Question

Explain how each of the factors listed below can influence the location of a retail business

• Visibility

• Cost of rent or purchase

• Proximity to customers and suppliers

• Proximity to competitors

• Complementary businesses

Answer 1

Below is the one by one explanation of the factors that influence the location of a retails business

1) Visibility

• In-store visibility of the products means how well they are stacked and are presentable from a far distance to the customer.
• Often Bright colored products have a high tendency to catch customer's attention.
• Whenever a customer enters a retail outlet his first contact is the products and if they are arranged properly and in a neat manner, there is a high tendency of sale.
• Also, the size and location impact the visibility of the retail outlet.
• Hence, Visibility directly makes your retail outlet presentable and hence location selection is very important and helps in revenue generation.

2) Cost of rent or Purchase

• Location heavily influences the cost of rent or the purchase value as areas that are known for huge businesses will cost more than the areas that are lesser-known.
• So Cost of rent or purchase becomes a major factor in determining the profitability expectations from a retail business venture.
• It is very important to understand the cost variances across past years so that based on location futuristic projection of rising costs can be estimated before venturing into the business.  

3) Proximity to customers and suppliers

• Location determination for retail outlets should be customer-centric so that the location is easily accessible to the customers and hence provide huge scope for sale.
• Now having sorted out the demand side of the business it is very important to have the supply side of the business to be sorted out and hence the location of suppliers also becomes very important
• The location of suppliers should be taken into account while determining the location of the retail outlet so that the transportation costs incurred to complete supply chain operations should be optimal.
• Often most of the suppliers provide door to door delivery, so it also becomes very important that the retail outlet has sufficient storage space so that replenishment at the store should be instantaneous.

4) Proximity to competitors

• Choosing location based on the type of business that you will be doing and checking whether any similar type of business is available in proximity to the location is very much important as the existing business might be established and will behaving loyal customers and hence it leads to a division of customers which directly impacts the profits.
• Because of similar businesses thriving in one place, it leads to unethical business practices and unhealthy competition.
• Customers get options and hence sales dwindle.
• Most of the time is spent thinking how to outsmart the competitor rather than focussing on operational excellence of own business model.
• So this becomes a major factor in selecting the Location of the business.

5) Complementary businesses

• Complementary businesses aim at coexisting and generate leads for each other based on their products.
• Ex - Mobile shops & telecom services
• So a study should be done on location having businesses that can complement your business.
• Thus location in proximity to complimentary business enhances an environment of coexistence and leads to business growth.

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