Just how important is a retailer’s location, location, location?

When retailers expand their presence with new stores, the key thing that needs to be factored in is location. Whether it's an affluent or rural area, it's important the retailer remains relevant. Retail Gazette explores the significance of retailers' locations and why some on the high street do better than others.

Retailer location
Should retailers be more cautious of where they launch new stores?

Where a retailer is located may be the determining factor of its success.

It’s commonly believed good location is the key element to attracting customers. A well-located store also makes supply and distribution easier. Location can influence a retailer’s ability to market itself, and to deal with the competition it faces from other businesses.

However, as 2019 progresses, the high street’s in-store visits continue to decline. The recent data by Retail Traffic Index, compiled by Ipsos Retail Performance, found that footfall “took a holiday” during the month of August as in-store visits declined far more than anticipated.

Overall footfall numbers fell by 9.8 per cent compared to August 2018. Figures were most dramatic in London and the South East, where numbers were down by 18.1 per cent year-on-year and 9.1 per cent on the previous month.

“You must make it easy for a customer to be a customer.”

It could be argued that although the UK’s capital failed to deliver footfall numbers, its demographic is increasingly lured towards online shopping much more so than the rest of the country.

Does this mean retailers should be more cautious of where they launch new stores?

Laura Morroll, a senior manager at tech consulting firm BearingPoint, said a retailer’s physical presence could influence online sales.

“A store is not just a place for customers to transact, it also brings brand marketing benefits that convert directly to online sales,” she told Retail Gazette.

“The cost of opening stores is not insignificant – the creative store concept designs we see so often these days can look more like expensive film sets than traditional stores and come with high set up costs not to mention costly rental term break clauses.

“Getting the location right is therefore really important.”

Ian Jones, chief executive and founder of loyalty platform LoLo, agreed.

“If a potential customer can’t find you easily then they will go elsewhere”

He said that unless a retailer has a strong loyal following, it won’t attract customers in inconvenient store locations.

“You must make it easy for a customer to be a customer. Unless they are emotionally attached to you they will find an alternate supplier,” he said.

“What are the three famous rules in real estate? Location, location, location.

“If a potential customer can’t find you easily then they will go elsewhere.

“If they can’t park nearby then they will go where the parking is easier.”

It’s common to see luxury retailers such as Gucci, Burberry or Chanel located in affluent areas, and value retailers such as Matalan in less affluent areas. Choosing the demographic wisely is usually the factor that determines whether retailers are likely to record footfall or not.

Gucci location
Italian luxury retailer Gucci is mainly spotted in affluent areas

However, Gwyn Davis, marketing business director at marketing agency BWP Group, said it was much more than just that.

“There are lots of considerations from macro to micro,” he said.

“Competition, catchment size and demographics, rents and rates, seasonality, transient population, relevance of your product and marketing potential, environment/peers/brand parity, location performance and trends overtime, future developments, reputation of the area, online vs offline, shopping centre vs high street vs retail park, and portability of product.

“A business needs enough of the right type of footfall to succeed”

“Fundamentally, get the right location and your business will survive, select the wrong location for your brand and it’s destined to fail.”

Davis emphasises the importance of relevance in regards to a retailer’s location.

“A business needs enough of the right type of footfall to succeed,” he said.

“Quantity is great, but relevance is key.

“If you are selling your product in the wrong place for the people you want to attract how can you expect to trade well?”

An example of certain retailers setting up spots in certain locations to stay relevant to their demographic is WHSmith’s wide range of shops in travel terminals.

For a retailer that appears to be struggling on the high street, it seems to be trading well within travel terminals such as airports and train stations. WHSmith has consistently revealed surging sales in its travel retail arm.

WHSmith travel retail location
WHSmith performs better in travel terminals because it sells journey essentials

The British retailer saw half-year pre-tax profits fall 21 per cent from £82 million to £65 million in the six months to February 28 on the back of sales rising eight per cent to £695 million, or one per cent on a like-for-like basis.

During that same period, WHSmith’s travel division saw total revenue rise by 18 per cent and three per cent on a comparable basis, while profit was up seven per cent to £44 million.

Despite this, WHSmith was named the worst retailer on the UK’s high street in an annual survey conducted by consumer lobby group Which?.

It was criticised for its poor value for money, poor in-store experience and service, and for its stores being “cramped and messy”.

It can be argued that WHSmith performs better in travel terminals because it sells journey essentials that people need when travelling, while on the high street, WHSmith has plenty of rivals.

Meanwhile, WHSmith’s travel terminal rivals include Oliver Bonas, Paperchase, M&S’s food stores and Boots.

It seems simple for retailers to select a location when wanting to launch a new store, factors such as area, demographic and competition are things retailers should consider, but with customer attitudes changing all the time, it can become a struggle for some to determine which location will ultimately bring the most footfall.

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