Choosing the right location for your retail store is complex but crucial. It requires a deep understanding of your target market, brand, and business model.
Whether you're struggling with foot traffic and conversions, looking to add a location, relocate an existing location, or are about to open a store, here are the often missed factors to retail success.
Work from home has changed much about predicting shopping behavior because consumers visit local grocery stores and other shops more often during the work week when it may be faster and more convenient.
Moreover, the Robin Report says 72 million+ millennials have reached the life stage of having families and buying their first homes. As a result, we are witnessing a suburbanization redux, echoing the post-World War II march of grandparents who put the suburbs on the map.
Top Points to Consider When Looking at a New Retail Space:
1. Foot Traffic
Think of foot traffic as the heartbeat of your store; no heartbeats, no life. A bustling area can be like a 24/7 advertisement for your brand. However, there are other factors more important than volume. It's the quality of that traffic. Is this a place where your ideal customer hangs out or passes by? A gift store that needs to interrupt people with multiple items in a front window won't be as successful without foot traffic. A Verizon store won't depend on people discovering it, as most shoppers would be trying to find one. And it isn't foot traffic alone but traffic speed you must consider. You can have a high traffic count on the street, but if the average speed is 50+, the street serves as a commuter space to get people where they're going. A slower downtown area allows more sightseeing from a car but can have lower car traffic. In retail, the "right place at the right time" isn't just a saying; it's your bottom line.
Knowing your customer is like having a backstage pass at a rock concert; it gets you up close and personal with the star of the show—your target audience. Review local demographics meticulously. Are these folks your target age group, income level, and lifestyle? A mismatch between your offerings and the local population can be as awkward as wearing a tuxedo to a beach party.
Proximity to your competitors is a double-edged sword. Being too close might create market saturation, making it hard for anyone to stand out. On the flip side, being near similar businesses could also generate more foot traffic, as the area becomes a known destination for your particular type of goods or services.
Think of your store's accessibility as the front door to your customer's journey. They'll move on if they can't find that door or it's too hard to open. How easy is it to get to your store? Is parking a hassle or a breeze? And what does it take to get into your shopping center? People rarely make U-turns for a business. What is the ingress like into your center, and how hard is it to get out? And let's not forget public transportation; you want your store to be as accessible as a catchy tune stuck in the minds of your customers.
5. Cost-Benefit Analysis
This is your classic scales of justice scenario. On one side, place all the costs—rent, utilities, maybe even renovations. On the other, stack your potential earnings. If the earnings tip the scale, you're in a win-win situation. But if costs weigh you down without a plan to grow sales, you'll swim upstream without a paddle. Better locations cost more for a reason. When you upsize your location, you do the same with your customer service. And if you get a lower rent, realize it too is for a reason, and you'll probably have to pay people to come to your shop via discounts and offers, so factor that in as well.
6. Healthy Competition
Don't be afraid of a competitor. A little competition can be good, as it draws more customers to the area. Just be clear with your vendors if they have exclusives or line agreements.
7. Zoning Laws
Zoning can be a silent killer; it's the iceberg to your Titanic if you're not careful. You must ensure that any particular restrictions are consistent with your business model. The most common are sign laws but could also include blue laws for your city. Always get this in writing with legal advice.
8. Lease Terms
Leases can be as binding as marriage and complex as a Rubik's Cube. You don't want to discover you're stuck in a 10-year commitment when you were eyeing a 5-year plan. Examine the contract for flexibility on extensions, exit clauses, and the costs included in that monthly payment. Using ChatGPT can help clarify who has the upper hand in a contract. Ample parking can be a significant advantage as well.
9. Data-Driven Decisions
Ethan Chernofsky from Placer.ai emphasizes that data-driven decisions are crucial in retail. You can get a free plan to discover Placer.ai's AI technology. It provides actionable insights into customer behavior, helping you understand:
Competitor Proximity: Sometimes, being near a competitor can benefit your business by driving more traffic to your location.
Consumer Behavior: Understanding how consumers interact with your store can help optimize your stock and services.
Offline Visibility: Placer.ai provides the much-needed visibility for retailers to understand what's happening offline, helping to counter the "retail apocalypse" narrative.
Mall Locations: If you're considering a mall location, Placer.ai can provide insights into:
Optimal Neighbors: Knowing who you should sit next to in a mall can optimize foot traffic. Location Cannibalization: Ensure that your mall location is not cannibalizing another location you have.
By giving thorough attention to these pillars, you set the stage for a retail environment that resonates with your brand, financial goals, and long-term vision.
Additional Considerations before Opening a New Store or Moving
Proximity to Potential Shoppers
Demographics: Research the area's demographics to ensure it aligns with your target market.
Consumer Behavior: Utilize data analytics, like Placer.ai, to understand consumer behavior in the area.
Proximity to Your Own Stores
Shift Coverage: If your new location is within 20 minutes of another of your stores, it's easier to cover shifts. Beyond 45 minutes, this becomes challenging.
Cannibalization: Be cautious that the new location doesn't cannibalize sales from another nearby store.
Demand to Support the New Location
Market Research: Conduct thorough market research to assess the demand for your products or services in the new area.
Competitive Landscape: Understand the competitive landscape to gauge if there's room for your business.
Impact on Online Store
Online Sales Dip: Closing a physical store often leads to a dip in online sales. According to a report by Competitor Monitor, the costs of store closings now directly impact online sales. They report that closing your physical store could reduce online sales by as much as 50%.
Questions to Ask Yourself Now:
Is the new location close to my target shoppers?
Is the new location close to my existing stores for easy shift coverage?
Is there enough demand in the new area to support another store, or will it cannibalize my existing stores?
What will impact my online store if I close a physical location?
Opening a new retail location or moving an existing one is a significant decision that requires careful planning and consideration. From understanding the local demographics and consumer behavior to assessing the impact on your online sales, each aspect plays a crucial role in the success or failure of your retail store.
By considering these factors, you're not just picking a location but setting the stage for your store's success. Remember, in retail, your location is not just where you do business; it's a vital part of how you do business.
The retail landscape is ever-changing, and staying ahead requires understanding and mastering the basics. Retail is about consistently being brilliant on the basics, and choosing your right location is one of those basics.