Guidelines for Student Project (MKTG 1058 DC) © Geoffrey da Silva

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MKTG 1058 – Distribution Channels

Discussion Points for Project on Location Analysis and Store Environment

January 2011

Malls Approved for Location Study: Raffles City, Palais Renaissance or Shaw Leisure Gallery

Before starting your project:

Survey the selected mall and have a broad idea of the kinds of stores and the likely customers those stores are likely to attract. Think of this in terms of segmentation and targeting strategies.

Selection of store: What is appropriate varies from group to group. Some key questions need to be asked. Does the store have a unique retailing concept? Where would it draw its customers from and does location matter? Why do you think it could have a loyal customer base? Does it fit within its overall image and positioning? Are you able to get supporting market information? How does it sit within the overall shopping centre layout? Any unique advantages offered by the shopping centre layout in terms of appearance, accessibility and others?

Nature of the product / service of your selected store: This is vitally important to the successful completion of your project. Many groups fail to do well because their analysis is superficial and textbook based rather than factoring the nature of the product. Product classification will include convenience, shopping and specialty goods- you are expected to have known this in your Principles of Marketing course. The nature of your product will determine shopping behaviors- which is very much related to location analysis since it determines the motivations for buyers to visit your store. Is the store you have selected one that is randomly visited or is it a „destination store‟?

The trading area analysis is the key issue because in your project you will need to argue whether or not there is a clearly demarcated trading area or whether customers may come from further away.

Read Chapter 7 in depth followed by Chapter 13. But take note that other areas of retail management found in the remaining chapters could be of use to your project.

Use Exhibit 7.5 as a guide to planning the stages of your analysis. This model reminds us that we are working from macro market data and inwards toward micro information about the site.

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Note: Getting the Right Perspective for the Project: You are reminded that you are NOT going to recommend other better sites for your store. Your retail store is already in your selected mall. In fact, you are required to discuss the merits and limitations only. It was mentioned in class about adopting the correct perspective since so many groups in the past were penalized because of this mistake. The text chapter 7 is written from the perspective that ‘the retailer has not yet selected a suitable site” and is using a screening approach in order to narrow down the best choice. In this project, we are already operating from the given site. You are to use the content in chapter 7 to select the ‘appropriate set of factors’ to comment on the suitability of the site. Those groups who merely copy content using the headings of chapter 7 will not secure a good pass. Instead you are urged to carefully analyze the nature of your store and its products to determine which factors are ‘strongly correlated’ to the patronage behavior at your store (notice that the project brief often uses the term ‘hypothesis’). You are also encouraged to introduce factors that may not be found in the chapter. This will show initiative on you part.

Approach to Completing the Project:

Break up the instructions into parts. Make sure you address ALL of the parts and don’t leave any area unanswered. The following working notes are only guides and not answers. Use them to work through the different sections of your report

Sections of the Project Brief (in boxes) followed by my comments: With their specific store the students are to first determine the trading area - that being the geographic area from which that store draws its customers. They must do so utilising Reilly‟s law of retail gravitation. In doing this they will have to decide whether the store itself or something else, such as the centre the store is located in, determines this trading area. Please remember that theorists such as Paul Converse have noted that with a shopping centre one can use the square metres of retail space rather than the actual population one would use when working with a town.

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Comments: After providing some background information about your store (type of business, target customers, competition, etc) proceed to discuss about location specifics of the store within the mall and the trading area. The most important aspect of location is a clear understanding of the trading area around the mall you have selected. Discuss the attributes of the trading area-other shopping malls, private residential or offices. Use maps to show where your store is likely to draw customers from. Use the focal trading area where your store is located as your anchor point (remember to compute Reilly‟s model you need to have a base trading area. To compute the statistics you will need to have at least 3-4 other malls from which to compute the break points. Note that we will be using square feet mall area space of your selected mall and the nearly malls or shopping centers as a substitute for population data (which is used in the formula in the text book. We use the floor area as a surrogate measure of traffic (shopper) volume; sometimes known as „footfall‟. Commuting distances are estimated from travel on main roads and the MRT (just provide rough estimates will do). All calculations must be shown in the appendix. After calculating the break points, you must mark off the trading area on an appropriate diagram. The lecture PowerPoint slides for Lecture 2 should be referred to, especially slides number 2-80 to 2-93. When choosing the other shopping centers or malls try to justify your selection. In addition, the other malls should have stores that have similar products or services that your selected store is offering. The competitor stores in those other malls will give you some idea of whether the trading area is over or under stored. Key issue here: is it the store or something else such as the centre of the store or factors such as the uniqueness of the product, etc that determines the trading area. Bear in mind that the concept of LA must be moderated to fit Singapore‟s context (we are a city state). The nature of the product and the resulting shopping / search behaviors will give you some indication of how wide or narrow the trading area is likely to be.

Once the trading area for their store is identified the students need to analyse the merits of that trading area in terms of whether it is understored or overstored.

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Comments: Look at the definitions of under/ over stored on page 225 of the text. Think back to your own store. Don‟t be limited by a comparison of exact retail store type comparisons but also consider other equivalent stores or store formats that might offer similar but not the same products. Just to consider an example- Harvey Norman store sells furniture as well as electrical products so if your store sells furniture you should count Harvey Norman as one of your direct competitors. So look wider before you commit to a decision on the trading area being over or under-stored. Give evidence of over or under- stored situations by showing the count of similar stores in your own mall itself as well as similar stores in surrounding malls. You can then comment briefly on the intensity (or lack of) competition for your store‟s brand. Saturation theory describes the concept of „intensity of distribution‟ or „market coverage‟ based on the number of retailers, the concentration within a given geographical market and the types of products offered by those retailers. When you comment on the extent of the trading area being over or understored, support with justifications.

They also need to carefully utilise all the other market demand and market supply factors which are described in detail in the prescribed text and be in a position to report on all aspects of that particular trading area.

Comments: You can comment on as many relevant factors, but do not feel obliged to force fit every criteria. Some factors will stand out as having high correlation to the attractiveness of your store. You can even include factors that are not included in the list shown in the text provided these are relevant. Be selective and point these out and elaborate on them. Example high consumer mobility in Singapore means that distance is not a barrier in store choice and location. Market demand factors are those that can sustain demand for the store products over a period of time. By analyzing the demand factors, you are actually profiling the types of customers that your store attracts. As for supply factors, the square feet issue relates to the “costs” of operating- rental cost is high depends on the location and level within the mall, as well as staffing costs and costs of turnover of staff. If you look at the nature of your product, you need to examine the expected profitability of running that store‟s operations. Is it high value or low value added? Is it high turnover low margin or low turnover high margin? Also you need to comment on the intensity (or lack of it) of competition around that trading area- how many stores in your existing mall and other surrounding malls, the range of products, types and intensity of promotions used, power of store brand, etc.

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In summary, this part of your analysis helps you to profile your trading area- gives a sort of description of who buys and who sells in that vicinity including the shopping mall itself.

In doing this admittedly there might be some factors which they cannot fully ascertain. If that is the case they should explain this and then work with a reasonable hypothesis after identifying that this is a hypothesis

Comments: This means those factors not considered in the list of pages 228-231. This where your group can excel in the project because you are applying creative and strategic thinking to your understanding of retail management. Hypothesis means showing relationships between a dependent and independent variable/s. Examples could be written as follows (do NOT copy!) - The number of stores selling similar product lines as ours in the shopping centre in which our store is located does not contribute to the condition of over-storing because this situation leads to an overall increase in customer traffic due to the strong positioning of the mall as being a specialist centre with deep product assortment. - The nature of our product predetermines the condition that there might not be a clearly demarcated trading area (as specified by traditional location analysis models such as Reilly) because of the ‘specialty nature’ of the brand. Customers are clearly segmented into niche segments and ours represents a small but focused segment. Therefore customers may come from all corners of Singapore - Technology makes location irrelevant because our products and services are available online on the web 24/7

After explaining that stores trading area the students should proceed to carefully evaluate the actual site their store occupies. A checklist for site evaluations is in exhibit 7.13 on page 239 of the prescribed text and the students should attempt to include those factors.

Comments: Remember we are now writing about the actual site- don‟t bring in discussion of the trading area any more here. The list shown in exhibit 7.13 is very long so you need to study each one carefully and eliminate those that have no bearing to the store and its brands.

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Be selective about how you choose the factors- better to have more in-depth discussion of a fewer number of relevant points rather than to skim over many factors in a superficial manner. The factors that you consider are those that best explains the merits of your store‟s location at the given site- did it meet the requirements of those factors and if not- why. Note again- in the Dunne text, the factors listed are based on the view that the retailer has not yet selected a site and is looking at prospective sites for a new outlet. You cannot use that thinking here. Many students failed this section of the report because they blindly copied from the text without knowing what they were writing about! In short, you are summarizing the advantages or constraints of your location of the store from the point of view of ex-ante or “after-the-fact.” DO NOT make recommendations for changing the current location- just comment on its suitability. In the case of this report, you are reflecting on the suitability of site in terms of its location suitability in drawing customers from the trading area or surrounding malls. Does the checklist factors shown in Exhibit 7.13 support or limit the viability of the store you have selected. Explain why.

They should also give some attention to factors such as demand density. The same rules as to working hypothesis holds here as in the above paragraph. Incidentally, with the store in a shopping centre pay attention not only to the surrounding traffic flow and accessibility, but also to the location of that store in that centre and the actual pros and cons of that location in that shopping centre.

Comments: The issue of demand density is that of whether your site meets with multiple choice criteria. See the example of Exhibit 7.12 in the text. See if you can map out a similar version of this figure, if not you can just describe this in words. In short, given the location of your selected mall, do you think that the area itself attracts customers that have multiple criteria that support strong patronage of the store and its products? Hypothesis in this instance means can you prove either as supporting or non-supporting that your current site meets a set of criteria. Some possible examples:

- the location of the mall is strategically located within the heart of Orchard Road belt which give it greater exposure to the tourist shoppers who comprise of higher end consumers in search of luxury and quality brands

- the location of major offices in the main and adjacent buildings help to augment the traffic volume in addition to casual shopper traffic

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- the site of the underground MRT station brings additional shopper footfall throughout the weekdays

- and so on. As for supply density, the text refers to availability of tracts of land for retail sites and expansion. We are not talking about tracts of land but instead we need to look within the mall for areas of possible expansion. If a mall is fully subscribed by tenants then there is less scope for a given retailer to change its location or to expand the floor space. You must be able to show floor plans of your selected mall. From this you must comment on:

- The suitability of the store location within the mall in terms of visibility and accessibility- does it have a strategic location?

- The store size (is it overcrowded or just nice? Scope for expansion?) - The locations of other retailers who offer complementary or competing

products. How do these stores add / subtract from the number of customers visiting your store?

With regard to the „surrounding traffic flow‟ take into account the movement of shopper around the vicinity of the mall. For example, how does the commuter traffic from the MRT line contribute to shopper traffic in the mall?

Further to that the students are expected to critically comment on the store image. Also the floor plan of the store, the store design and the visual communications all as explained at length in Chapter 13 of the prescribed text.

Comments: Use Figure 13.1 on page 434 to comment on store image. Discuss the strengths and limitations (but don‟t go into too much commentary on what changes you plan to make). Discuss how the store image helps to differentiate the store brand. In the case of lack of store image, critically evaluate how the store loses its competitive advantage in terms of customers not noticing it and moving on to other stores. One of the key issues to be brought up is how well the store‟s image clearly communicates the “retailing concept” (research on this!). How does the store front and its visual merchandising „tell a brand story‟ when the shopper enters the store?

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And also how the store layout helps to communicate the brands offered as well as being attractive and outstanding compared to other stores. Photos will help- put them in the appendix. But make sure you get the right approvals and don‟t be caught by the security if you are unauthorized to take pictures. This can be serious since they might view you as „representing competitors‟. We expect to see diagrams showing the store layout and your comments on the „type of layouts used and its suitability for the given product. Does it facilitate more impulse buying for example?

In short students are looking at a particular store and doing an extensive retail location analysis of that store, and then contemplating the store layout and design. Students are not defending the location of their store, nor its layout, but commenting on both the advantages and the disadvantages of the current location and layout.

Take note of this final comment closely into consideration and stay on track. This is not a difficult project to do provided you start early and answer the seven sections listed in this set of guidelines. This is strictly a retail study using the techniques of observation and data collection. You are to comment on both the positive and negative attributes of store location and store design. At all times keep your mind focused on the nature of the product or service when commenting on the suitability of the store location and store design.

Essentially we want you to browse the store, contemplate the operation, and think this out for yourself anonymously. In doing this you can make certain assumptions as long as you identify those assumptions.

Important Reminders: The report should incorporate some basic maps or diagrams so that someone not familiar with this location can very easily ascertain the circumstances pertaining to it. The actual report is to be handed to the SIM Administration (NOT directly to the local lecturer) with proper RMIT assignment cover page. These reports are not to exceed five thousand words and must accord with the instructions which follow relating to the presentation of written work. Please do not contact anyone working at or associated with your chosen store or the shopping centre it is in.

Deadline: 1 April 2011. This is week 12 in our lecture schedule; do NOT hand over the assignment to lecturer. Please deposit in the BOX.

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Administrative Details:

Please make sure the names printed on the cover page MATCHES the names listed in the register. Please list the names in alpha order and correct admin numbers. Please note: I also would like a soft copy (CD-ROM) to be attached to your report. This should contain the main report and all the accompanying appendices. The report must have ‘spiral binding.’

Here are the suggested outline headings for the project report: You should try to follow this flow; of course if you have additional areas to comment on, do feel free to add.

1. Introduction (background information of the store and its products, target customers and local competition)

2. Objectives of the study 3. Determination of Trading Area and Commentary 4. Merits of the Trading Area (under and over stored) 5. Market and Supply Factors impacting on Trading Area 6. Additional Hypothesis/es that describe Trading Area 7. Site Evaluation Factors and alternative hypothesis 8. Impact of Location within Mall or Shopping Area 9. Evaluation of Store Image and Design 10. Overall Assessment of Store Location and Design 11. Appendices 12. Bibliography

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References: ** To help you get started here are few possible references. Please use your own references as much as possible. The list below shows some of the leading academic references in the field of location analysis in retailing. Be selective. Evaluating Retail Trade Areas for convenience Stores. By: Houston, Franklin S.; Stanton, John. Journal of Retailing, Spring84, Vol. 60 Issue 1, p124

Developing a location research methodology. By: Rogers, David S.. Journal of Targeting, Measurement & Analysis for Marketing, Mar2005, Vol. 13 Issue 3, p201-208

A Disaggregate Model for Predicting Shopping Area Market Attraction. By: Weisbrod, Glen E.; Parcells, Robert J.; Kern, Clifford. Journal of Retailing, Spring84, Vol. 60 Issue 1, p65

The Contribution of Store-Image Characteristics to Store-Type Choice. By: Schiffman, Leon G.; Dash, Joseph F.; Dillon, William R.. Journal of Retailing, Summer77, Vol. 53 Issue 2, p3

Specification of Patronage Models for Retail Center Choice. By: Gautschi, David A.. Journal of Marketing Research (JMR), May81, Vol. 18 Issue 2, p162-174

Shopping-centre attributes affecting male shopping behaviour. By: Sim Loo Lee; Ibrahim, Muhammad Faishal; Chong Hsueh-Shan. Journal of Retail & Leisure Property, Oct2005, Vol. 4 Issue 4, p324-340

Attitudes to transport modes for shopping purposes in Singapore. By: Ibrahim, Muhammad F.. Transport Reviews, Mar2005, Vol. 25 Issue 2, p221-243

E-retailing versus physical retailing: A theoretical model and empirical test of consumer choice. By: Lee, Khai Sheang; Tan, Soo Jiuan. Journal of Business Research, Nov2003, Vol. 56 Issue 11, p877

Shoppers' perceptions of retail developments: Suburban shopping centres and night markets in Singapore. By: Ibrahim, Muhammad Faishal; Soh Kok Leng. Journal of Retail & Leisure Property, Oct2003, Vol. 3 Issue 2, p176-189

The Importance of Entertainment in the Shopping Center Experience: Evidence from Singapore. By: Ibrahim, Muhammad F.; Wee, Ng C.. Journal of Real Estate Portfolio Management, Sep-Dec2002, Vol. 8 Issue 3, p239

Congruency of scent and music as a driver of in-store evaluations and

behavior. By: Mattila, Anna S.; Wirtz, Jochen. Journal of Retailing, Summer2001, Vol. 77 Issue 2, p273

Influences on Store Patronage Behavior: A Comparison of Department and

Discount Stores in Singapore. By: Shamdasani, Prem N.; Hean Tat Keh; Lee, Evelyn Z.C.. Journal of Asian Business, 2001, Vol. 17 Issue 2, p63