Question

What factors should be taken into consideration while a retailer is considering a location decision to be located in a new city?

Answer 1

There are a number of factors that should be taken into consideration while selecting a new location for setting up a retailer.

The retailer must be well aware of the target customer base. They should identify their locations in relation to the retail outlets. Only when they are sure that the customers would find it feasible to visit the retailer should they move onto other factors.

The availability of cheap and good quality labour is another important consideration while setting up a new outlet. Depending upon the size of the retailer and their expectation of skill levels from the labour, this factor varies in importance.

Distance from the supplier is another important consideration that should be kept in mind. If the supplier is far away from the new location, the transportation costs would be higher. Ultimately it would result in lesser profits for the retailer as there would be a continuous excess expenditure even in the future as the supplier will not change their location.

The retailer must be well aware of the local laws and atmosphere. This can be very restrictive if the local laws do not favour effective business. For example, if the number of hours that the retailer can be open for business is limited, they would not be able to sell more products. There could be restrictions on advertising by the retailer or strong labour unions that favour the workers.

The costs and the decision associated with either buying or leasing the land and/or building is also a prime factor that affects the decision-making process.