Top Three Rules for Retail Site Selection
This week’s business tip sort of just landed on our doorstep through a series of interesting conversations with several different businesses over the past few months. And when I mean doorstep – I actually mean physical brick-and-mortar doorstep. So what I’m talking about here is the importance of making a good business decision when you select a retail real estate location. The quality of this location can literally mean the difference between business success and bankruptcy. And this week, we’re going to share three very important rules when it comes to selecting a location for your business.
over the past few months, we’ve actually been a bit surprised by the number of conversations we’ve been having with business owners and business leaders about real estate issues. In particular, locations that are underperforming and are a significant drag on the organization’s P&L. And in a few instances, some of these locations were shut down to stop the bleeding. And in a pretty remarkable situation, one fairly recent new location was under-performing so significantly that it put this multi-location business, that already ran on really tight margins, on the cusp of insolvency.
So for this week’s business tip, I thought I share the top three things or rules everyone needs to consider when selecting a new, real estate location for your business.
Number one – Know your customer and prospective customer. And in particular, how they engage with your brand’s (as well as your competitors’) physical brick-and-mortar locations. Now I know that seems like a blinding flash of the obvious, but given how many locations we all see close every year, you know this is something people are overlooking. Are you a convenience business or a destination business? Will people go out of their way to visit your location? If so, how far out of their way will they go? What times of the day to people visit your locations? Is your location convenient for them (relative to other alternatives) given their daily patterns? Are you a single trip / single destination business or are you a part of a multi-destination trip. And all of this leads me to the number two rule for retail real estate site selection.
So number two, understand your location’s retail gravity. And in particular, understand its health. Now this one is hugely important for most retail locations. And the best way to think about this is really three-fold. One, what is the mix of other retail and commercial locations nearby? Are these strong, healthy and growing businesses? Two, what is the vacancy rate nearby and is this because businesses are closing down and moving out, or is this because this is a new and growing area? And three, and this is very much related to that last statement, what’s going on with the demographics in this location’s trade area. Is the population increasing or decreasing? What is the population mix of the nearby neighborhoods? Are there enough of your types of customers to support your business? Are the demographics changing in a way that is favorable for your business?
And the third rule I’m going to share – and keep in mind, by no means are these the ONLY three things you need to consider when you’re looking to open up a new business location, but these three will definitely get you started in the right direction – so number three. Think really hard before you consider a location where a business similar to yours already closed down. Now I know you all can relate to this one. How many times have you seen a restaurant go into a location where another restaurant already failed – only to have to shut down within a year or two. But it’s not just restaurants, all sort of businesses do this. And more times than not, they suffer the same outcome. Now this rule isn’t purely black and white and there are plenty of exceptions, but this is a situation where you really need to understand rule number one and rule number two and you need to do your homework and thoroughly understand why the previous business is no longer there.
So to recap. Number one. Thoroughly understand your business and deeply understand your customer and prospective customers. Number two – thoroughly understand the retail gravity health. And finally number three – use an abundance of caution when considering a location where a business similar to yours already left. If you make your site selection decisions while fully and honestly contemplating these three rules, you’ll definitely be improving your odds of making a good business decision.
INDEX:
00:00 - INTRO
00:54 - Set up for this week's business tip
01:56 - The Top 3 Rules for Retail Site Selection
02:06 - Rule #1
02:22 - Rule #2
04:04 - Rule #3
04:46 - Recap of this week's tip
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