Location can make or break your retail operation


THE LOCATION of your first retail store can make or break your business. Let the site help sell your products: A store's future is brighter when prospective customers see it frequently.

After identifying a probable site, study it. Watch people pass the place, and observe their movements. Confirm that the access to your location is relatively easy and the parking is adequate for the number of visitors expected. If the location fronts a dangerous road with fast-moving traffic, your store might not even be noticed.

The choices: Shopping centers attract clothing or gift stores. Even though you will face the threat of competition, the variety invites shoppers to compare prices and quality. Malls are great because they generally have a high level of foot traffic. But space in a mall is also more expensive to rent.

A strip center is not an area in downtown Baltimore known as The Block. In retailing, the term strip refers to a series of stores attached to one another. Usually the row of businesses face a major road such as Eastern Avenue, Gov. Ritchie Highway or Reisterstown Road. The rent is generally less expensive than it is in enclosed malls or in open-air plazas like Cross Keys on Falls Road.

In a retail center -- mall, plaza or strip -- the rent variance results from a location's impact on sales. While some stores may be on the verge of bankruptcy, others in the same center with better locations may flourish. Common sense dictates that the closer your store is to the main attractions or entrances of the center, the more business you might have.

Patronage: Before signing a lease, do some homework. Sit in the parking lot at various times during the week. Count the number of cars in one section of the lot to help you estimate how many people are probably in the center. This becomes the size of your market when the store opens.

Also observe where people walk. Most retail stores need foot traffic, however there are some exceptions. Customers in search of beds, ovens or tires will look for your store wherever it is located. These shoppers have already decided to buy this type of merchandise before making the the decision to visit your store.

Demographics: To make wise decisions about a prospective location, you need detailed demographic information about the surrounding area. Much of this data is available at the local economic development office or the Baltimore Regional Council of Governments. You may be able to obtain all the information you need from the shopping center's real estate management firm.

The management company should be able to provide demographic information based on data from the U.S. Census Bureau. The data will be organized so that you can study characteristics of the population within one mile of the center, three miles, five miles, etc. The reports show the number of people, the average household income, education, age, gender, the number in the household and ethnic background.

Consider whether your products will appeal to at least half of the people described in the statistics. A child-oriented store may not fare well in an area with few children. Conversely, if your store is the only one for miles that is geared toward kids, it might prosper.

Then, try to decide whether the populace will drive from their homes or walk from their offices to visit the center during the course of an average week. Take, for instance, a strip center where the main attraction is a supermarket. People will generally not drive more than a couple of miles for a food store. Keep in mind that the success or failure of other stores in the center, such as the supermarket, will have an impact on your business. In this scenario, if the demographics show that your products may not appeal to people within two or three miles of the store, look elsewhere.

Once you have targeted a shopping center, you will need to submit your business plan to the center's property manager. The manager will examine your plan, including product photos and prices, to see if the merchandise fits with that of other stores in the center and with the general economic level of the customers. A higher-priced product line is appropriate for a center close to moneyed people, while a lower-priced line will attract a more varied clientele.

The Lease: The cost of space in a shopping center or mall may differ greatly depending on the location. The price is usually quoted as "X dollars" per square foot on an annual basis. For example, to figure the rent for a 1,000-square-foot store at $20, multiply 1000 by $20 and divide by 12 (months). The space will cost $1,667 a month. The rate at a location such as Towson Town Center can range from $40 to $90 a square foot while the rates at a location such as Reisterstown Road Plaza can be less than half that.

The center will charge for the maintenance of any shared areas such as the lobby/hallway, parking facilities, trash collection and the center's security force, if any. The fees can total an additional $7 to $15 per square foot. As with almost all business sites, you will be responsible for the wiring and maintenance of your telephones and electrical outlets.

The center should provide a "shell," which is the clean and painted four walls, ceiling and floor, plus a functioning air conditioning system. If the site was previously occupied, the center's management should offer cash or a reduced rent to pay for renovations.

Read the lease carefully and do not be afraid to make changes. There are no concessions unless you ask. The average lease term is about three years.

The Bottom Line: Compare the demographics, traffic patterns and costs on a number of sites before you sign that lease.

Patrick Rossello, president of The Business Consulting Group in Towson, is a member of several local advisory boards. Send questions or suggested topics to him c/o Money at Work, The Evening Sun, 501 N. Calvert St., Baltimore, Md. 21278.

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