There is no formula by which the choice of a retail store location can be made simple and precise. Moreover, there is no one method nor one way of deciding on a profitable location for all stores in all areas. The establishment of each store is a separate problem. Certain factors are more important in one part of the country than in another and for one type of store than for others. Therefore the purpose of this manual is not to describe the one ideal procedure which should be used by all operators when selecting a site, but rather, to set forth a general, practical and easy-to-follow procedure which may be used as a pattern, to be changed here and there to fit individual needs. Also some current location practices in certain selected lines are described that may be useful as guides in specific fields. 3 Because it has been demonstrated that retail types tend to arrange themselves in an orderly pattern, it is possible to classify stores for the purpose of discussing site specifications. Some studies have used the familiar threeway classification of stores on the basis of buying habits-convenience goods stores, shopping goods stores, and specialty goods stores. Others discuss the problem from the standpoint of commodity classification, using the following groups: Food group (groceries and combination stores), general stores (with food), general merchandise, apparel group, furniture-household-radio, automotive, filling stations, lumber-building-hardware, eating and drinking places, drug, and other retail stores. In this manual both classifications will be used, depending on the requirements of each specific case. Sources of Material This study is based on published data listed in the bibliography in the appendix and on unpublished data obtained from independent retailers, managers of real estate departments of large chains, voluntary associations and wholesalers, realtors, and city planning engineers. The latter data were secured through 39 interviews, supplemented by correspondence, but because several interviews were with realtors who specialized in selecting locations for large companies, the data secured describes the experiences of more than 39 companies. These summaries are not inclusive, nor are all retail types considered. 3 "The Problem of Retail Site Selection," by Richard U. Ratcliff, Michigan Business Studies, University of Michigan. Vol. IX, No. 1, 1939. 4 "Real Property Inventory of Cleveland," by Howard Whipple Green. Vol. 16, Part VII, 1941. PART I GENERAL METHODS OF SELECTION Before the operator is ready to investigate locations it is necessary for him to decide on the type of business to be started. This decision will involve a consideration of his abilities, experience, personality, tastes and physical characteristics as well as the amount of capital which he expects to invest in the business. The entire location procedure is composed of three steps, the selection of the town, then the choice of the community in the town, and finally the selection of a specific site in the chosen area. Selecting the Town Generally, large companies delineate their trading areas on maps, indicating their stores with colored pins. Thus it is easy to ascertain where a company is not well represented when it wishes to choose a town in which to locate a store. The head of the real estate department calls upon his location engineers in the field to supply him with information which can be obtained only by constant and intimate contact with the territory. All other data needed are complied in the central office. The average small operator is rarely in a position to choose the town on so scientific a basis. He has neither the staff nor the capital to study the relative merits of sections of the United States nor of towns. His choice is usually a natural one. For example, he may wish to locate in his home town where he is known and liked. And climate and other health factors often play an important role in the choice of a town. Nevertheless, he should evaluate a town to the best of his ability and limited resources before deciding to open a store there. Valuable assistance is available to small operators who wish to make a scientific selection of a town in which to locate but who cannot afford to follow the procedure described below. Wholesalers and manufacturer-wholesalers who provide various services to the retailers associated with them often aid in locating stores. This assistance varies, from advice given in the office of one of the executives, to carefully prepared printed location aids and forms on which to record factual information. Such material is then oriented and analyzed by a consultant who works closely with the prospective retailer until a final selection of the site is made. Some of this assistance is free, but a charge is made for the most complete and helpful service. 692534°-46- -2 3 Moreover, it is possible to obtain useful information free of charge or for a small sum from Federal, State and local government agencies. The publications of these agencies are usually available in public libraries. Data on competition and population, for example, can be obtained from these sources and provide valuable bases on which to estimate retail opportunities. Competition The amount and quality of competition is, of course, one of the most important factors to consider in selecting a town. Any section, no matter what its other merits, may be a poor one in which to locate if there are already too many good stores of a similar type located there. Of course, the presence of a number of similar stores is not necessarily unfavorable if they are all doing good business or if they are not fully meeting the needs of the community. Few large chains stay out of a town because of competition if they can obtain the right location at the right price, but they are nevertheless interested in studying the competition which they will meet in an area. Information on the number of stores in a town can be obtained from the decennial reports of the census published by the Department of Commerce. These are available in public libraries and in many local offices such as the chamber of commerce, newspapers, banks. Census data on total retail sales and number of stores are given according to type of store by main store classifications: Food group (grocery and combination stores). General merchandise group. Apparel group. Furniture household-radio. Automotive. Filling stations. Lumber-building-hardware group. Eating and drinking places. Each main classification is also broken down into subdivisions. For example, the food group is composed of the following types of stores: Grocery stores (without fresh meats). Combination stores (groceries-meats). Dairy products stores, milk dealers. Meat markets, fish markets. Candy, nut, confectionery stores. Delicatessen stores. Fruit stores, vegetable markets. Bakeries, caterers. Egg and poultry dealers. Other food stores. Some Other Important Factors It is important to select a growing town rather than one which has already reached the peak of its development. Likewise, the composition of the lation and its occupation are important indicators of the retail pattern. popu It would be helpful for the prospective small retailer to obtain information on other important factors relative to the town. He should be able to answer the following questions in addition to ones concerning competition and population: 1. Is the town predominantly industrial, agricultural or commercial? 5. Are civic associations in the town aggressive, moderately active or 6. Is there good town spirit, that is, do the residents cooperate on civic projects? 7. Is it a good town to live in with regard to climate, schools, churches, banks, stores, amusements, etc.? 8. How large a trading area does the town have? Twenty-three large companies were questioned concerning factors which are considered when evaluating a town for store location purposes. One executive listed 32 and the others named many of the same factors. 1. Total retail sales. 2. Per capita retail sales. 3. Total population of the town and county. 4. Age of population. 5. Quality of population. 6. Population trend of town and county. 7. Amount of competition (number of stores). 8. Quality of competition (kind of stores). 9. Is company represented in this town? 10. Is surrounding area static or dynamic? 11. What industries are in the town? Trend, permanence, seasonality and prospects. 12. Pay rolls. 13. Climate. 14. Mores of the town. 15. Labor conditions (especially for the store). 16. Total income of town. 17. Per capita income of the town. 18. Rent range of business buildings. 19. Type of trading area. 20. Is it a county seat? 21. Amount of new building being done. ما 5 22. Debits to individual accounts. 24. Standard of living in the town. 27. Advertising media available. 28. Local legislation, taxes, etc. 30. Geographic and topographic conditions. 31. Religion. 32. Reason for the town's existence. One large mail-order house interviewed stated that they keep current reports on many of the 32 factors for certain key towns in which it seems desirable to locate a store sometime in the future. All companies are particularly interested in avoiding those areas in which population is either decreasing or stationery and, therefore, study all the indices of population shifts. For example, the fact that a large proportion of war workers now plan to remain in new areas is being given careful consideration by real estate men when choosing towns for future stores. The type and size of store contemplated also affects the choice of towns. To illustrate, one restaurant chain which operates large eating places has a policy of locating only in cities of 200,000 or more and prefers cities with a population of at least a quarter of a million. A large drug chain will not locate in a town with a population of less than 25,000. These companies have learned from experience that their particular type and size of store is most profitable in cities of a certain size. A prospective retailer who cannot rely on past experience may use published data on operating expenses for different trades by size of store and town. Studies of retail expenses emphasize the significance of pay roll and rent in the total cost of retailing. Inasmuch as small stores have few paid employees, rent becomes the largest element of total operating cost and, therefore, is a very important factor to consider when selecting a town. Rents paid in different trades vary appreciably by size of city. Table 1 gives typical occupancy expense in 33 retail trades, by size of town. The data show that, in general, locations yielding equivalent sales volume cost less in small communities than in large ones. They suggest also that, regardless of size of city, the larger the store the lower the occupancy expense as a percentage of net sales. Occupancy expense ratios should not be thought of as ideal standards, but rather at averages that conceal great variations. The existence of a higher typical occupancy expense ratio in one trade than in another does not mean that all concerns in the first have higher rents than all those in the second. A prospective retailer should not choose a town solely on the basis of low occupancy expense ratios. One reason is that rent, although a significant part of total cost, is but one of the items of expense, all of which vary |