Opening a new retail store is exciting. But before the buzz of choosing the decor and inviting customers comes one question critical to your new store’s success: Where will it be located?
With retail space costing an average of $20.85 per square foot, the place in which you set up shop is important. Pick the wrong retail location and risk being tied into a year-long lease, failing to drive significant foot traffic and consequently having store overheads crush profits.
This guide discusses how to choose a retail location, with bonus tips on how to maximize the space you choose.
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What is a retail location?
A retail location is the place a business sells goods in person. From traditional freestanding brick-and-mortar stores to mall space, the best retail location is in a high-traffic area where your potential customers are known to shop.
Competition for retail space is fierce. In 2022, US retailers opened twice as many stores as they closed, with the average vacancy rate sitting at just 4.6%. It takes work to find the right location at the right price. But carefully evaluating the best home for your next store will pay dividends in the long run.
The importance of retail location
The more people you have visiting your store, the higher your chances are of generating revenue.
Your retail store location plays a large role in this. Areas known to have high foot traffic could allow you to ease off on local marketing and heavy retail signage. An attractive window display has the potential to pull in passersby who weren't otherwise thinking of visiting.
Turn store traffic into sales
With Shopify’s mobile POS, you can serve customers anywhere in your store and banish lineups at the checkout counter. Use any smartphone or tablet to process returns and exchanges, accept payments, and check out customers wherever they are.
The COVID-19 pandemic shook up the way consumers engage with brands. One of the most notable shifts was toward localism—preferring and buying from nearby brands that support the local community.
Some retail locations have a greater sense of community than others. For example, independent stores in downtown areas are likely to have more local engagement than big-box retailers in busy malls.
We strategically make it a point to engage with events where we know our target demographic is, such as marathons and outdoor events.
Treat your physical location as a hub for supporting the local community. From partnerships with other retailers to participating in events, choosing a retail location near where the action happens puts your store in a better position to contribute.
Supply chain implications
A retail location isn’t just a space to meet new customers. Use the stockroom inside your new location as a storage and fulfillment hub.
From a few locations outside the U.S., we at Palaleather have managed to grow our capability of shipping worldwide through the careful selection of a retail location in the business's early years.
The retail location you choose has an impact on how fast inventory comes in and out. It’s harder for suppliers to deliver stock to some areas, like busy malls with shared unloading bays and tiny storage shelves.
On the other hand, fulfillment strategies like buy online, pick-up in-store don’t work if your store isn’t located in an area already part of your customer’s habits.
Types of retail store locations
- Brick and mortar retail
- Mall space
- Shopping centers
- Business parks
Now that we know the importance of choosing the right space, here are six retail locations to consider when opening your next store.
Brick and mortar retail
Brick-and-mortar retail is the most traditional type of physical location. Also known as freestanding or anchor stores, it’s a type of building used by retailers to connect with customers in their own premises.
Pros of brick-and-mortar stores
- Rent is cheaper. Busy shopping malls can charge a premium to retailers looking to tap into their existing foot traffic. Out-of-town landlords don’t have that luxury, so rent can be much cheaper.
- They’re more accessible. Brick-and-mortar stores can be situated out-of-town but on a public road. Proximity to public transport (such as bus stops) and cheaper parking makes this location more accessible.
- Some customers prefer them. Research shows that 27% of shoppers buy holiday gifts in local independent stores, beating traditional department stores or specialist merchants.
Cons of brick-and-mortar stores
- Zoning rules apply. Cities, towns, or village governments often set zoning regulations on how buildings in any given area can be used. Any building that falls within a residential zone is unlikely to get approval for becoming a retail shop.
- Foot traffic can be nonexistent. Expect to invest heavily in local marketing, advertising, and signage that guides potential customers toward your store.
A shopping mall is a place where customers come to shop. Usually spanning millions of square feet, they feature numerous stores—from big-box retailers to independent stores—all under one roof.
Pros of mall space
- High foot traffic. With some malls recording upwards of 20 million visitors per year, your business could be exposed to thousands of shoppers on a weekly basis—all without excessive advertising.
- Co-marketing opportunities. The owner of a mall rarely has any inventory to sell, so owners promote their retailer’s inventory to drive foot traffic.
- It’s secure. Malls often have 24/7 security to protect the millions of dollars’ worth of merchandise stored inside.
Cons of mall space
- Rent is expensive. Malls often charge premium prices for the exposure they give to retailers.
- Competition is fierce. Leading shopping malls span more than two million square feet. There’s a good chance your direct competitors will be in the same building, fighting for your target customer’s attention.
- They can be inconvenient for one-off trips. If someone is making a special trip solely to your store, the hassle of visiting a busy shopping mall can be off-putting.
A shopping center is a busy building where people come solely to shop. Also known as a strip mall, it can have up to 20 physical stores—including restaurants—situated in a single area.
Pros of shopping centers
- Foot traffic. Smaller than a mall, shopping centers still have a steady flow of potential customers that could stop by your store.
- Range of customers. Shopping centers often house grocery stores and restaurants—both of which attract a wide customer base. That can be beneficial for stores that sell widely used products.
- They’re accessible. Public transportation often runs to and from shopping centers.
Cons of shopping centers
- Additional fees. Unlike malls, shopping centers often add the cost of security, parking, and building maintenance onto your retail lease.
- Parking can be hit and miss. On a busy day, parking spaces can fill up fast; some shopping center managers require each store to reserve its own customer parking spaces.
A business park is an area often used as headquarters for businesses. On some, you’ll find industrial plants and warehouses. But these units can be a great spot to expand your retail business.
Pros of business parks
- Parking is plentiful. Businesses located in a business park likely have their own employees driving to work, resulting in large parking lots customers can use.
- Lots of space. A unit in a business park is typically bigger than one you’ll find in a busy shopping center. That leaves plenty of opportunity for storage, creative layouts, and experiential retail.
- You’re surrounded by business people. Build relationships with business owners in nearby units for support when growing your own.
Cons of business parks
- They’re usually built in semi-residential areas, so customers might be going out of their way to visit your store.
- Foot traffic can be minimal. This largely depends on the other units. If they’re offices or industrial plants, for example, only workers will pass through the business park.
- Public transport is unlikely to run there since most employees commute via car.
Downtown is the main business and commercial area of a town or city. Many merge retail buildings with residential, such as retail units beneath high-rise apartments.
Pros of downtown
- There are lots of people around. Whether they’re passing through on their commute or visiting other retailers, positioning your store downtown exposes you to large volumes of people.
- They appeal to health-conscious consumers. Unlike busy malls with less-than-ideal air circulation, downtown is considered an open air environment with minimal touchpoints (such as doors), wider spaces, and fewer crowds.
- Big companies like Google are investing in downtown areas, driving more foot traffic and hosting events for the local community.
Cons of downtown
- Rent can be expensive. Since building owners merge domestic and commercial units, some charge a premium for retailers who want to tap into residents.
- Limited customer bases. Unless you’re in a tourist area, downtown is typically dominated by members of a a younger demographic who prefer city center living to suburbia.
- Parking is restricted. Many spaces are reserved for residents of the buildings.
- Some smaller towns and cities don’t have a popular downtown area.
There’s a lot that goes into finding a retail location. If you’re still unsure about which is best for your business, consider setting up shop in a place you already have: your home.
Pros of home-based retail
- It’s much cheaper since you’re not paying extra real estate leases or operating expenses. Plus, small business owners working from home can reduce their tax liability.
- It’s flexible. Minimal visitors means you have ultimate control over your “opening hours.”
Cons of home-based retail
- Security can be an issue. You can’t have potential customers stop by your home-based store if you don’t want to reveal your home address.
- Distractions come thick and fast, especially if you’re working in a busy household.
- Scaling becomes difficult. Selling more inventory is great for business, but not great if its storage begins to dominate your home.
- Some landlords prevent tenants from using their property as a retail space.
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Retail location strategy
Choosing a retail location takes time. What might at first seem like the most sensible option can quickly turn into the most expensive one, both in terms of extortionate rent and missed retail sales opportunities. Here’s how to choose one for your next store.
Monitor the competition
Granted, busy shopping malls have hundreds of stores inside. But competition isn’t always a bad thing. The place your competitors decide to set up shop has probably been well thought out. Consider their reasons for being there.
Take it from Jeff Moriarty, marketing manager at Supplement Warehouse: “We are a nutrition company with an ecommerce store as well as about 20 retail locations around the US. We chose our locations by following our competition.
“We looked where bigger chains like GNC and Vitamin Shoppe were putting stores and we did the same. We also looked at cities that had the most gyms and fitness centers, which is our target demographic,” Moriarty says.
Over the past 20 years, we have only had to close one location, but it was also in a city where our competitors closed their stores a couple years earlier as well!
Test locations with temporary retail
Not ready to make the leap into a permanent storefront? Test different retail locations before committing to a particular space with temporary retail options, such as:
Glossier took this approach with its retail location strategy. After opening a pop-up store in London, CEO Emily Weiss said, “In London, we'll be following our most successful temporary store of all time with our first-ever permanent international flagship.”
📌 GET STARTED: Shopify POS is the fastest way to accept in-person payments, sell at events, or open a pop-up shop. Download the Shopify POS app onto any smartphone or tablet and rent a mobile card reader to start selling wherever your customers are.
Leverage retail locations for fulfillment
Choose a retail location within close proximity to your customer base and treat the store as a fulfillment center to offer blended shipping options, such as:
According to a Forrester Consulting study conducted on behalf of Shopify, half of consumers want to browse products online and check what’s available in local stores. It’s why over 50% of adult shoppers use BOPIS, with 67% adding extra items to their carts.
Let’s put that into practice and say you’re a coffee shop looking for your next retail location. Opening a store within a busy shopping center or mall space might sound like the perfect location, since you’re exposed to casual shoppers.
But opting for business park units could be a smarter strategy. Not only is rent likely to be cheaper, but customers commuting to work can pick up their morning coffee without too much disruption to their daily routine… Especially if there’s space for a drive-thru lane.
💡 PRO TIP: Set up local pickup in Shopify to start offering in-store pickup as a delivery option at checkout. Pay less on last-mile delivery, speed up fulfillment times on local orders, and drive more foot traffic to your stores.
Reduce location size with omnichannel
Retail locations in busy areas often come with a heavy price tag. That doesn’t mean you need to rule them out altogether.
Reduce the size of your store—and therefore the square footage you’re paying for—with omnichannel retail strategies like showrooming and endless aisles. In both cases, a shopper visits your physical store and browses a small selection of products. But instead of immediately taking the item home with them, customers either:
- Pay in-store and have the product delivered to their home
- Email themselves a shopping cart containing the product(s) they viewed, ready to purchase at home
The future is neither ecommerce or retail. It’s just commerce. So the question becomes, ‘How do you symbiotically integrate both channels?
💡 PRO TIP: Encourage store staff to send the carts they save to no-shows by email at the end of their shift. This is an accessible way to recover abandoned store sales and attribute more revenue to your store–even if the transaction happened online.
Find the right location for your retail store
The process of expanding your retail business is a daunting one. Whether you choose downtown or a shopping center, use these tips to secure the best spot for your next store. Remember: the goal is to best position your store to capture potential customers in the local community.
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