Tips for Local Businesses to Select Better Store Locations:
The site selection process is fun, but it can be laborious.
There are many complexities that exist, like creating and reviewing market analysis and financial analysis reports, or computing the jargon used in the negotiating process.
But, what about local businesses with fewer resources?
Well, you have one major advantage above the national group. You’re local.
Real estate is a local business and you know the town better than someone who does not live there. You can put yourself in the customers shoes because you know the places you like to visit and why. But, why stop there? You should utilize the same process and technological advancements the national groups use, and ultimately, cross reference the two to select better locations.
Here are a few things to consider in reviewing different locations:
- Customer segments: It is important to recognize who your customer is and where they are coming from. For instance, restaurants receive customers from work, nearby shopping area, freeways, cinemas, etc., while office supply stores receive customers from smaller businesses and local consumers. Additionally, it is important to recognize how far your customer is willing to drive. The majority of sales from convenience stores come from 1-2 miles, grocery store and restaurant majority sales come from 2-4 miles and destination retailers, like IKEA, come from 20-30 miles. Therefore, it is important to know where your customer is located and how far they are willing to drive.
- Customer profiling and geospatial studies: It is important to review the trade area around each possible location. In the U.S., every household is categorized on demographics (income, education, profession), psychographics (lifestyle behavior) and purchase behavior (expenditures). We have worked with ESRI BAO and RCLCO on different demographic reports. These data companies can create market studies with an analysis of 1-mile, 3-mile and 5-mile radius reports or five-minute, 10-minute and 15-minute drive time analysis from a given address. These reports help determine if the immediate market demographics fit your customer profile. I encourage local businesses to ask for and review demographic reports for different locations that they are considering.
- Sales forecasting: This will be more difficult with smaller companies that have limited data on different locations, but it is still a useful procedure, especially if there are growth plans for scaling the business. For sales forecasting, some national tenants use regression modeling combining customer profile data, trade area extent, sales by household by distance, market saturation levels and co-tenancy influences and other correlating variables.
Ultimately, local businesses will be able to better serve their customer and increase stores sales by being more strategic in their site selection.
Tom Johnson, Sales & Leasing Coordinator, is currently working with local, regional and national business owners on the new mixed-use, Waterside Place town center.