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How to Choose a Location for Your Store or Business


When choosing where to open a store or business, you should keep in mind the following:

  1.   Area. You should consider the area that your business serves as the distance that most people drive to get to the store. For example, if most people drive 15 minutes to get to a store in your city, you should think of the area that your business serves as a 15-minute commute from your location.

This is a good starting point for thinking about the geography, a potential location can serve however it does have limitations. Firstly, it assumes that people are coming to your place of business from home instead of from work which may be further away. Also, the model doesn’t recognize the different types of Shopping and dining experiences while potential customers might only be willing to travel 10 minutes to pick up a pizza, they might be willing to drive 45 minutes for a fancy dining experience. When deciding on how big the area your business serves is, think about how far a person might be willing to travel to buy from you.

Generally speaking, the lower the dollar amount of the purchase and the more regularly they make the purchase, the shorter the distance customers are willing to travel. Once you decide on the area that your business serves, you should research the area. Here are some questions to answer:

  1.   How many people live there?
  2.   Are the people that live in the area your target customers?
  3.   Do the people that live in the area spend money locally?

Another important question to ask is what does your competition look like? For example, if you’re opening a business, how many and how successful are the businesses with similar price points and food styles?

There are no hard and fast rules as to what constitutes market saturation, however, one barometer would be the success rate of new businesses and whether or not you believe that your business is successful without taking away a big portion of the business from another business. If you need to demolish a competitor to have success, the area is probably not fertile ground for starting that type of business.

  1.   Access. If customers cannot get there easily, they are less likely to come. What constitutes access in major cities in downtown areas is different in suburban areas. In a downtown area, you want to look at foot traffic and proximity to public transportation like subways and bus stops. In suburban areas, it all comes down to the car. Ideally, you would want your business directly off a major roadway with good traffic.

Many state and local municipal government survey the traffic on roads and can provide you with this data, in fact, the data can be as granular as sections of particular roads. The key number is the average annual daily traffic which is the number of vehicles that typically use the road per day. This can be very helpful in comparing two locations that both look like they have similar traffic. The data is, however, imperfect in many aspects. It can be outdated and doesn’t tell you the time of day, the day of the week, or type of traffic that may be using the road.

What type of traffic will work best for your business? Once people get to your business, will they be able to park? Another way you can ask this question is, will there be enough parking for customers and employees during peak hours which is lunchtime for many businesses or peak season which is Christmas time for many businesses?

A customer that cannot find parking will not be able to shop and may not come back. A general rule of thumb for stores is that there should be 5 to 8 parking spaces available for every 1000 square feet of retail space. Restaurants require more parking, you should have a parking spot for every three dining seats in a restaurant plus a spot for every employee. A restaurant with 36 seats in 8 employees during dinner service should probably have around 20.

  1.   Noticeability. How many people will see the location as part of their normal activities? Will your store be your business’s biggest advertisement?

There are two types of noticeability. First is proximity, your customers can notice you because they’re going to a nearby location. For example, if your store is located in a department store mall, a number of potential shoppers may be walking around the mall to visit other stores. As these shoppers have already parked and are in a shopping mindset, there is a high probability that they will walk into your store as well. For this reason, many retail stores like being in malls with anchor tenants like large department stores which advertise heavily and draw people into the mall.

Second is drive by. Your customer can notice you because they drive by your store and see signage or window display. In determining your drive by noticeability, the size and location of your signage make a huge difference however, you should ask your landlord if there are any restrictions on building a sign and check out your local zoning ordinances. If you can have a big sign, the number of people driving by your establishment becomes even more important.

  1.   Local neighborhood. What types of shopping activities are nearby? Do you want to be located near the competition or far away from it? Have you ever noticed that car dealers tend to be clustered around each other? There was a very good reason why.

When shopping for a new car or high-value ticket items, shoppers tend to visit multiple dealerships before they make a purchase, however, just because they want to visit multiple dealerships doesn’t mean that they want to travel to find them. A potential car buyer might be inclined to take a test drive in a car that is not at the top of their tri list if it’s next to a dealer which sells a brand they like.

For some businesses like cars furniture stress and other high-value purchases, locating near the competition is a good idea. It is also a good idea of locating near complementary business when there is potential for cooperation instead of competition. For example, a vegetarian restaurant might want to be located near a pet store, a casual dining establishment by a movie theater, and an ice-cream shop next to a school.

When thinking about your local neighborhood, you should consider the perceptions of potential visitors. If you operate at night, will shoppers feel safe in the area? The level of lighting, the number of people around, and the area’s reputation will all play a role in how safe visitors feel.

If you have any questions or comments, please feel free to leave them in the comments sections below.

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