Pros and Cons of the Different Types of Retail Locations
Choose between malls, shopping centers, free standing retail, and more
Commercial retail locations are available in many different forms, and each one has its advantage and disadvantages. There are many factors that impact choosing a location, and selecting the right one will depend on your business, budget, and community.
For a brick and mortar business, choosing a retail location is a major decision. From the cost of rent to the level of foot traffic to regulations you must follow, the type of retail space you select can impact many aspects of your business.
From kiosks to large anchor stores, a mall has many retailers competing with each other under one roof. In a mall, there are generally three to five large chain stores and dozens of smaller retail shops.
Before selecting this type of location, learn about local trends in mall shopping and how that particular mall is doing before you agree to rent space there. Overall, mall shopping has declined since the Great Recession, and in the United States, the number of store closures is increasing yearly. However, many malls expect to see growth, adding experiential attractions to bring in new customers and drive foot traffic.
Pros of Mall Space
- Lots of foot traffic
- Anchor of community shopping
- Less advertising needed for customers to find you
Cons of Mall Space
- Immediate competition from other stores
- Regulations and rules from mall management
- Higher rent than other retail locations
What Makes Mall Retail Work
- Shopper demographics that match your target customers
- Adaptations to attract customers, such as pop-up events
- Anchor stores that are doing well
- Low turnover/few empty stores
Strip malls and other attached, adjoining retail locations may have as few as three units or as many as 20. The types of retailers and the goods or services they offer will also vary. Before signing a lease, always investigate both the availability of parking and any regulations that the property has for retailers.
Pros of Shopping Centers
- Fewer rules and regulations for retailers
- High visibility from street
- Lower rent than many malls
- Often served by bus routes/public transit
Cons of Shopping Centers
- Less foot traffic
- Parking can limit accessibility
- Lack of modern facilities and updates
What Makes Shopping Center Retail Work
- Plenty of parking
- Few empty store-fronts
- A variety of stores and restaurants to attract customers
- Modernized and updated buildings
Many communities are hard at work to revitalize their downtown areas, and retailers can benefit from this effort. You'll often find many older, well-established retailers in a downtown area. Because space is usually limited, these locations are often good choices for smaller or specialty stores. However, there are chains and big-box retailers that can make use of downtown retail locations, especially if they are willing to build up rather than out.
Pros of Downtown Areas
- More freedom/fewer rules for business owners
- Attractive to younger customers who prefer urban living
- Heavy foot traffic
Cons of Downtown Areas
- Expensive or limited customer parking
- High rent
- Limited ability to expand/adapt your space
What Makes Downtown Retail Work
- Public investment in revitalizing downtown spaces
- Regular downtown events to attract residents and visitors
- Well-maintained/updated buildings
- Accessible parking
Free Standing Retail Locations
This type of retail location is any stand-alone building. It can be tucked away in a neighborhood or right off a busy highway. Free-standing locations come in many sizes and can be appropriate for any type of retail business.
Pros of Free Standing Retail
- Few or no restrictions from landlords
- Reasonable cost per square foot
- Limited immediate competition
Cons of Free Standing Retail
- Local zoning may restrict retail activities
- Lack of foot traffic
- Requires regular marketing to attract customers
What Makes Free Standing Retail Work
- Dedicated parking
- Easily accessible from major roads
- Near other retail or residential areas
An office building, or a business park where many office buildings are grouped together, is similar to a strip mall or outdoor retail center. These are often good options for a retailer whose customers are other businesses.
Pros of Business Parks
- Tenants share maintenance costs
- Buildings have an upscale and professional appearance
- Easily accessible to other tenants
Cons of Business Parks
- Lack of foot traffic
- Corporate feel less suited to B2C businesses
- Lack of visibility for storefronts/signs
What Makes Retail Business Parks Work
- Plenty of parking
- Well-maintained outdoor spaces
- Plenty of tenants in the building with few empty stores
Home-based Retail Stores
Millions of retail businesses start in their owners' homes. Some may eventually move to a commercial store location, while many remain in the business owner's spare room, especially if the business primarily operates online or works with distributors.
Pros of Home-Based Retail
- Inexpensive to start
- Flexibility balancing work and family life
Cons of Home-Based Retail
- Regulations can restrict use of space, accessory structures, or number of customers you can have on-site at once
- Lack of parking
- Difficulty separating work and family life
- Limited room to grow/expand
What Makes Home-Based Retail Stores Work
- Home business-friendly local ordinances and zoning
- Separate phone line and entrance
- Regular business hours
- A plan for growth
Choosing a Brick and Mortar Retail Space
As consumer shopping patterns change, businesses also have to choose their location carefully. In many regions, retail store closures have increased since the Great Recession in 2008. Across the United States, there were 5,864 store closures in 2018; that number rose to more than 7,000 stores that closed in 2019.
However, additional retail spaces also opened up during each year, and many consumers still want to do their shopping in-person. Even among millennials, the generation often accused of ushering in the downfall of brick-and-mortar retail, more than 80 percent of consumers prefer to shop in stores.
Brick and mortar retail spaces are still a good choice for many businesses. The key to creating a sustainable business model is finding the right kind of retail space for your business, customers, and community.
Yale School of Management. "The Future of Malls: Was Decline Inevitable?" Accessed Jan. 15, 2020.
International Council of Shopping Centers. "How top mall owners are tackling 2019." Accessed Jan. 15, 2020.
International Council of Shopping Centers. "Envision 2020: The Future of the Shopping Center Industry." Accessed Jan. 15, 2020.
National Endowment for the Arts. "Sprawl and Public Space: Redressing the Mall." p. 81. Accessed Jan. 15, 2020.
American Planning Association. "Downtown Revitalization in Small and Midsized Cities (PAS 590) Executive Summary." Download. Accessed Jan. 15, 2020.
American Planning Association. "News & Views, August 2017 (Economic Development Division Newsletter)." Download. Accessed Jan. 15, 2020.
Coresight Research. "Weekly US and UK Store Openings and Closures Tracker 2019, Week 28: Target to Open More Small-Format Stores." Accessed Jan. 15, 2020.