As a budding entrepreneur, selecting a location for your retail business will be one of the most important and difficult decisions you’ll ever make in life.
Pick the right one, and you’ll eventually find incredible amounts of success (assuming there is a demand for your products). Pick the wrong one and it won’t matter how good your products or services are; you’ll almost certainly fail.
This might be surprising to hear for most entrepreneurs but location is the number one reason why retail stores go out of business. Yes, product quality, customer service, delivery times, poor management etc. all play their parts in a start-up’s eventual downfall, but none of these factors even come close to the impact location can and does have.
As a retailer, you need to be where your customers are, at the heart of the action. The closer you can position yourself to the target market, the better your chances of eventually finding success.
Of course, there are plenty of different factors that will play into the final decision such as costs, space available, availability of local transport, the nature of your business, etc.
You might find a space on the outskirts of the city that’s incredibly cheap and easily accessible, and you might also find one in the city centre which is too small to sustain your business. It’s all about what qualities you prioritise over the others.
There are however a few questions you’ll need to ask yourself when you’re assessing different locations and properties. These questions will form the basis for your decision and should help make the selection process a lot easier.
It’s important to choose a location where the majority of your target market lives/works. For example, does it really make sense to open a toy shop in an industrial manufacturing zone? Sure, a few parents might come in from time-to-time but you’ll never see kids who are your real demographic.
You’ll need to conduct fairly thorough research into your target consumer before you research locations. At this point, it’s usually a good idea to refer back to your original business plan where you first surveyed the markets. If you haven’t yet prepared a full-fledged plan, check out guide on the process of creating one here.
You’ll want a space that has easy car and pedestrian access as well as a large parking lot up front. You’ll need to think about more than just your customers here.
Since you’re opening a retail store, you’ll need to get inventory delivered regularly from manufacturers and other retailers. This inventory usually comes in large vans and trucks, so there should be ample amounts of space for these vehicles to park and for workers to offload the items.
You’d be surprised how many entrepreneurs forget to factor in the cost of renovations when they’re surveying the market. Most retail spaces will require moderate amounts of modifications to match your needs, so it isn’t a problem if a few shelves need to be moved around or even if you need to break down a wall.
The situation starts to get worse when fixtures have to be replaced, the walls need to be repainted, and flooring must be removed/reinstalled to bring the space back to life.
In most cases, you can negotiate with the landlord to help cover the cost of major repairs.
You’ll likely have gone over this in extensive detail while preparing your business plan, but now it’s time to think of it from a slightly different point of view.
For certain retailers, having similar companies operating in the same area is actually a huge plus. Think about clothing stores. Have you ever seen someone open an apparel store in a market known for car parts and repairs?
These shops are usually found in large malls alongside other apparel, jewellery, and accessories stores, since consumers tend to visit all of these shops even if they’re only shopping for a specific item.
On the other hand, you’re highly unlikely to see more than one or two grocery stores in a single mall. It just wouldn’t make sense to open such a business where another one is established.
Sometimes competition helps similar companies flourish. Sometimes it discourages co-existence altogether. It all depends on what kind of operations you plan on running.
Get in touch with a real estate broker or a property lawyer and find out what the local law says about how much signage you can put up, if there any restrictions on working hours, the taxes you’ll have to pay, storage restrictions, and any other concerns you might have.
We also highly recommend that you get your new store insured as soon as you buy it. This ensures that you’re protected against any nasty surprises that might come up as you get the place renovated.
Are CCTV cameras and alarm systems installed or will you need to pay extra for security? Is the parking lot well-lit at night? If you’re opening a store in the mall, does it have secure shutters?
You should also get in touch with some of the local businessmen and ask them if the neighbourhood is safe for businesses.
Make sure you and your attorney go over the contract properly before signing any documents. Pay close attention to the lease conditions. Are you committing with the landlord for a long period of time or will it get renewed every year?
This is important to know because a long-term lease means you won’t need to worry about the rent rising anytime soon, but you’ll have to pay for the space even if your business isn’t successful. On the other hand, a short-term lease gives you more flexibility, but the landlord can start charging you higher when they see that the business is taking off.
Keep in mind that there’s always room for negotiation and you can always get a better deal than the one the landlord offers initially.