Expanding Your Business: Finding a New Store Location

By Allan Pulga

These days, wireless retailers are pretty much everywhere. You want to expand and open a new location, but where should you go?

In finding the right location for your wireless retail store, there’s a seemingly endless list of questions to answer: How do you do your market research? How do you determine the demographics of a particular area? And its traffic flow?

And once you’ve found the location you want, how do you negotiate the lease? For how long? How much are you willing to pay per square foot in your market, and what is standard in that market? What about lease holds? How much do they cost?

Thankfully, there are resources available to help you in your quest for answers.

The helpful experts at Entrepreneur.com say the right location should offer a reasonable degree of security, access to public transportation for customers and employees, adequate parking, room for an office, and of course, sales space.

“The best retail location combines visibility, affordability and lease terms you can live with,” they say, in their online Finding a Location guide.

The guide lists three phases of choosing a retail location, choosing: a city, an area or type of location within a city, and a specific site.

Below are lists of considerations for each phase:

- Size of the city’s trading area

- Population and population trends

- Total purchasing power and who has it

- Total retail trade potential for different lines of trade

- Number and size of competition

- Customer attraction power

- The nature of competition

- Availability of access routes to the stores

- Zoning regulations

- Geographic direction of the city’s expansion

- General appearance of the area

- Sales and traffic growth prospects of the trade area

- Demographics of the neighbourhoods

- Traffic flow

- Complementary nature of neighbouring stores

- Adequacy of parking

- Vulnerability to competition

- Cost of the site

Every store site has its strong points and weak points. The trick is to determine which site offers you the best ratio of strong to weak attributes – which site best suits your business needs?

At strategis.gc.ca, the Government of Canada’s Business and Consumer Site, there is a guide to choosing a retail store location. In this guide, there is an excellent grid summarizing the costs and benefits of various retail locations.
Take a look:

                                   Benefits                     Costs

Downtown           

                             - Good transit                   - Perceived parking problems 

                            - Established market          - Possibly in decline   

                            - Independent focus           - Usually poor evening traffic

Regional Mall    

                            - High traffic                      - High rents                           

                            - Plenty of parking             - Very competitive                

                            - Established draw             - High building costs            

                            - Professional image           - Controlled hours

Community Mall

                            - Trading area defined        - Mixed images                          

                            - Good parking                  - Limited market                    

                            - Community-driven           - Limited traffic

Strip Mall                        

                            - Specialized tenant mix      - Limited draw                                

                            - Visibility                           - Limited access/transit         

                            - Convenient

Free Standing/Big Box   

                            - Lower rents                     - Unit size (large) 

                            - Value image                     - Exclusive to major tenants     

                            - Lower overheads             - Harder to attract customers

It’s no secret: Today’s malls are saturated with cellphone stores. But there’s a reason for that.

Jay Kingaard at Entrepreneur.com explains that shopping centres take care of everything for the retailer: site selection, parking, weather protection and most importantly, a collective customer draw.

“Shopping centres are distinctly different from downtown and local business strips,” he says. “The shopping centre building is pre-planned as a merchandising unit for interplay among tenants.” So, if there’s room for your wireless store to interplay with the existing mall tenants, take full advantage.

• Are its shoppers your prospective customers?
• Would the centre offer the best sales volume potential for your kind of merchandise or service?
• Can you benefit enough from the centre’s access to a market? If yes, can you produce the appeal that will make the centre’s customers come to your store?
• Can you deal with the competition of other stores?
• How much space do you need and where do you want it?

Once you’ve found the shopping centre that suits your business, you must decide how much space you need and where to locate yourself within the mall.

Your rent depends on the amount of space you need, Kingaard says. Because rents are typically high, merchants need to rethink their space requirements to use space efficiently. At the same time, you need to consider what kind of sales volume you’ll have – this will determine the amount of space you need for inventory, for an office and perhaps a shipping/receiving area.

“You should also consider the necessity for adequate space for expansion when business picks up,” he adds.

As for location within the mall, do you need to be in the main flow of customers as they pass between the stores with the greatest customer pull? Who will your neighbours be? What will their effect on your sales be?

In shopping centres, rent is usually stated as a minimum guaranteed rent per square foot of leased area against a percentage. “Typically, this percentage is between 5 and 7 per cent of gross sales, but it varies by type of business and other factors,” says Kingaard.

But that’s not all. Kingaard advises retailers to think of “total rent” when considering what is affordable. This means adding up rent with dues owed to the centre’s merchants’ association, for example, or other surcharges.

“About 80 percent of America's 1,800 enclosed and regional shopping malls have temporary tenants, which include kiosks and carts,” says Kingaard.

The advantage to opening a kiosk or a cart is obviously cheaper rent: usually about a quarter of the rent for an in-line store. Specialty products and accessories abound – silver jewelry, engraved products, sunglasses, hair accessories, watches, etc.

“Many entrepreneurs find carts and kiosks a low-cost way to launch a retail business or to supplement an existing business. Some retailers use carts as test businesses in potential markets, while others make more than $1 million by operating several carts in several malls and cities.”

“Everything is negotiable”

“Once you've decided what kind of space you want, where, and how long you need it, it's time to consult a lawyer to discuss what specific issues you need to address in order to negotiate the best lease for your business,” Kingaard explains.

Core points to review carefully are: occupancy date, chargeable floor space, which renovations or tenant improvements the landlord will do or pay for, services to be provided (such as heating and air-conditioning), liability, and renewal or termination terms.

“Once you're close to reaching an agreement with the real estate broker, leasing agent or landlord, your attorney can make sure that everything is in writing to clearly define each party's obligations.”