Fall 2003
Finding the Right Location

Whether a first venture or an expansion, every retail entrepreneur dreams of finding the “perfect” location. That’s the one with dirt-cheap rent in the best center that attracts hordes of customers with fat, open wallets who want exactly what you sell.

Dream on. Even if you land a great deal on rent in the busiest mall, there’s no guarantee that the customers it attracts want your products. Even the “best” malls—highest traffic, premier tenants, super demographics, dynamic marketing—can’t guarantee that your concept will work with their shoppers. Retail is challenging enough—no need to make things harder by trying to sell to the wrong customers.

The next thing you have to know: Don’t rush. It can take weeks, even months, to find the right spot. Rushing and then settling for a so-so spot just to meet a loan date or start-up schedule can cost you. So start by taking a leisurely look at the following factors to help you scope out a great spot.

Size matters

You have a wealth of choices for finding the best location. Where? Anywhere large numbers of consumers visit, gather or walk past. You probably live within an hour of at least two malls and dozens of other places where specialty retailers operate and thrive. In addition to malls, these places include: outlet centers, outdoor markets and “urban villages”; tourist venues like beaches, resorts, theme parks, sports events, festivals; office buildings, downtown areas, colleges and more.

Approximately 1,800 enclosed malls are up and running in the US today. And more than two dozen were built between 2000 and 2002, adding 30 million s/f of retail real estate, with more to come. A mall’s size determines how many temporary tenants a center can manage. A typical regional mall might have 15 to 30 specialty retailers operating year-round, and twice that number for the holiday season.

According to the International Council of Shopping Centers (ICSC), the average mall being built today has more than 1,000,000 s/f of “gross leasable area,” or GLA: the total square footage that retail tenants can occupy. Here are the ICSC definitions by GLA, and the type of retail tenants for each one:

Regional malls: 400,000-800,000 s/f; department store anchors plus a mix of national chains and independents in in-line stores

Community/neighborhood centers: 100,000-350,000 s/f; many with chain groceries plus retailers

Power centers: 250,000-600,000 s/f; mostly “big box” anchors

Outlet centers: 50,000-400,000 s/f; at least half the tenants offer discounted merchandise

Themed or festival centers: 80,000-250,000 s/f; leisure and tourist-oriented merchandise

Lifestyle centers: 150,000-500,000 s/f; upscale, open-air; retailers focus on “lifestyle products” (fitness gear, books/music, décor)

Each location has a pre-existing customer base. For example, the typical outlet-center shopper buys different products and at different price points than the typical resort shopper buys.

Key elements

To help find the best location for your business, look for malls or other shopping venues that have:

  • Access to a large base of target customers
  • A healthy retail environment
  • Enough space to showcase your merchandise well, achieve the retail image you want, and generate the greatest sales revenue possible
  • A good fit with other retailers in the center, and minimum competition
  • Affordable rents and other costs

To weigh the strengths and weaknesses of each these factors, do your homework—market research and other digging that will answer the questions below.

Target customers

Who’s going to buy the products you’re selling? Your target customers. You have to identify them, define them and learn where they shop, so you can evaluate a location for its access to those customers. If you don’t know who they are, look at your product(s): what you plan to sell will point you toward the type of customers you’ll attract. These questions can help:

  • What’s your price range?
  • What image do the products project?
  • Are they already available?
  • If so, have they been available for a while or are they new?
  • Where are they sold?
  • Who is most likely to buy them?
  • Why (e.g., impulse, fun, need, status)?
  • Where are shoppers most likely to look for them?

Now for demographics: Who are these people? Fill in the blanks: age, gender, married or single, with or without children at home, income level, education level, homeowner or renter, ethnic/cultural background, personal interests. The answers will give you a snapshot of your target customers.

If you have trouble identifying them yourself, don’t worry. There’s loads of consumer and market information to turn to (see sidebar).

Will they shop here?

Once you know who your target customers are, how do you know if they shop in the mall you’re considering? Your goal is to identify a location that attracts them.

To do that, look at the demographics of the consumers in the mall’s “trade area” from which a mall draws most of its customers. A mall might have a “trade-area population” of 80,000 or more, and draw most of its shoppers from within a 20-30-mile radius or a 20-30-minute drive.

While retailers lure new and repeat shoppers by advertising and marketing, the fact is, every retailer in a mall relies on the mall’s ability to draw shoppers. So you need to find out how well the mall does that. You can get information on the mall’s shopper traffic and types of shoppers from mall management, government agencies, and companies that specialize in demographic research. This is what you want to know first:

  • Does the mall’s trade area have a large number of your target customers?
  • Has the population of target customers grown, shrunk or stayed the same in the last five years?
  • Is it likely to grow or shrink in the next two years?

Also worth researching are population trends. For example, if you plan to sell skateboard accessories but the number of households with kids dropped steadily in the last few years, you might consider another locale, or a different product line.

Analyze this (mall)

You still need to dig deeper before signing anything. Being in a mall that’s struggling can be disastrous. The more you know about a mall and its shoppers, the better. Here’s what you want to find out:

  • How is this mall classified (regional, outlet center, etc.)?
  • Is this the kind of place shoppers come for your product?
  • What’s the mall’s sales-per-s/f for the year to date? For the past five years?
  • What sales-per-s/f ratio is typical for your type of business in this mall?
  • What are the mall’s total annual sales? The average sale dollar amount?
  • What’s the average shopper traffic: weekly, monthly, yearly?
  • What percent of shoppers buy?
  • Do the specialty retailers see sales increase each year? At what rate?
  • Has the mall been gaining or losing retail tenants?
  • What happened to the last business in the space you’re considering?
  • What factors influence the failure of retailers here?
  • Are the businesses near this mall doing well?
  • Is the local economy affecting spending in this area?
  • Is management interested in helping your business get going?

Scope out the space

If you like the answers you have so far and decide the location is viable, the next step is to evaluate the space itself.

  • Is there enough room to merchandise your products effectively?
  • What’s the physical condition of the space? What work does it need?
  • How much will you have to spend to make it attractive and well-equipped?
  • Is this a high-traffic area of the mall?
  • Can you create the retail image you want here?
  • Are there enough signs? good lighting? electrical outlets and phone lines? If not, what are your options?
  • Will your inventory/equipment be secure here? What about overnight and long-term inventory storage?
  • Is customer parking adequate and well lit?

By the way, if you’re considering an in-line space, be particularly cautious about estimating build-out costs. It’s easy to underestimate costs and end up spending thousands to turn someone else’s store into your store.

Who’s your neighbor?

The next step: evaluate your retail neighbors.

  • Are there strong anchors here?
  • Would your product fit in with the retail mix here?
  • Who are your retail neighbors?
  • Which retailers complement your business and bring traffic?
  • Which ones compete with you?
  • What could you offer that would differentiate you from them?

Finding answers

Mall management. This is your first stop for market data about a particular mall or shopping center. Most specialty leasing managers are more than willing to help new retailers find the information they need, so don’t hesitate to ask. They want to see your business succeed and expand—they want to be the ones who helped you get started and “knew you when.” In addition to sales figures, ask for the results of any in-house research, such as customer surveys and traffic counts.

Also ask the leasing manager’s opinion about areas in the mall that get the most and least traffic. And because of their near-constant contact with center shoppers, management can provide you with a wealth of “anecdotal information”—in-the-trenches accounts that can sometimes be even more valuable. If you make an appointment (and maybe pick up a lunch tab), you can learn a great deal about your potential operating environment and retail customers.

Locations online. Some mall developers’ websites have information on available space, leasing terms and other data for potential tenants. For example, General Growth Properties has details on nearly 150 mall locations (general growth.com—click on “Our Malls” and then “Mall Directory”). Mall profiles have details about the center, demographics on the community, descriptions of local tourist attractions, and a list of current retail tenants.

Eyes and ears. Research is great and it’s necessary, but numbers alone can’t replace your own experience and gut instinct, so take a hike—literally. Walk each mall you’re considering during different times of day and on different days of the week (checking it out on Saturday won’t tell you it’s dead on Tuesday).

Sit in one spot (near your potential location) for an hour or two to observe. Notice how customers dress… their overall mood (energetic? bored? annoyed?)… if and what they’re buying (spot the shopping bags) or if they’re just window-shopping. You could even ask a few shoppers why they shop there and what they buy. Then choose another spot and repeat the experiment. Change spots, days and times, so that you get a broad picture. You also can find out a lot about your competition by observing, so check on them, too.

Making the decision

Armed with your research, you should be ready to evaluate your potential locations and answer the final question: “Is this the right place?” The answer is in your research. If it’s not, keep adding to your data until it is. Or if you’ve hit the wall and can’t see the answer clearly, consider hiring a consultant for help. You’ll be able to tell them what you do and don’t want, and your reasons, based on your own research. Since you’ve already done so much of the work, they won’t have to, which may keep their per-hour fees down. (Look for them in trade publications, the Yellow Pages, or organizations like SCORE. Or contact a retail trade association.)

Finally, if you do find the right location but can’t afford it, don’t give up on it yet. Try to negotiate the rent or fees, or consider renting for a shorter term. Most temporary retailers sign leases (“license agreements”) for anywhere from a day to a year, and a shorter lease term than you originally planned may be a good option.

Homework, legwork, intuition and heart: the combination that that will lead you to the right location.

Publications of ICSC

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