Like the old real estate adage, the three most important things in retailing are Location, Location, Location.
It may be partially tongue-in-cheek, but there is a lot to it. That’s because location offers us a sustainable competitive advantage. Think about it. If I buy a fast food restaurant franchise and put in on a certain street corner. That’s it. No other business can locate their business there. And if you’ve done your homework and figured out the best possible location to reach your target audience, this gives you a tremendous advantage over your competitors.
The only question is: What type of retail location does my business need?
When retailers decide to locate a business, they can choose one of two types of retail locations: Unplanned or planned.
Unplanned Locations
Unplanned locations do not have centralized management. The retailer is in charge and must handle all of the business requirements and legal restrictions that operating a business entails. Just because an unplanned location doesn’t have centralized management doesn’t mean the retailer won’t necessarily have a landlord though. Unplanned locations usually come in one of two forms: freestanding and urban locations.
Freestanding locations are purpose built building meant only for that retailer. Much like a standalone Olive Garden or Container Store.
Urban locations are usually ground floor spaces in densely populated downtown areas or high-rise buildings.
Planned Locations (Shopping Centers)
Planned Locations are far more varied and we have another name for planned locations, it’s shopping centers. A shopping center is a group of retail and other commercial establishments that is planned, developed, owned, and managed as a single property. The shopping center management controls most all aspects of what goes on in the shopping center including parking, security, external lighting, outdoor signage, advertising, and special events of customers. And there are many different types. Let’s take a look.
Neighborhood and Community Centers
Neighborhood and community centers was one of the most common forms of shopping center. Also known as “strip malls” these locations are usually in convenient locations, have easy parking, and relatively low occupancy costs (rent). The downside of these locations are the relatively limited trade areas (meaning the geographic area that they service), the lack of entertainment aspects, and very little protection from the weather.
Power Centers
Power centers consist primarily of collections of big-box retail stores such as discount stores (Target), off-price stores (Marshall’s), warehouse clubs (Costco), and category specialists (Lowe’s, Best Buy, Bed Bath & Beyond, Dick’s Sporting Goods). They have an open air setup, free-standing anchor tenants, limited small specialty stores, low occupancy costs, and tend to be located where land is more available. They also typically have large trade areas. The retail center in Grafton that houses the Costco would be a good example.
Enclosed Shopping Malls
When we think of shopping malls, enclosed shopping malls tend to be the type that spring to mind. These are climate-controlled environments with retail shops on one or both sides of an enclosed walkway. Shoppers of enclosed malls don’t have to worry about the weather (except perhaps when walking to and from their car), they will see a lot of other shoppers given how enclosed shopping malls attract a large and diverse groups of shoppers, and they are usually surrounded by comfortable, well-manicured environments. Enclosed shopping malls typically are “anchored” by large department stores referred to as anchor tenants and all store operating in the malls have standardized hours of operation. Unfortunately, these locations tend to be more expensive for retail tenants, the level of control exerted by shopping center management can sometimes be overbearing, and retail competition within the centers can sometimes be intense. These malls have faced a lot of challenges in the last few years and the COVID pandemic only exacerbated an already brutal situation. Many malls, like the Grand Ave Shops in downtown Milwaukee are experimenting with a conversion to a mix of retail and residential tenants.
Mixed Use Developments
Mixed use developments combine several different uses into one complex including shopping centers, offices, hotels, residential complexes, civic centers, and convention centers. They are often designed to be all-inclusive environments os that consumers can work, live, and play in one place.
Lifestyle Centers
Lifestyle centers a form of mixed use development incorporate an open-air configuration and tend to be located in affluent residential neighborhoods. They often feature restaurants, theaters, and other entertainment options. They also tend to feature upscale chain specialty stores and their department stores tend to be smaller in size. Many also incorporate residential properties with apartment or condominium units above the ground-level retail like Atlantic Station in Atlanta, Georgia.
Here we see a typical example with the Bayshore Town Center in Glendale, Wisconsin.
Outlet Centers
Outlet centers feature manufacturer retail locations and retail outlet stores. In the early days of these types of centers, shoppers could be seconds (or products with small manufacturing errors) or clearance items. Now, outlet stores often have their own dedicated product lines made to less stringent quality standards.
Nearby, we have the Pleasant Prairie Outlet Mall which is a great example.
Other Location Opportunities
Finally, many other types of managed properties see the benefits of incorporating retail stores into their facilities. For a while now, airport terminals have looked a lot more like malls than the sterile transportation hubs they were in the past. For example, the Milwaukee General Mitchel Airport recently opened a Summerfest Store replaced a Harley-Davidson store.
We’re also seeing more temporary pop-up retail locations that offer seasonal products or one-off exciting retail experiences. These are used to create buzz around a brand, test new retailing concepts, or to evaluate a new neighborhood or city.
The store-with-a-store concept, pioneered by Ralph Lauren at Bloomingdales, is an agreement in which a retailer rents a part of the retail space in a store operated by another independent retailer.
Merchandise kiosks have also become a popular retailing alternative. These can be small, manned booths or high-tech vending machines. By taking advantage of portability and the latest technologies, retailers can connect with their customers in a more diverse range of environments.
To wrap up, retail locations come in two forms: unplanned—where retailers are essentially responsible for everything—and planned locations, otherwise known as shopping centers, where shopping center management is responsible for most elements of running the overall facility. The most common forms of planned locations are: Neighborhood and Community Centers, power centers, enclosed shopping malls, lifestyle centers, mixed use developments, and outlet centers.