Published in Business Franchise Australia and New Zealand 2013
In today’s market, many franchise systems want to locate outside of the major shopping centres, as they want lower rents, lower rent increases and longer lease terms with options available. In addressing these sites however, you do not have the information being supplied to you such as in a Westfield’s or Centro shopping mall, so you have to base your decision more on your own research.
If we have a site in a shopping strip, it is normally referred to as an inline store. My definition of an inline store is that it is amongst other sites facing on to a road and / or footpath, adjoining the next door neighbour.
Many shopping strips are owned by independent lessors, so there is little or no group information, unless provided by a Chamber of Commerce, or a business group. I would like to pass on my views on how to evaluate inline stores if offered to you.
Generators – the power of the shopping strip
The power of the shopping strip you are planning to enter is extremely important. We call this the generator rating, and what is it that is around you that will attract business to your immediate area.
If your concept is a daytime product, then being in the vicinity of supermarkets, chemist shops, newsagents, post office and banks is probably the best proxy for the strongest part of the shopping strip. If, on the contrary you are on the end of the strip, next to the petrol station, small coffee shop and quirky boutique clothing shops or the charity stores, then you definitely are in the lower end as far as generators are concerned.
Having a clicker to count people passing is a great way of straightening out your thoughts. Move around the strip and take five minute pedestrian counts at various parts of the strip, and you soon get the feel of where the busy sectors are.
We run a product called StripLocator, which is a methodical way of measuring the number of stores in the strip, and the proportions or mix of stores, and look to how they suit the business proposed. As I said earlier you can look for the daytime generators in the form of supermarkets, banks, chemist shops, post office and newsagents. If you are a night time product or a café or restaurant, you probably are best clustering in the vicinity of other similar businesses. For example, why do you find many restaurants and coffee shops near picture theatres? Because they draw a continuous flow of people before and after the films!
StripLocator allows you to compare shopping strips in each capital city in the same way, and create a ranking or priority order for how you will lay out your future network.
Impulse vs. Destination – leads to Pedestrian traffic.
Before selecting a site, you need to think in terms of how your product rates in terms of Impulse vs. Destination. If we think of it in terms of a line, 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.
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 is reasonably expensive, and you have already predetermined where you will buy it 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.
The higher the impulse value of the goods you are selling, then the more importance to be in a highly visible, high pedestrian 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. 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 on the strip. 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 the side street paying cheap rental if you have a high impulse product such as phone cards,sandwiches or other food items.
In a strip this is pretty much a function of size, window frontage, whether you are on a corner or not, and to an extent being at ground level with easy access. Store suitability is having the right size and shape of store for what you are selling (and rent you are paying). If you need 80 sqm, it is no good having 120 sqm. If you need to display your goods in the window, it is no good having a three metre frontage, with the door taking up the first 1.5m!
Corner stores have some advantage as they normally give more display space, can be seen easier from cars passing and may give you two street fronts and two windows to display your goods.
Basically common sense should tell you what the store should be like. Don’t compromise because of a cheap rent deal for the store that will turn out impractical in the future.
It is no good having a store selling one product range when either there are few people in the area, or they are not likely to be your customer. Whilst companies like ours can provide detailed demographic information, you can always look up any area in Australia yourself on the ABS website www.abs.gov.au and then look for Census Data, and then Quikstats. You can put in a postcode or suburb, and find out from the Census 2011 about that area.
Think in terms of what you are selling,the pricing point and who you are selling to. If your average meal price point is very high, then selling into low socio economic areas is probably less attractive than high socio economic areas. If you are selling kids meals and ice cream, then young kids and their parents should be the best target audience.
A Target Market Index is one way of putting together two or three demographic variables to see which areas are best for what you are selling.
Clustering and Competition
My final point is competition. Whilst you may not want to be exactly beside your main competitor, being in a group of like-minded businesses tends to draw the public to the area, and gives you a higher turnover than being out on your own.
I speak with many food operators, and I hear comments like – we just go near a McDonalds, or in a strip, let’s just go near the Grill’d. This is probably quite a complement to their site selection procedures; however they do definitely draw business to the immediate area.
By thinking in terms of the five areas above, you may have a better way of comparing apples with apples when making that most important store decision for the future.
Peter Buckingham is the Managing Director of Spectrum Analysis Australia. He is a certified Management Consultant, and a Fellow of the FCA and IMC.