household income and the distribution of this income.
1.2.2. The competition and compatibility of the retail outlet also counts. The other retail outlets in the area are considered while deciding the location.
1.3. TRADE AREA ANALYSIS
1.3.1. The market potential is gauged by analyzing the trading areas - geographic areas which generate the majority of the customers.
1.3.1.1. 1-Primary Trading Area
1.3.1.1.1. It is that part where majority of the customers are based, say 60-65 per cent. It is close to the store
1.3.1.2. 2-Secondary Trading Area
1.3.1.2.1. It is situated at a distance of 2-7 miles or under 20 minutes of driving time from the outlet. It contains 15-25 per cent of the outlet's customers.
1.3.1.3. 3-Tertiary or Fringe Area
1.3.1.3.1. It contains the rest of the customers. It includes those who occasionally shop as an alternative to local shopping. It can extend up to 50 miles, where there is a lack of alternatives.
2. 2-GEOGRAPHIC INFORMATION SYSTEM
2.1. SITE IDENTIFICATION AND SELECTION
2.1.1. Once market potential is assessed, a retailer has to decide the site to locate the store
2.1.1.1. Traffic
2.1.1.1.1. Both pedestrian traffic is taken into account. The traffic that passes the site indicates what its likely sales potential is going to be
2.1.1.2. Competition
2.1.1.2.1. Who are our neighbors? They can be good or bad, depending upon the nature of our business
2.1.1.3. Buying/Leasing
2.1.1.3.1. A site can be purchased outright or can be obtained on lease. The lease terms require careful study - whether the period of lease is long or short and the rent that is charged. A short lease may necessitate a change of location. A high lease rental may affect the final accounts.
2.2. Anticipated Profits
2.2.1. Each possible site is evaluated on the basis of return (estimated) on assets. This will require three inputs - total sales, total assets and net profit. Each will vary from site to site.
2.3. Product Mix
2.3.1. Merchandise available for sale also influences the site selection. A grocery store may be located in a residential society. It may not work out in a commercial business district