Choosing a Retail Store Location

Important Location Factors When Opening a Store

Store owner in front of shop
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Where you choose to locate your retail business will have a major impact on your public presence, walk-in traffic, potential for future income, and other elements. Choosing a location that does not account for such factors may limit the business's ability to succeed and grow.

Before choosing a retail store location, define how you see your business now and in the future.

  • What are the demographics of your core customers?
  • Can you visualize your building?
  • Do you know what you want to sell and what you want your business to be known for?
  • Have you determined how much retail space, storage area, or the size of the office you need?

If you do not answer these basic questions, it will be hard to find the perfect location for generating the maximum amount of profit for your retail store.

Type of Goods Sold

Examine what kind of products you sell, as some goods will require certain types of locations. Would your store be considered a convenience store, a specialty shop or a shopping store?

Convenience goods require easy access to let the customer quickly make a purchase. These products are also of general interest among consumers. A mall might not be a good location for convenience goods because this product type may be priced on a different scale compared with other retailers on the property. Consumers might be inclined to patronize convenience stores located on the path of their daily commutes. This can mean occupying space situated in or near a transit hub or along heavily trafficked routes.

Specialty goods fulfill more unique needs than general purpose products. Customers generally won't mind traveling out of their way to purchase this type of product because they cannot procure them through convenience or general goods retailers. This type of store may perform well near other shopping locations because their offerings may complement each other.

A big-ticket shopping store usually sells items at a higher price that are bought infrequently by the customer. Furniture, cars, and upscale clothing are examples of goods found at a big-ticket shopping store. Because the prices of these items are higher, this type of customer will want to compare prices before making a purchase. Retailers in this segment will do well to locate their stores far away from their rivals.

Population and Your Customer

When choosing a city or state to locate your retail store, research the area thoroughly before making a final decision. Read local papers and speak to other small businesses in the area. Obtain location demographics from the local library, chamber of commerce or the Census Bureau. Specialty research firms that cater to retailers could also provide demographic information. Any of these sources should have information on the area's population, income brackets, and median age. You know who your customers are, so make sure you find a location near where your customers live, work and shop.

Accessibility, Visibility, and Traffic

Don't confuse a lot of traffic for a lot of customers. Retailers want to be located where there are many shoppers but only if those shoppers meet the definition of their target marketSmall retail stores may benefit from the traffic generated by nearby larger stores. There are several aspects retailers should consider along these lines.

  • How many people walk or drive past the location?
  • How well is the area served by public transportation?
  • Can customers and delivery trucks easily get in and out of the parking lot?
  • Is there adequate parking?

Depending on the type of business, it would be wise to have somewhere between 5 to 8 parking spaces per 1,000 square feet of retail space.

When considering visibility, look at the location from the customer's viewpoint. In many cases, the better visibility your retail store has, the less advertising is needed. A specialty retail store located six miles out of town in a free-standing building will need more marketing than a shopping store located in a mall.

Signage, Zoning, and Planning

Before signing a lease, be sure you understand all the rules, policies and procedures related to your retail store location. Contact the local city hall and zoning commission for information on regulations regarding signage. There may be limits on the size and imagery used in signs that advertise your business. Ask about any restrictions that may affect your retail operation and any future planning that could change traffic, such as highway construction.

Competition and Neighbors

Other area businesses in your prospective location can actually help or hurt your retail shop. Determine if the types of businesses nearby are compatible with your store. For example, a high-end fashion boutique may not be successful next door to a discount variety store. Position it next to a nail or hair salon, which tend to draw the same demographic of customers, to more optimal results.

Location Costs

Along with the base rent, consider all location-based costs involved when choosing a retail store location.

  • Who pays for lawn care and security?
  • Who pays for the upkeep and repair of the heating/air units?
  • Will you need to do any painting or remodeling to have the location fit your needs?
  • Will the retailer be responsible for property taxes?

The location you can afford now and what you can afford in the future may vary. It is difficult to create sales projections for a new business. One way to determine how much rent you can pay is to find out how much sales similar retail businesses generate and how much rent they pay.

Personal Factors

If you plan to work in your store, think about work-life balance issues such as the distance from the shop to home and other personal considerations. If you spend much of your time traveling to and from work, the commute may overshadow the benefits of being your own boss. Also, many restrictions placed on a tenant by a landlord, management company, or community can hamper a retailer's independence.

Final Considerations

Your retail shop may require additional handling when it comes to choosing a location. Make a list of any special characteristic of your business that may need to be addressed.

  • Will the store require distinct lighting, fixtures or other hardware installed?
  • Are restrooms for staff and customers available?
  • Is there adequate fire and police protection for the area?
  • Is there a sanitation service available?
  • Does the building have a canopy that provides shelter if raining?
  • Are there (blue laws) restrictions on Sunday sales?

Don't feel rushed into making a decision on where to put your retail store. Take your time and research the area. If you have to change your schedule and push back the date of the store's opening, then do so. Waiting to find the perfect store location is better than just settling for the first place that comes along.