LOCATION, LOCATION, LOCATION… Such a Critical Factor in Retail
It is very common to hear in the US the 3 most important factors for business success are 1) location, 2) location, and 3) location. This is a definite indication of the importance of how location impacts the potential of your business to succeed. Any wonderful business initiative, inadequately located, will struggle, to say the least, to grow and create profit. I would like to focus on how I’m using the word inadequate instead of bad. Why? Let me explain, but before, I’ll tell you that this general principle is applicable to any business or industrial operation, be it manufacturing, storage, or any other, nonetheless, I will focus on retail businesses.
As we mentioned in a previous post about market segmentation1, “… certain products will be more attractive to certain groups than to others.” Retail businesses will enjoy more traffic if you make them more accessible to those groups of consumers or market segments attracted to your products or services. Unless you’re an online business, locating your business close to your target market segment will be fundamental. Consequently, going through the exercise of selecting the business location starts by knowing who your consumer groups are, right? Let’s start!
You’re interested in the factors that define your market segment. We can divide these factors into demographic and psychographic:
- Demographic factors are, for example, age, gender, level of income, academic education, race, national origin, number of children, etc. This information can be found online through those entities that are in charge of population census like the US Census Bureau2.
- Psychographic factors describe the values, opinions, and lifestyle of people. This information is collected through market research usually done by specialized firms.
Why are these types of factors important? Two people can show similar demographic descriptors, for example, being in the same age group, same gender, have similar level of income and academic formation, same national origin, and race. Even though the demographic factors influence the taste and preferences of people, it’s very possible that these two individuals have very different interests and lifestyles, which are psychographic factors. One of these individuals might invest much more time into his or her physical health, placing more value into a strong and healthy appearance, while the other might not place so much value into such “details” and might not give so much thought into what they eat as “we’re all dying anyways”. Do you know people such as these? I think we all do! These two individuals will view an all-organic food store very differently.
A great advantage for business owners is that people tend to live in clusters where they find others like themselves. Consequently, when choosing a location for your business, there are some key definitions we need to reach:
- Define the clientele or market segments that your business is going to serve using both types of factors.
- Identify where the members of these segments are geographically located, so that you can place your business where there’s enough people interested in your concept.
- Identify and evaluate the competition in the chosen area and see how you’re going to be different to ensure that you’ll be the preferred option in the area.
Of course, when you’re already choosing where to be located, you should also look for factors such as ease of access, the local traffic, general business visibility, parking availability, local rent prices, contract term, amongst others.
How to select a business location is a very important choice to make. It is rather common that, while the general area might be the best for your business, having your business with a very particular placement within the area significantly improves your position within the market segment. Go over to our Retail Site Selection so you get to know more about the power of this tool that we have devised for you.
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