Lecture #7: Store Location
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In real estate, the three most important aspects are location, location, location. The same can be said of Retailing, for it is location that can make or break a business. The choice of location is of paramount importance, because it is often one of the most permanent of business decisions ever made.
Physical locations, while technically fixed to a specific point on the terrain, are in a state of constant change in terms of their commercial worth. Good locations can become bad locations, and bad locations can become good locations. Neighborhoods can be good, but then become bad, and then even good again (the Virginia Highlands area of Atlanta is a good example--it was a bedroom community adjacent to downtown for many years, then gave way to urban blight in previous decades, and then was revitalized and is a now a hot yuppie neighborhood with trendy restaurants and boutiques lining the crowded city streets).
Even new highways can influence retail location. The interstate highway program that the US built between the 1940s and 1990s has caused many established cities to be bypassed, creating areas of retail drought in the process. But where these new highways were built have blossomed many new retailers, and many new residential developments. One retailer's threat is another's opportunity. The trick is to stay on top of things, and try to not get locked into a long lease!
Notice how the retailing scene in Amarillo has changed in recent years:
- The downtown CBD was very popular in the 1940s and 1950s
- Route 66, with its various configurations through the years, was finally decommissioned in the late 1960s, to be replaced by I-40
- Business started their southwestward migration after Route 66 closed and the interstate opened. The population of the city also started moving in this general direction.
- Sunset Center opened in the 1950s
- Western Plaza opened in the 1960s
- Westgate Mall opened in the 1980s
- Numerous shopping areas have opened in the 1990s on Coulter and Soncy, reflecting the growth in the southwest side of town.
Notice also how a new highway can significantly affect retailing in towns of all sizes. When I-27 was completed between Amarillo and Lubbock,the following occurred:
- Canyon was bypassed entirely.
- Happy was bypassed, and now "The Town Without a Frown" is virtually nonexistent.
- Tulia was bypassed. Some development (a truckstop and motel) has occurred near the freeway.
- Kress was bypassed. All but dead.
- Plainview rose to the challenge when I-27 bypassed its CBD. It grew substantially on the west side of town, with a variety of shopping locations, motels, restaurants, grocers, and motels.
- Hale Center, Abernathy, and New Deal have not prospered
- The north side of Lubbock is still fairly devoid of business. It is only on the city's southwest side that most retail development continues to occur.
One other thing to note is what happens when neighborhoods "change." This is an euphemism for racial integration and/or transition. While this is certainly a poor reflection of American society and its inherent prejudices, it does occur. The city in which I spent my early youth (Harvey, IL) experienced such a change. "White flight" occurred, property values plummeted, poor blacks replaced the whites who had fled to other nicer suburbs, and the local mall (Dixie Square) went down the drain. It was ultimately used for a movie chase scene in The Blues Brothers. This once-thriving suburb of Chicago is now very por, with large sections of the city littered with crack houses and boarded-up businesses.
Store Location Options
There are a number of options available to retailers for their store's location. Among them are:
- The CBD (Central Business District), which has decayed in most cities to the point of near extinction. With the exception of a few midwest and northeast towns, the CBD is dead, occasionally revived by an urban rehab of an old building, turned into trendy bars and novelty shops. These often struggle to survive, though (especially the novelty shops). However, there are older cities like Boston, New York City, and Chicago with vibrant CBDs, as well as other top-tier towns with urban renewal projects like Indianapolis, Cleveland, and Baltimore that are doing quite well.
- Freestanding sites. These offer the retailer a high degree of independence, but often require a substantial investment if the building and property are owned. The retailer is usually able to designate their hours of operation, and decorate as they see fit. These freestanding units may be separate building along a busy street, or may be "out buildings" (also known as "pad sites") on the perimeter of shopping centers.
- Shopping Centers, which include neighborhood centers (small shops and a supermarket), community centers (often with a small department store or a few other moderately significant tenants), and regional centers (usually in the form of malls, which range from small (50-60 stores, to mega (200+ stores). The days of mall growth are virtually over, as the US has reached near-saturation of these retailing behemoths.
- The Current Favorite: The Power Center. This is a new twist on the shopping center. The primary tenants are "big box" category killers, such as electronics stores, office supply stores, pet supply stores, and home improvement centers. A few specialty stores fill in the cracks between them, but the headliners are the ones who get top billing.
- And of course, The Internet. This is a location, albeit in an abstract sense. It is increasingly important for retailers to consider the option of having an online store, one that looks good, and offers functionality and consumer convenience.
- Outlet Malls. These are another popular destination for shoppers. Ranging in size from older, modest properties of a few hundred thousand square feet all the way to 2,000,000+ square feet at Grapevine Mills and other mega-outlet malls, these attract tourists (both domestic and international) by the busload. For the most part, these are populated by corporately-owned stores, although there are also some franchised units. Generally speaking, these outlets malls carry seasonal overruns, out-of-season items, blems, and a few other items not normally carried by other retailers. It is important to note that outlet malls have had to learn the hard way that they should not try to compete with their own distributors located down the street in traditional shopping malls. Thus, they have made a conscious effort to not carry the exact same thing these distributors are carrying. Also, outlet malls tend to be located on the outskirts of towns or even in remote locations, so as to minimize direct competition with other distributors.
Course Syllabus
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