Four tips for successful site selection

Spectrum Analysis , offer the following four tips for successful site selection.

Shopping Centres vs. Strips

Many businesses have a preference to go into big Shopping Centres (or malls), whilst others believe shopping strips are the way to go.

Shopping Centres definitely have high attraction power for customers as the volume of traffic is normally very high. In Australia we can gather the basic statistics on Shopping Centres from the Property Council of Australia, who produce books giving a page of details for nearly every shopping centre in Australia (unless the owner is not a member of the Property Council of Australia and does not wish to be included).

The Property Council data tells us the owner, manager and their contact details. It then tells us the GLAR – gross leasable area retail and MAT – moving annual turnover of the centre. It then gives details on the major tenants and their area, number of car parks, who many of the Specialty stores are, estimated pedestrian traffic and details on major refurbishments of the centre.

Different owners may collect data in different ways, so we are at the mercy of the details supplied to the Property Council.

In the case of Strips, there is no formal collection procedure or body that acts like the Property Council. We use a product called Strip Locator which is a method of comparing one strip to another as an indication of the strength of the strip.

The comparisons as we see it are:

Shopping Centre

• Traffic - Normally higher in a SC and measurable.
• Product mix (competitors) - Some governance in a Mall depending on the owners as they can limit the competition if they wish.
• Rents - Normally much higher with little long term protection.
• Long term renewals - Currently most SC’s will give only a 5 year lease with no options, so you are at their mercy at time of re leasing.

Strip Shopping

• Traffic - Lower and unpredictable.
• Product mix (competitors) - No protection from your competition acting any way they wish.
• Rents - Higher chance of a lower rental.
• Long term renewals - More likely to be able to negotiate longer tenure, including options for lease renewals.

Tip 1– Are you able to afford the rents for a high exposure site, or should you be looking for lower exposure, lower rental stores in Strips? If you have a concept large enough to be in both, then be aware of the higher costs in shopping centres and the normally reduced tenure and rarely offered option.

Impulse vs. Destination

Before selecting a site, it will need to be determined how the product rates in terms of Impulse vs. Destination. If we think of it in terms of a line, with High Impulse/Low Destination at one end and Low Impulse/High Destination at the other, where do we sit on that line?

High Impulse items

High impulse items are usually low cost, spontaneous purchases such as buying a carton of milk, a packet of cigarettes for a smoker or a newspaper. You may make some decision where you go, but convenience normally drives this purchase.

When we look at the most High Impulse business we can imagine, think of a Busker. In this case, they are very mobile, and are able to move to the best traffic flow at no cost, other than moving their instrument and case and walking to the other side of the pavement or whatever.

As the cost of the goods you are purchasing increases, you move further along the line towards Low Impulse / High Destination.

High Destination purchases

If the goods you want are reasonably expensive, and you have already pre determined where you will buy them from, then that is a high destination purchase. If you want a specific type of car such as a BMW, then you will find and go to a BMW showroom.

Giving a value to this Impulse vs. Destination ratio

A business can normally be addressed as x% impulse; y% destination, some examples are below;

• Busker - 100% impulse, 0 % destination
• Rolling Stones Concert - 1% impulse, 99% destination
• Buying Petrol - 80% impulse, 20% destination
• KFC - 60% impulse, 40% destination
• High class restaurant - 20% impulse, 80% destination
• Buying small electrical goods - 70% impulse, 30% destination
• Buying a plasma screen - 20% impulse, 80% destination

As is visible, the more premeditated the purchase, the higher the probability you will look up where you want to go, not just spontaneously make a purchase from the first store you see.

The decision

The higher the impulse value of the goods you are selling, then the more importance to be in a highly visible, high traffic location. If you are a very strong destination product, then you can take a more back street approach.

The rental you pay for a property is probably defined by the owner’s view on whether the premise is on high traffic flow and high visibility. In shopping centres, most stores have a different rental per sq meter depending on the shopping centre management’s view on these factors.

What you need to do is pay the appropriate rental for the appropriate store, and if you have a high Destination type product, then you do not want to be paying top rental for the peak corner in the centre. If you are a high Impulse product, then you do need high passing trade, or you will not sell your goods. No point being down at the back of the shopping centre paying cheap rental if you have a high impulse product such as phone cards, sandwiches or other food items.

An exclusive restaurant that has a great reputation and word of mouth tells people how good it is can be in a lower rental street or area, as the public will find it and come to it.

A quick serve restaurant such as McDonalds or KFC must be in a high impulse area, be it in a food court or on a main high exposure road.

Tip 2 – Do you understand where your concept lies in terms of Impulse vs. Destination? The higher the product is an impulse, the more important to be in a high exposure location.

Finding the appropriate sites in Shopping Centres

By now you should have understood the concepts of finding the best area for your products. You also should now have considered if your goods or services are Impulse vs. Destination, and where they fall on the line.

In our view there are different types of customers coming into a shopping centre and you need to consider their needs:

• The Quick shopper – the person who comes into the Centre to go to the supermarket and the fresh food area. This person is buying their weekly needs and will have little time or desire to wheel their goods around the centre browsing at other goods.
• The Retail Therapy shopper – the person who comes to the centre to browse for bargains and look in many stores over a couple of hours. Very common on weekends in the large Shopping Centres.

Some people are in between, but in a big centre may have pre conceived ideas of where they are going.

Large Shopping Centres tend to have precincts and if your goods fall into a specific group, then it is often an advantage to be in the correct precinct. Examples of precincts we are starting to see are:

• Fast Food – the Food Court of a shopping centre. This is the traditional area people gravitate to for lunch
• Fresh Food – often a precinct where you have vegetables / green grocers, butcher, fishmonger, hot bread shops and others. Often it is adjoining the entrance to a supermarket
• Fashion – areas that attract the high end fashion names and many boutique fashion stores intermingle with the big names.
• Telcos – The telephone stores often gravitate together, normally as the smaller players have come to be near the Telstra store
• General areas - These have many different tenants from the bookshops such as Dymocks, Autobarn, ABC shops, Eyeware such as OPSM and many others. This normally contains all the stores where a separate precinct is not easily identifiable, plus being interlaced with clothing and fashion.
• The Cheap areas – in the back or lower section of many shopping centres, you find the areas where there are low traffic, and the owners will take a low rent. Stores that need this low rent are often the $2 shops / rug shops or stores selling to people as a “bargain”. Often they need reasonable size but cannot afford much rent.

Being within a precinct can act as a generator for your business. We look at many businesses as a Friend or Foe situation, and if for example you are a quick serve restaurant such as KFC, Ali Baba or McDonalds, it is normally felt you need to be in the Food Court as this is where your customers come to. If you were a KFC out of the food court, with no other food options around you, you would not expect to do as well as being in the food court.

Look for Precincts in the Shopping Centre and think how this will affect the business you are in. If possible seek stores that bring your type of customer into the area.

Tip 3 – Decide on the Precinct you feel is most appropriate for you to operate in. In large centres, look where that precinct is and what opportunities are available in it. If a general concept, then look to where other general stores are operating, so they are also similar in the Impulse vs. Destination ratio.

Finding the Appropriate sites in Strips

Shopping strips vary in shape and size and the configuration depends on issues like parking and cross streets. Most strips have an identifiable “centre” and one of the best ways of seeing this is to look where the banks and supermarkets are located.

Strips are normally daytime activity centres, however there are strips that are night centres or food centres. Examples of these Australia would include Fitzroy St St Kilda (Melbourne), Oxford St Darlinghurst or Kings Cross in Sydney and the Northbridge precinct in Perth.

The normal daytime strip is active due to people shopping and visiting during the day. Some of the main areas you are able to see are:

• Banks – normally all located in a close area
• Market and fresh food
• Telecommunications – phone shops tend to congregate
• Newsagents and Chemists tend to be near the centre
• Outer, lower rental stores normally nearer the ends
• Cafes and restaurants may be grouped or scattered throughout. If there is a theatre, then this will be a prominent part of a restaurant / café precinct

If you are going into a strip, we believe you need to consider the 10 nearest stores as an indication of the precinct you are within. If you have 4 cafes or restaurants, then this is the sign that you are a restaurant precinct, or similar if 4 or 5 fashion or shoes stores.

Look to what you are selling and see if there are precincts that will assist in being in the area.

Tip 4 – Look for the precincts within the strip where you want your concept to be in. Think of the day vs. night time traffic and be aware of the different rentals the different precincts charge you.

By Peter Buckingham - Managing Director of Spectrum Analysis, a Geodemographic company, specializing in sales predictions and understanding the dynamics of site selection.