Important of Location Decision in Retailing

Page 1 of 3

Important of Location Decision in Retailing

By | May 2011
Page 1 of 3
Importance of Location Decision in retail Business;
The importance of the location decision is due to the following factors. Location is a major cost factor because it 1. Involves large capital investment
2. Affects transportation costs
3. Affects human resources cost, e.g., salaries etc
Location is a major revenue factor in retail business because it 1. Affects the amount of customer traffic
2. Affects the volume of business
The terms ‘location’ and ‘site’ are often used interchangeably but there is a distinct difference between the two. ‘Location’ is a broader concept, which denotes the store and its trading area from where a majority of its customers originate, while a site refers to the specific building or part of the building where a store is located. Location and site characteristics should interact in a positive and synergistic way with a store’s merchandising, operations and customer service characteristics. For example, a designer men’s store located in an up market shopping centre or a mall near posh residential colonies, housed in an attractive building with adequate parking facilities.

Levels of Location Decisions and its Determining Factors;

A retailer has to take the location decision, basing on three aspects: 1. Selection of a city
2. Selection of an area or type of location within a city
3. Identification of a specific site
The factors which influence these decisions are discussed below:

1. Selection of a City
The following factors play a significant role in the selection of a particular city for starting or relocating an existing retail business: • Size of the city’s trading area: A city’s trading area is the geographic region from which customers come to the city for shopping. A city’s trading area would comprise its suburbs as well as neighboring cities and towns. Cities like Mumbai and Delhi have a large trading area as they draw customers from far off cities and towns. • Population of population growth in...