Retail Site Selection
Making a new retail site selection could be the single most important factor in your business' success. Identifying the optimal retail location is a key decision for any new business or an existing business looking to expand.
Whether you are a brand new entrepreneur looking to establish your very first business location, you are thinking of expanding your current business, or if you're seeking a new franchise location for a large corporation, it's essential that you take a fact-based approach.
This means analyzing all the data that is available to you to choose the best possible location.
There are a number of expensive consulting firms and software packages that are available to help you with this important decision. However, before you start spending big money, you should leverage the wealth of free and public data sources that are made available to you by a variety of government agencies. Towncharts.com brings this critical data together for you in one easy-to-read location that also provides the data for every location in the U.S. along with important comparative information. You'll find data to help you understand:
- Current demographics
- Trending demographics
- Economic health
- Housing trends
and more. Let's take a look at the process involved in making a retail site selection.
Retail Site Selection Step 1: Develop a Customer Profile Using Demographics
Who is your customer?
Whether your business is a restaurant, a clothing retailer, or a pet store, the place to start is with your customer. You'll need answers to questions like:
The answers to these questions are on Towncharts.com.
- What type of income do they have?
- Are you looking for bargain hunters or luxury purchases?
- Are your customers primarily men or women?
- How old is your customer?
- Do you expect to sell to a young audience or a more mature clientele?
- Are they singles or married couples?
- What location offers the most of the type of customer you are looking for?
Each location in the United States is tracked, be it a city, a zip code, a county, or a smaller micro area. Data on key demographic breakdowns such as age, gender, marriage status, overall population growth rate, languages spoken, family size, citizenship status, and where they were born is all available on Towncharts. Use this data to create a demographic snapshot of your customer
for an effective first step in the Retail Site Selection planning process.
Once you have this demographic data, be sure to look at the proportions as well as the raw numbers
. The actual raw numbers are very important but you must also take into account the direction those numbers are moving in. Is your prospective retail location in an area with a large and growing population of potential customers? Or is it an area with stagnant population growth and potentially a low proportion of the people in your custom profile?
Retail Site Selection Step 2: Understand Your Customer's Economic Profile
What are your customers' spending patterns?
Once you have a picture of who your optimal customer is in terms of demographics, you can begin to create a profile of your customer's economic situation. Is your optimal customer a bargain hunter, perhaps interested in a fast casual dining experience? Or do they tend to have a lot of disposable income available? Are they looking for a luxury brands? These questions can be addressed by looking at the prospective location's local economic data
Towncharts.com provides a wide range of the economic related data that can help you understand the locations that would appeal to the most people in your spending category.
Check out the "Economy" tab on Towncharts.com for information about the cities, towns, zip codes, counties or other locations that you are considering for your new site location.
Under the Economy tab you will find annual median earnings per worker and per family. You can also see the distribution of earnings by income ranges such as $50,000-$75,000 or over $100,000. Other metrices include:
- Male versus female earnings
- Source of income in terms of retirement income/wages/self employment
- Unemployment rates updated by month
- Percentage of people employed full time versus part-time
- Average weekly hours worked
- Local cost of living by major spending categories
You'll also have access to all kind of work commute figures including:
The time left for work
- The time returning from work
- How many people work and live in the same exact area
- How people get to work in terms of driving/walking/public transportation
- How many people work from home
All this information can be very helpful in understanding how many people might pass a particular location and at what time.
Finally, very detailed data about the actual employment or jobs worked in the area
are also shown. This data is provided from a number of different perspectives such as in what sector they work (private, government, self-employed), in what industry group they work, and even a breakdown of detailed job categories. Finally, extra detail is provided about all those that are self-employed in the prospective market areas.
Retail Site Selection Step 3: Other Prospect Profile Details
Other categories of information are also available from Towncharts.com that can help in the detailed profiling of prospective customers such as Educational and Healthcare market data
. Some of this data would be most useful for specialty retailing businesses that might require a more particular type of customer or that sell a particular type of product such as a healthcare-related item.
On the Education tab, a key item that might be important to your customer profile is education level (a.k.a. "Educational Attainment".)
The first two charts on the Education tab provide key market data on this metric including the percentage of the population that graduated from high school and the percentage with a Bachelors degree (or better.) These two metrics can be very important to the type of customer for which you are looking.
Additional education metrics that may be critical to your customer profile include the actual level of educational attained and the field of study pursued by those with a college degree or higher. These figures are also broken down by gender, race, and age category. Finally, for city level data there is extra education information available about school enrollment, local area schools, and much more.
Other specialty situation data available to profile your customers and make an educated retail site selection include an entire section of metrics on local area healthcare
. This can be critical data if your business has to do with healthcare. Metrics include the percent of the population with healthcare insurance as well as the change in the percent of the population with healthcare insurance. Other data breaks this out by age, gender, race, and other categorizations. Additionally, detailed information about the type of coverage carried in the market area is provided such as private insurance, employer provided, directly purchased, public coverage, Medicaid, Medicare, etc.
Finally, for city level locations, information about providers of care in the local market area are provided including hospitals. Data on hospitals includes the number, size, location, and quality of care and service information.
Retail Site Selection Step 4: Develop a "Trade Area"
A trade area is the area around your retail business from which you expect to draw customers. Do you expect to only get customers from very close proximity to your business location or do you expect they will come from a greater distance? For example, a quick service restaurant (QSR) might only expect to get customers right in their immediate local area whereas an auto dealership might expect customers from their entire county as well as surrounding counties.
Trade area size will differ mainly based on the type of product you sell. Are you a specialty destination restaurant that will pull people in from great distances or a fast food restaurant that would only draw from nearby (or farther distances if it's on the freeway)? To frame your trade area, you will need to understand the amount of competition for your product in the trade area. For example if you are a hardware store you will probably not draw people from another area where there already is a hardware store (unless there is some reason like a larger / more specialized product selection for instance.) Be sure to also include "substitutes" for your product or service and understand whether they are superior or inferior to what you offer and expect to adjust your price to accommodate. An example is a fast food restaurant where the food is inexpensive versus a high-end destination restaurant which is much more expensive -- There is a place for both. This rule applies to everything.
Retail Site Selection Step 5: Forecast and Estimate Sales
This gets back to your customer profile but also the volume of customer traffic you can expect based on both the amount and type of competition as well as how far you expect to draw your customer base. Questions to ask are:
- How often do you expect customers come in?
- How will they find you?
- How long will it take them to find out that you are available?
- How much money would they spend when they visit your location (i.e. what's will your average revenue be)?
Retail Site Selection Step 6: Actual Site Location
Now you should have narrowed down the areas that would be best suited for your business. The size of your area will be heavily dependent on the distance from which you will draw customers. Once these general areas are chosen, you'll decide upon the street address and location for your new site. Obviously there needs to be commercial space available for your retail business so the commercial real estate availability will be the first criteria.
After you have commercial real estate locations that are available you then can begin to understand how easily accessible they are based on roads and other physical factors.
- Will your customers be able to see your from the road?
- Is there a lot of traffic that passes your location, offering potentially free advertising? How hard is it for a person to drive into your parking lot?
- Do you expect foot traffic?
- If so, how easy is it for a person to walk to your location and is there already good foot traffic?
- What specific competition (including substitutes) are already in this location and will that be a problem?
Retail Site Selection In Summary
By following this basic work plan and using Towncharts.com you can get a very good understanding of potential site locations. You can do all this without spending a dollar
for expensive software, commercial databases, or consulting services. If need be you can start with this information to pre-screen your retail business site selection and be a much smarter consumer of services you may also purchase later.
Do you have any questions about using Towncharts.com for site selection? Let us know!