Location, location, location.

It’s an age-old adage that still applies in the commercial real estate market. A business needs to find the right location to be successful. But, as urban markets grow and choices for retail space diversify, finding the right location can be challenging.

If you don’t have a framework to make your decision, it’s easy to get lost in the options. 

Should you lease space in a mall? A suburban development anchored by a major tenant like a grocery store? A less expensive location farther from major traffic nodes? Or a professional building in an up-and-coming neighbourhood?

This post will educate you on the types of information you’ll need to collect, both about your business and about the retail market you’re leasing in, to help you make the right decision.

 How to choose a retail store location:

1. Know your customer. Know your product.

Every step in this process requires you to understand your customer and product.

The right location will be dependent on who you’re selling to and their buying patterns. If you don’t understand your customer you’ll never be able to make informed decisions on where to open your business.

If you haven’t gone through the process of writing a detailed business plan (or are having trouble getting the necessary level of detail), we’d suggest finding someone to help. The Government of Canada has free resources, but you can also find a professional business writer or a consultant to help guide you through the process. 

When you know who your customer is and how they’ll buy your product you can begin your search for the right location.

 

2. Decide whether your business relies on exposure or if it's a destination.

Once you know your clientele you can determine whether your store will rely on exposure or will be a consumer destination. First, let’s look closer at what each of these mean.

 

Exposure

If your customers are impulse buyers…

“Oh, let’s grab a coffee before we head out of town!”

…you’ll need a location that provides exposure. Consumers will typically buy impulsively if your product is not differentiated from your competitors.

Most coffee shops, liquor stores, and fast food restaurants fit into this category. Your customers will choose to buy your product when they see your sign. Therefore, the more people that drive or walk by your business the more customers you’re likely to attract.

You’ll pay more to lease a high-exposure property, but unless your product is so unique that it draws people from around the city, you’ll be glad you did.

 

Destination

If your product is unique enough…

“Halo is the best lighting store in the city! You need to go there to get that new chandelier for your dining room.”

…you don’t have to worry as much about locating your business in a high-traffic or high-exposure location. Because your product is different from your competitors, your customers will come to you.

Destination business are often high-end or unique products that can’t be found elsewhere, or strong brands that are the first to open in your market.

Keep in mind, this isn’t an all-or-nothing choice. Most destination businesses will still benefit from high exposure. After all, just because a high-end jewelry store is the only place in your city to get a certain kind of necklace, excited shoppers may still impulse buy it when they walk by.

Remember: exposure is good, but, depending on your business, you might not need to pay the premium it demands.

 

3. Look at other retailers in your area of interest and analyze your competition. 

Location is important, but your fellow retailers play a vital role in the types of consumers that are drawn to your area. 

Land developers, like Qualico Commercial, will build a merchandising plan to help them decide on the types of tenants they want for a new development.

 

What’s a merchandising plan?

For a strip mall in a suburban neighbourhood, a land developer might decide that the development will be most successful if it includes a major grocery store, two fast food chains, a restaurant, a pharmacy, and a bank.

This assortment of retail businesses is their merchandising plan.

Because it’s unlikely that two pharmacies will survive in a single development, you might find that the landlord you’re trying to lease from won’t allow you into their development. If you’re unsure what a developer’s merchandising plan is, just ask. You can save yourself some time by finding a development that’s actively looking for a business of your type to move in.

Sometimes there is no merchandising plan to follow, but you’ll still need to decide whether your business will benefit from being near the competition.

 

Businesses that benefit from competition

Have you ever wanted to go out for a meal with friends but were unable to decide on a restaurant?

“Let’s head down to Hypothetical Avenue,” says one of your friends. “There are lots of places to eat down there.”

In this case, several competing restaurants have clustered into a node. People know that in certain areas of the city, they’re sure to find a restaurant they enjoy. A city might organically develop a fashion district, or a mall might purposefully select its retailers to become a fashion destination for the city. 

In these cases, competition is a good thing. Competing stores will attract new customers to the area and all the retailers will benefit.

 

Businesses that suffer from competition

If you open your business in an area that’s already saturated with retailers of your type, you might find there aren’t enough customers to go around.

Similarly, you might be trying to open a business in an area where a well-established brand already controls the market. If your product doesn’t offer customers a unique advantage, it’s unlikely you’ll be able to draw the customers away.

In this case, you’re better off finding an area of your market that’s underserved. A different location, farther from your competition, will lead to greater success.

It’s important to understand the retail environment that you’re entering. 
  • Will your business benefit or suffer by nearby competitors?
  • If you have found a good location, do you fit into the developer’s merchandising plan?
Answering these questions will bring you closer to finding the perfect location.

 

4. Study the customer demographics of the area.

Urban centers can be broken up into communities within communities, and the demographics of those communities can differ significantly. 

Sophisticated franchises (like your favourite fast food chain or department store) tend to have their location selection process down to a science. To do that, they rely heavily on demographics.

Knowing the population within 3 to 5 kilometers of your location, the average household income of the surrounding neighbourhoods, and the traffic flow on adjacent roads can provide you with a good picture of your market. 

This data is often available free-of-charge from your municipality or through census data collected by different levels of government. 

Analyzing the demographics in your area and comparing it with the customer you defined in your business plan will help you get a better idea of whether you’re looking in the right area.

 

5. Compile your information and make a decision.

You’ve defined your customer, determined the importance of exposure for your product, decided whether you’ll benefit or suffer from being close to your competition, and have a good sense of how the demographics of your market differ from location to location. 

All that’s left is for you to make your decision.

 

Need more help?

If you’ve already gone though all these steps but are still struggling, it might be a good idea to get some help.

 

Talk to a Broker

Commercial real estate brokers that specializes in retail developments think about these steps every day, and they’ll often have completed most of the research already.

Brokers know the demographics of your city, they understand the thought process behind a merchandising plan, and they can usually tell you whether you should be positioning yourself close to or far from your competition. 

 

Talk to a Qualico Commercial Leasing Director

Qualico Commercial has leasing directors that represent five Western Canadian cities (Edmonton, Calgary, Red Deer, Winnipeg, and Vancouver) and are a good resource for finding out more about the retail opportunities in the city where you want to lease.

Our leasing directors understand their markets, know the merchandising plans for all Qualico Commercial developments in that market, and have experience matching businesses with the location where they’re most likely to succeed.

Look on our team page, locate the city you’re searching in, and reach out to one of our leasing directors.

 

You should now have a much better framework for choosing a location where your retail business can find success.

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