Retail Success = Right Location, Right Location, or Right Location
It's a consistent refrain in the retail world: the key to success lies in finding the perfect location for your business, whether you're selling apparel, shoes, or food.
But why is location so crucial? Simply put, it often ranks as one of the most significant expenses on your P & L , sometimes even surpassing the cost of goods sold.
Let's delve into my experience of opening shops and scouting new sites for my brands.
Rental Factor - Your rent shouldn't exceed 20% of total sales on average, with the potential upside capped at 5% of total sales.
Relationships - While your relationship with your broker may be excellent, it's equally important to foster a superb rapport with your landlord. They play a vital role in liaising with neighboring businesses and local authorities to ensure the smooth operation of your shop.
First Floor Versus Ground Floor or a Floor with Ample Parking - Unless you're selling essential products like alcohol or medicine, prioritize a ground floor location with ample parking, even if it's slightly off the main thoroughfare. If your product is compelling enough, customers won't hesitate to travel an extra kilometer to experience it.
Food Court versus High Street versus Mall - There's no one-size-fits-all answer here. It depends on your brand's strategy. However, for beverage-led brands like tea or coffee, surviving in a food court model can be challenging due to the need for a certain average order value (AOV) to thrive.
Know Your Target Audience - Understand the demographics, behaviors, and purchasing habits of your target audience in relation to your location and price points.
P & L - Perhaps the most critical aspect. Ensure your profit and loss projections align with your sales expectations. If the numbers don't add up, reconsider opening at that location.
Avoid the Show-off Game - Entering a market solely to boost your brand's image is a surefire way to drain your resources and lead to failure.
What are your thoughts on these points? If you found them insightful, please take a moment to subscribe to my newsletter.
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