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Spring 2008 Start-up Strategies: How to Land Your Dream Location

In retail “a great product” is the starting point for building a successful retail business, not the golden ticket that will generate tons of revenue no matter what.

Great products have been known to languish in great malls if the match isn’t right between the product and the center’s shoppers. Here are the factors to consider prior to start-up to make sure your product isn’t one of them. Whether you want to be in a shopping mall, airport, resort, lifestyle center or any other retail venue that attracts crowds of shoppers year after year, here are some quick tips and unspoken secrets of how to land the prime location you’ve been dreaming about.

I’ve asked more than a few aspiring retail entrepreneurs, “What’s your dream location?” over the course of more than 14 years in the industry launching and managing a variety of cart concepts. What I’ve found is this: The more inexperienced the retailer, the more likely he or she is likely to say their dream location is in the mall with the highest foot traffic counts or the one with the most cars—or the most expensive cars—in the parking lot over the weekend. The more traffic, the more sales—right? Wrong.

Especially if you’re new to the industry, it’s easy to get focused on hard data like foot-traffic, or car counts, that seem like unbiased, objective ways to compare one mall to another, when so many other site-selection factors seem hard to nail down or quantify objectively. Add to that a retail environment where trends are constantly changing, consumers remain notoriously fickle and the media almost constantly tossing around the phrase “economic uncertainty,” and it’s easy to see how retail entrepreneurs, with so much on the line, can be tempted to latch onto quantifiable foot-traffic numbers they can see in black-and-white on a spreadsheet.

But the most successful specialty retailers know that no matter what their product line is, no matter what the retail concept, their dream location is the one that will land them the most sales possible, which may or may not be the mall with the most warm bodies coming through the door or the most Bentleys in the lot. Your dream location is the one that’s right for your business, your product, your start-up budget and your long-term plans for success. At the heart of all of this is your customer, which is where every site-selection process should start.

Step 1: Know Your Target Customer

Of course, there are a host of factors that impact any retailer’s ability to thrive, but when it comes to site selection, the bottom line is getting maximum visibility in front of your target customer.

If you don’t have a clear, fully developed idea of who your target customer is, get one before you shake hands with your first leasing manager. Specialty retailers, no matter what they’re selling, don’t typically draw shoppers to a mall, airport, lifestyle center or other retail venue; they sell to the center’s pre-existing customer base. That base has certain demographic features, psychographics and, if you’re selling electronics, technographics that you’ll want to be very familiar with. Does the center’s shopper demographics match up with the customer you want to target? Does the mall’s customer base skew toward seniors when you want to sell to tweens? Does the mall cater to upscale shoppers, while you’re targeting value or discount buyers? (Or vice versa?) For each potential location, you should also know “the basics” about the shopping center you’re considering: shopper demographics, sales per square foot, occupancy rate and anchors.

Step 2: Identify Synergistic Neighbors

For minimum competition and maximum synergy, you want the right match between your location and your neighboring retailers. Optimally, you want a location with no direct competition and retail neighbors who work in conjunction with you—referring business, sharing customers or merely attracting the same type of customers you’re targeting. If you’re selling jewelry targeted to tween girls, a specialty retail neighbor with a build-your-own-stuffed-animal concept will give you more selling synergy than you’d get being near an anchor at the other end of the mall, that actually generates more total foot traffic. You might see more passers-by near the anchor, but you’ll find more target customers outside the bear-stuffing store.

Step 3: Know Your Concept’s History

Knowing your concept’s history is more than just finding out the numbers and if the concept has been in the mall before. Knowing your product will not only tell you where and what kind of retail venue you should be opening in but where you should be located within that venue.

Here are a few questions to ask the mall leasing manager and other specialty retailers in the mall prior to making your decision:

  • Has this product been sold in the mall before?
  • How well did it perform?
  • Where was the retailer located?
  • What price points did the product have?
  • How was the product displayed?
  • Was the product right for the center’s target customer?
  • Was the retailer able to attract shoppers’ attention in five seconds?

You should also talk to the manufacturer, because the manufacturer will typically have some insights about core customers, display, features or benefits retailers should highlight. Two key questions to ask your product supplier are:

Who is the product’s target customer?
What selling strategies should I use to maximize sales?

These two questions tell you where in the mall, airport, etc. you need to position yourself to be visible to the maximum number of target customers possible and how to appropriately display and sell the product (which may limit where you can sell, depending on if the line is demonstration or more passive).

Step 4: Analyze the Venue

Stores like Build-A-Bear, Brookstone, The Gap—all major retailers have strict requirements when choosing a location. They don’t just go into any vacant spot. Why should you be any different?

Here’s how to get a feel for what a mall, airport, theme park, etc. is really like:

  • Spend the day at the mall—the whole day from open to close.
    A few hours is not enough time to find out if your target customer shops the center, how the traffic volume changes over the course of the day and how the types of shoppers change throughout the day.
  • Go back on the weekend. What’s the center like on Saturday vs. Sunday?
  • Watch where people enter. Where are the main entrances and which direction do shoppers usually turn once they get in the door?
  • Notice purchases. How many people have bags in their hands and what stores are they from?
  • Talk to customer service reps. Ask them how the mall’s traffic changes and where people are shopping.
  • Talk to retailers to find out their views of traffic and what appeals to the customers they sell to.
  • Identify good retail neighbors. Which retailers are selling to your target customers? Does that mean competition or synergy for you? Which specialty retail neighbors are smart, energetic and serious? Which ones will look out for you? Which ones will encourage your employees to goof off?
  • Check out the lighting. Is the venue bright and cheery, or dark and gloomy?
  • Meet the leasing manager. Get a solid feel for the shoppers the center attracts and find out what marketing strategies the center uses to attract traffic to the center.

It’s also important to know as much as you can about the retail venue’s trade area, including:

  • Is the population shrinking or increasing?
  • What is the health of the local job force?
  • Is the job market gaining or losing strength?
  • What stores are being built around the area?
  • Where is the nearest competing retail venue. (Research this venue also!)

Step 5: Don’t be fooled by Santa!

An experienced specialty retailer once told me something most specialty retailers would consider counterintuitive: “Most retailers think they should be as close to Santa as possible, but Santa lines can really block you from being seen by the rest of the people in the mall. Being near Santa can really cost you sales.”

Is being near Santa the right or wrong move? It can be both. Usually Santa is situated nearest the lowest-trafficked wing, because malls look to Santa to increase traffic flow around the slower sections of the mall. In addition, parents standing in Santa lines can become stressed out while dealing with young kids who have trouble waiting in line. These parents aren’t going to stray from the line to look at your products, and they’re generally not in the right frame of mind to buy at that particular moment, anyway.

Step 6: Negotiate

What elements of a license agreement are open for negotiation? Everything is always open for negotiation. That said, it’s important to know your product inside-out and determine what is in your best interest to negotiate before you meet with a leasing manager.

If your product is best suited to a particular area that is not the strongest section in the mall, negotiate a couple hundred dollars per month off the rent or ask for a lower rent percentage, as that will allow you to save a little money, if you believe your sales will reached the normal breakpoint offered by the leasing rep. Don’t try to save a few dollars and take a location that is not right for your product or retail concept.

When it comes to visual merchandising, show up prepared for your meeting with the leasing rep. You can usually work with the mall to have the visual fee waived or used as a security deposit if you bring a well-thought-out display that is visually striking and does not need a lot of work to create.

You can also lower your rent by committing to a longer tenancy term, or if you have more than one location in the same mall or multiple malls within the developer’s portfolio.

What you should stress about your product or concept during your negotiations depends on what you are trying to achieve. Leasing reps are more likely to give you a rent discount if you are in more than one of their properties or have a product that’s new to the market. If your product or concept already has a sales history at the center, negotiate based on those previous sales.

Of course, regardless of your product line, it’s always smart to point out you have read the venue’s operating rules and regulations and stress that you plan to run your business in a professional manner.

How do you know when to say, “Nope, that rent’s too high and I won’t be able to make a profit. I’ll look elsewhere?” When the numbers just don’t add up.

You’ll obviously need to—at a minimum—cover your fixed expenses: cost of goods, rent (shoot for rent percentage between 15 and 20 percent of gross sales) and payroll, including commissions or bonuses. Your rent and payroll will fluctuate if your sales are tremendously high, but unless that happens, you will have set costs you need to cover (and general expenses, such as phone, credit card terminal/processing fees, etc.). If you crunch the numbers and they leave you little profit, keep looking.

Make an Informed Decision

No matter what, thoroughly investigate more than one location for your new business. Even if you end up with the location you wanted the most from the beginning, the process of analyzing multiple locations will educate you about site-selection and prime you for the days ahead when you’ll be making product comparisons and developing pricing strategies that will resonate with your target customer.

Always remember to ask yourself: Can I make significant sales, and pocket healthy profits, in the location I’m considering? If not, find another. n

Jon Scheerz is sales manager at Iron Stop, a Dallas, TX-based manufacturer and wholesaler of wind spinners. He has been in the specialty retail industry for more than 14 years. Jon can be reached at: Scheerz02@gmail.com

Kimberly Alvord is the owner of BCI, Business Consulting Inc., and has been a retailer and consultant to numerous companies in the specialty retail industry for more than 10 years. She can be reached at KimberlyAlvord@yahoo.com.


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