Business Coach Column by Ruben Anlacan, Jr. (President, BusinessCoach, Inc.) from the Manila Bulletin
Everyone agrees that location is one of the most significant factors in the success of a retail business. However, among small entrepreneurs, it is rare that a scientific effort is employed when looking for a business location. Most decide on gut feel; others on superficial examination. Finding the ideal location for a retail store must be given top priority. To assist the entrepreneur in this quest, here is a list of some of the blunders to avoid:
• Not seriously considering several sites. Doing a thorough site analysis means looking at, and evaluating various probable locations. This takes a considerable amount of time. If you settle for just one location to check, then you are likely to make a biased decision. In case that one location turns out to be unsatisfactory, then you may have wasted too much time without an alternative.
• Depending solely on the franchisor. Besides not knowing the true quality of their location expertise, the franchisor may have different priorities. Some franchisors are short sighted. There are those who seek only to get as many franchisees as soon as possible. Even for franchisors with the best track record, it would not hurt to do your own research for validation.
• Getting a location only because it is cheap. Landlords rarely have a low estimate of their property. If the price is low, there may be a problem with the site. In this case, be twice as careful in investigating the place. What appears to be a bargain, may turn out to be a nightmare.
• Not conducting a proper traffic count. Perform a daily traffic count, with hourly intervals, for at least one week. Make sure that the period does not coincide with any event that may distort your finding. Take into account, too, if seasonal factors may misrepresent the results. For example, December is usually a peak season for many items; hence, you must not assume that it is representative of the rest of the year. Know too if the traffic stops to shop, or if they are just passing through the area.
• Not considering the demographics. Demographics are the characteristics of the population, such as income, age, gender, education, etc. Study carefully your ideal customer demographic and make sure that they make up a large percentage of the traffic. To do this, you need to observe the kind of people you are counting to see if they fall into your target market. This is particularly important if your products need an upscale market.
• Not considering the surrounding establishments. You must think of the potential effects of the neighboring establishments, even if they are not direct competitors, they will have a positive or negative effect on your sales. See if your store fits in well with the surroundings.
• Failing to survey the acceptability of your product or service. Survey or better yet, conduct an actual test to see how much your product or service will be desired by the local population. Preferences may differ and you cannot assume that what was a hit in one location will also be well liked in another.
• Ignoring parking and the needs of the disabled. If you are expecting that many of your customers will come in their own car, you must consider the availability of parking. Remember too that there is a law mandating easy access for those with disabilities. There must be an entry point for those in wheel chairs.
• Getting too expensive a site. The best location may be too costly. Do a break-even analysis to know if expected sales can cover the rent.
• Neglecting to consider the quality of the competition. If your competitor is a well-run company with an internationally known brand, it is likely that it will take a larger share of the market. However, the opposite may be true if the competitor’s shop looks dilapidated. If you have a nicely built shop, there is a strong possibility that you can grab more than an even share.
• Not checking the susceptibility to flooding. The recent heavy flooding should bring an unforgettable lesson on the damage a store will suffer if the area is prone to flooding. Ask around the neighborhood to verify, if indeed, the location is flood free.
• Blindly following what worked for others. An excellent example of this is the common advice to locate beside your biggest competitor. While many retailers struck gold using this strategy, there are also those that did not make it. Play safe and do your homework.
• Not reading the lease contract carefully. Not all lease contracts are alike. There may be provisions that will hinder your operations. Is the yearly escalation price too high? What are the operating hours? What will happen if you want to pre terminate your lease? These are just some of the things you will only learn if you read the contract thoroughly. If some of the conditions are disadvantageous, negotiate to make the agreement more favorable to your business.
• Not planning for the future. If the area has strong growth prospects, you should get a location big enough for future expansion.
Choosing your location is the most significant decision in retailing. There are numerous variables to consider and getting and analyzing data is a tedious endeavor. However, taking the time and expense to do a methodical search is the best investment you can make.
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