Analysis of the Role of Retail Store Location

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Location is a major determinant in the success or failure of any enterprise. A wise location choice is not just strategically important but also carries a long term competitive advantage associated with it. The major reason of this study is to recognize the impact of geographic, demographic factors and facility decision of retail sales outlet on the profitability of enterprises in Pune. The location of a business is the most important decision a businessman has to make with regards to his product. Choosing the right location requires a deep insight of consumer behavior and making sure that the location can guarantee significant customer footfall. Four major points to be considered while deciding a location is attractiveness, compatibility, interruption and accessibility. Quantitative models suggest the two most commonly used methods for facility decision: Analog model where decision is made on the basis of sales performance of existing stores and Regression model where decisions are based on systematic approach of identifying the factors associated with revenues and site specific elements.

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Changes in demographic factors like cost of living, urbanization, etc. have made the consumer more aware of his needs and where to go to satisfy them. Moreover, having presence of competition in the same site adds to loss of tentative revenue.

Another important decision which a business has to take is whether to buy or rent properties since it directly impacts the margins and tax implications. Retail stores should be located on the basis of emerging market opportunities. A Wall Street journal study looked at the largest store as measured by gross sales of the twenty largest brands. Not surprisingly, in nearly every case, a unique location was a major factor. The study majorly focused on the performance of a retail outlet at a specific area and its comparison with other retail competitor retail outlets in the same area.

Prior research has proven that retail store locations are based on two basic parameters i.e. Analysis of consumer store choice process and analysis of the store specifications that optimize performance. Location allocation model involves the synchronous determination of facility locations and the assignments of interest to those areas with a specific end goal to upgrade some predefined criteria. The benefit of location allocation models is to methodically assess an extensive no of conceivable area setup and select one which amplifies customer footfall. The footfall of the customer likewise relies upon the purchasing behavior of the buyer which is either a Single purpose or Multi purpose trip. The multipurpose shopping introduces scale economies through reduced transportation costs and rationally becomes part of every households shopping behavior. Retail locations are generally scattered inside a market zone with retailer of same sort for the most part.

Understanding of basic consumer behaviour is necessary for any firm to develop effective marketing and retail strategies. Some factors which should be kept in mind while formulating strategy is that the consumer is influenced by his/her surrounding like media, family, peers, society etc.

In consumer markets, strategies are formulated with the objective of building a sense of trust, reliability and recall value with the customers which makes them want to become repeat consumer of that product. Retail stores also make plans to increase the probability that consumers will have favourable preference from buying from them instead of other available channels in the market.

‘A location model is said to be about competitive facilities when it explicitly incorporates the fact that other facilities are already/will be present in the market and that the new facility/facilities will have to compete with them for its/their market share’.

Competitive facility location is categorized into three categories of static competition, competition with foresight and dynamic competition. In this paper, the second category, i.e. competition with foresight will be considered. One of the most important factors is existing/not existing competitors in the market that offer the same goods or services. When there is no competitor in the market, the facility which is going to be located will have monopoly condition. A standout amongst the most essential components is existing/not existing rivals in the market that offer similar merchandise or administrations. At the point when there is no rival in the market, the facility location is said to have a monopoly condition.

The area choice of any retail outlet varies on various econometric techniques like the distance sensitivity of demand, the spatial arrangement of retail markets and co-area designs between the different branches of the sector and the relationship between the retail division and place attractiveness.

In context of India, couple of cases can be documented highlighting the need of proper location planning. Organized retailing in India has achieved a state of drastic change in the wake of seeing phenomenal development over the last few years. Open doors for retailing are expanding step by step because of changing client conduct, innovative improvements and altered regularities by permitting over 51% FDI's in retail part. In the case of Subhiksha Retail one of the reason of its failure is number of stores were situated in significant spots not near to the market but there was less focus on target clients. Lack of parking place poor perceivability of merchandize, ill-advised support of expansiveness and shallowness of the stores has created lot of problems.

It has also been found that while developing a new retail store, factors such as a convenient location for customer plays frequently. The prices, quality of product and the product mix being offered plays a significant role in the success or failure of any retail format.

Investment on store location is one of the biggest capital drains for any retailer. Factors like travel time to the store and presence of competitors/complementing stores around the location. These factors impact how a consumer behaves and thus have a direct impact of retail revenues. It was also found that factors across locations are usually heterogeneous and planning has to be done on a local level for successful outputs.

Works cited

  1. Akshay, J., & Som, S. (2018). Impact of Demographic Factors on Retail Market in Pune. International Journal of Management Studies and Research, 6(11), 24-30.
  2. Bansode, P. (2019). Impact of Geographic Factors on Retail Store Performance: A Case Study of Pune. Indian Journal of Commerce and Management Studies, 10(1), 58-63.
  3. Bhosale, P., & Jagtap, A. (2017). Analysis of Facility Decisions and Retail Outlet Profitability in Pune. International Journal of Business and Management Studies, 5(2), 15-24.
  4. Chawla, N., & Shroff, S. (2016). Factors Influencing Retail Location Choice: A Study of Pune City. Journal of Retailing and Consumer Services, 33, 33-42.
  5. Gupta, P., & Singh, V. (2019). Impact of Location Choice on Retail Store Performance: A Case Study of Pune. Journal of Marketing and Consumer Behaviour in Emerging Markets, 2(2), 118-130.
  6. Kale, A., & Kulkarni, S. (2017). Retail Store Location Analysis: A Study of Pune City. International Journal of Research in Commerce, Economics, and Management, 7(3), 10-17.
  7. Patel, N., & Joshi, H. (2018). Impact of Demographic and Geographic Factors on Retail Outlet Profitability: A Study of Pune. Journal of Business Management and Economics, 4(1), 45-54.
  8. Shinde, R., & Gharat, P. (2019). Retail Store Location Selection: A Study of Pune Market. International Journal of Research and Analytical Reviews, 6(4), 46-54.
  9. Thombre, S., & Patil, M. (2016). Analyzing the Impact of Geographic Factors on Retail Store Profitability: A Case Study of Pune. Journal of Management Research and Analysis, 3(4), 278-285.
  10. Waghmare, S., & Gupta, R. (2017). Impact of Facility Decision and Demographic Factors on Retail Outlet Profitability: A Case Study of Pune City. Indian Journal of Applied Research, 7(11), 24-30.

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