Finding a winning commercial site for your small business isn’t easy, but it is crucial. In these challenging times, many site closures are due to rental escalation or simply poor location selection. On the flip side, an excellently-chosen retail location can turn passersby into loyal patrons and drive business to your door.
Unfortunately, site selection can be a mysterious process. To ensure you’re getting bank for your buck, it’s important to evaluate each location’s potential through structured processes that weigh essential factors such as demographics, visibility, and access.
This article outlines a systematic approach to site selection, offering insights into how to align your retail goals with the right location.
Demographics
Ideally, you would like to have information so you can match up the potential customers with the resident population. What this means is that if you know who the potential customers are, you can look to where they live and consider that area for locating your business.
In Australia, you just need to search for “Quickstats,” which should take you to the ABS website, where you can look up all sorts of demographic information for your area of interest. This includes population, age, income, ethnicity, and many other pieces of relevant information to help you understand the local area.
For example, if you were going to open a Mercedes dealership, you would be seeking a higher socio-demographic area, probably with an older population. If you were selling very cheap children’s sandals, you would be looking for a lower socio-economic area, with a high percentage of children, or a lower-than-normal average age cohort.
Physical location
Once you have at least drawn conclusions on what areas best suit what you are retailing, how do you look for the retail site? Try to think in terms of whether your product is Impulse or Destination, and that will give you some ideas on where to look.
Impulse products are those things people buy on a whim and need on a regular basis. Think cigarettes, milk, and other items from a convenience store.
Destination products are much larger purchases, where customers will make a conscious decision to seek out that product and go to the destination where it is located. Think in terms of a new car, a high-priced restaurant for your birthday or anniversary, or renovating your house.
The more you are at the impulse end of the line, the more you need to pay high rent for a top site with lots of passing traffic. The more you are focused on a destination product, the more you can be off the main road and pay less for a quality place that suits your needs.
What you are normally weighing up (along with the rent) are the following factors:
- Traffic – road, pedestrian, and bicycles
- Visibility
- Access and parking
- Space (square meters)
- Suitability of the physical facility
- Who are your neighbors?
You might also consider what traffic flow you are on (and whether competitors are also present there).
Building a process to make better decisions
If you are only opening one store, then this decision is normally a one-off, or not something being done on a regular basis. If you want two or more stores, or are a franchisor or a large company with many retail outlets, then this becomes a regular event, and you should have a process to make the best possible decisions.
My recommendation for small businesses is to stop thinking of site selection and retail site analytics as an unwarranted expense. Instead, think of money spent on choosing a winning commercial site as a long-term investment. These are normally the most important decisions in your retail business for your long-term survival.
