Most entrepreneurs get started in their homes. Depending on the type of business they’re running, they may “graduate” to a nearby Starbucks, Panera or anyplace else that supplies free Wi-Fi and strong coffee. But some businesses—such as retailers—need a brick-and-mortar location right out of the gate.
Unfortunately, finding that perfect retail space isn’t the slam-dunk move that many small business owners think it will be. It’s one of those things that seem easy enough to do, until you actually attempt it. That’s when you quickly realize that—beyond finding the perfect location—there are all sorts of variables to take into consideration.
To help simplify the task of choosing a retail location, here are 10 things to keep in mind during your quest:
Know your objectives.
Before you start looking at real estate listings, clear your mind and think about your business in the broadest terms possible. Try to envision your long-term objectives. Once you have them in mind, take a minute to write them down—you’ll be glad you did later in this process.
Get beyond location demographics.
If you’re like most storeowners, you probably feel that you’ve done your due diligence by learning the demographics for the area you intend to serve (population, median age, average family size, incomes, etc.), as well as information on local competitors and traffic patterns for the area. And that’s great because all of these details are important; but before you commit to signing a lease, check out the remaining items on this list.
Understand the layers of location.
If you’re looking for a location in your existing service area, recognize that your search includes three variables: the city or town; the area or neighborhood within that city or town; and, the specific site (e.g.- mall interior versus a storefront in a strip mall, or a stand-alone building).
And if you’re relocating or expanding into a city or town outside your existing service area, you’ll want to consider: the size of the city’s trade area; population trends for that trade area; total purchasing power for the area, as well as how that purchasing power is distributed; the total retail potential for different lines of trade; the number, size and quality of your competitors; and, how your operation ranks alongside the competition.
Of course, you’ll also want to know the usual details: the customer attraction power of the store or shopping district in question; the availability of access routes to the location you have in mind; zoning regulations; a good sense of the direction in which the area is growing; and, the overall look and feel of the area.
When it comes to the site itself, you’ll want to know whether or not traffic passing the site is sufficient to sustain your store’s growth. You’ll also need to know that the site is capable of intercepting traffic that’s en route from one place to another; that your store complements other stores at that location; that parking is adequate; that the location isn’t vulnerable to unfriendly competition; and, that the cost of the site is consistent with what you have in mind.
‘Get’ how what you’re selling coincides with location.
Location correlates with what you’re selling. That’s because consumers tend to group products into three major categories: convenience, shopping, and specialty goods. As a general rule, the cheaper and more disposable the product (e.g. cigarettes, milk, or beer), the more likely that it’s a convenience purchase—and the more important it is to locate your store within a high traffic area.
For stores that deal in shopping goods (items not purchased by everyone on a daily basis), the quality of the traffic is more important than the quantity. People are willing to drive to get what they want—but not too far. As a general rule, it’s best to sell shopping goods within five to 10 miles of where your target market lives.
Specialty goods generally come with a higher price, but the term more accurately reflects consumer goods that are purchased infrequently, such as fine jewelry or tires. In most cases, buyers of specialty goods are already sold on the brand they want, so they’re willing to drive further to get it.
That said, if you deal in specialty goods, you should locate your stores in the type of neighborhood where the adjacent stores and restaurants are compatible with your operation.
Look for retail compatibility.
Retail compatibility is very important, especially if your business is just getting off the ground. In simplest terms, this means you want your store located next to other businesses that will generate traffic for you.
A retailer who deals in shopping goods, for example, would ideally be located near other stores carrying shopping goods. And this holds true whether your store is in a mall, a strip mall, or a stand-alone location.
Leverage your merchant’s association.
There’s strength in numbers, and that’s where an effective merchant’s association can make a huge difference to your store’s success, often saving you money through group advertising programs, group insurance plans and collective security measures.
Some associations have been known to induce city planners to add highway exits close to their locations, while others have successfully lobbied for city funds to remodel their shopping centers, including the extension of parking lots, refacing of buildings—even the installation of better lighting.
Definitely make a point of asking other retailers about the merchant’s association in the area you’re considering. And be wary of any area that doesn’t have a merchant’s association; it often indicates a shopping area that’s on the decline.
Know your landlord’s track record.
Beyond the lease terms, the landlord for the property you’re considering can make or break the success of your retail store. Restrictions on signage, unaddressed maintenance and repairs, leasing space to incompatible or competing retailers—these are just a few of the ways the wrong landlord can torpedo your success.
Before committing, talk to current and past tenants for a sense of the landlord’s track record. Does he return calls and arrange for quick repairs? Is he or she in touch with the needs of the tenants? Does he or she maintain policies that would hinder your ability to market creatively from your location? Would other retailers lease space from him or her again?
Familiarize yourself with zoning and planning for the area.
Most zoning boards and economic planning groups are working several years in advance of current requirements. Your town’s zoning board will gladly provide the latest “mapping” of the retail location and surrounding areas that you’re considering.
In all likelihood, they can also provide you with insights that will help you narrow down your list of possible locations. Be sure to ask about any zoning restrictions that could stall your business, as well as upcoming construction or traffic changes (and pending zoning changes) that may offer a competitive advantage.
Study that lease agreement.
If you did your homework, you gathered information on the area’s future zoning plans before looking at the landlord’s lease agreement. That’s a good thing because the area’s zoning plans will help you decide how long to remain at the location in question—something you want to know firmly in your mind before leasing space.
To help determine how long you’ll stay at this location, ask yourself the following questions:
- Will I operate my business in this location indefinitely, or is there a larger plan that calls for relocation?
- Is there room to expand at this location?
- Is there flexibility in the lease that would allow me to extend (or exit) the agreement if I needed to?
- Is the rent set at a fixed amount, or is it pegged to my sales volume? If pegged, is there a definite ceiling? (For example, X dollars per month; or, X dollars per month plus X percent of gross sales.)
- Does the lease protect both parties, or just the property owner?
- Does the lease spell out the landlord’s responsibilities for repairs, construction, alterations, etc.?
- Does the lease prohibit subleasing?
Consider other possibilities that could affect your business.
Depending on the nature of the business you’re in, there may be many other considerations that you’ll need to flesh out. Here are just a few more questions that may help you settle on a retail location:
- Do I have any special requirements, such as heating or cooling?
- How will having a remote location affect my advertising budget?
- Are there buses or trains that stop near this location?
- How hard will it be to find quality employees in this area?
- Any issues with crime? Are the local police and fire departments adequate to protect my store?
- Is the neighborhood shopper-friendly in the evening?
- Are there restrooms for the customers to use?
- Is this location convenient to where I live?
- Is the area’s population density sufficient to grow my business?
Again, these are just a few of the things you’ll want to consider, so take the time to add questions that are specific to your operational needs.
Choosing the right retail location is an important decision that requires significant research and planning. It’s not a decision to jump at lightly, but if you do your homework and take a methodical approach to making your selection, you should settle on a retail space that serves you well for years to come.