As one of the four elements of marketing mix, location is often cited as the three keys to success in retailing. Indeed, as retailers come at the end of the supplier chain and provide the final link between producer and consumer, their success or failure to a large extent depend on their choice of location. Brown elucidated the significance of location in the following way:
Important though the other elements of the retail marketing mix undoubtedly are, the most sophisticated store designs, meticulous merchandise planning procedures, imaginative advertising campaigns, astute pricing policies and competent sales personnel all come to naught if a retailer’s locational strategy is flawed (1994)
However, while acknowledging the crucial role of location, it could be argued that like the majority of the retailing’s aphorisms, the ‘location, location, location’ adage is more a regurgitation of received wisdom than a distillation of prevailing practice (Brown, 1991).
If we consider the large number of failed retail business, it is not difficult to see that mistakes in location only account for a small percentage of the reasons for their failure.
The success of a retailer hinges on the correct combination of the retailing mix and other elements are every bit as important as location.
In this report, the importance of location will be discussed and the role that location plays in retailers’ success or failure will be identified. While addressing the role of location, other elements of the retail marketing mix will also be examined since all of them are interrelated and can not be treated separately.
To make sure the conclusion drawn has some generality, two retailers differ greatly from each other are used in this report: Early Learning centre and Toys R Us are two major retailers in UK’s toy retailing industry and they embrace a different approach to achieve their respective business strategy.
The Early Learning Centre is a British chain of stores selling toys for very young children. It runs 215 shops in the UK and around 70 in other countries. They are known for selling products which use wood and other non-plastic materials, which are designed to be educational, and which are designed to be tough and safe for children to use. Their stores vary in size according to different locations but most of them are high street outlets with limited spaces. The particular branch chosen here is the ELC store in the Luton Arndale Centre which is a large shopping centre situated at the heart of Luton town and is extremely accessible from all parts of Luton and surrounding districts.
Toys R Us is the biggest toy retailer in the US and since 1983 it has successfully expanded internationally. By 1997, 57 stores have been established in the UK. They are often referred to as ‘category killer’ because their large amount of merchandise in the toy category and low prices has driven many small independent toy retailers out of business. Many of the Toys R Us stores in the UK are located in retail parks. The particular branch chosen here is at the Luton Retail Park which situated off Gipsy Lane, 1 mile off Junction 10 of M1.
Both the shopping centre and the Retail Park are extremely accessible from all parts of Luton and surrounding districts. The Arndale Centre can be reached by train, many bus services and Taxi. For private car owners, three car parks are available. For the Retail Park, a huge car park is available but access is more limited to car owners.
I visited both stores on a Sunday to seek out clues of their performance. At the ELC, children and their parents and other adults buying for their relatives filled the small space and solicited information from the sales person frequently. Large motorized flow and queues at the checkout with large trolleys full of toys suggest Toys R Us still holds significant market power. At both stores, children seemed very happy about playing in the store and many parents had trouble dragging their children out of the stores. Although their retail formats differ greatly, both of them seem to be successful in their respective niches.
ELC and Toys R Us belong to the Focused differentiator group and the Broad low-cost player group respectively by applying Porter’s Generic Strategy model. To achieve their strategic goals, corporate strategies need to be translated into appropriate retail format at individual outlet level. Consequently, the ELC store is designed as a high street specialist while Toys R Us employs a mass merchandiser format (providing a comprehensive range within particular product areas).
The retail format is the store package that the retailer presents to the customer (Newman and Cullen, 2002). It embraces all elements of the retail marketing mix with location, size, merchandise, price, promotion, atmosphere and service all being important ingredients. In the following analysis, both retailers’ retail formats will be broken down and each element will be closely examined while the role of location will be highlighted by exploring its relationship with other elements of the retailing mix.
Location fulfils the basic retail function of making goods and services accessible to customers. The ELC and Toys R Us located their store to a shopping centre and retail park respectively to increase their accessibility. The past few decades have witnessed rapid development of shopping centres and retail parks both of which appeal to the modern consumers and greatly increase the catchment area for the stores therein.
Shopping centres offer great convenience to consumers by incorporating huge varieties of goods retailers and support leisure and catering services. The shopping centre is designed as a controlled flow of pedestrians past as many of the outlets as possible. This is achieved by locating magnets stores at opposite ends of the mall (Brown, 1994). In the case of the Luton Arndale Centre, Argos, Woolworth, Tesco and many other magnets stores help to draw large number of pedestrians to the intervening smaller outlets such us ELC. In addition, as one of the main attractions of a shopping centre is making it easy for consumers to compare products in the same and complementary category. The resulting extensive customer interchange which tends to occur between compatible and competitive retail outlets is likely to greatly increase store patronage for ELC (Brown, 1994). For example, Mothercare in the Centre sells complementary products compared with the ELC, thus these stores will generates additional traffic for each other.
Retail parks originate from increasing car ownership and provide easy car access for consumers, especially when purchasing bulk items like furniture, carpet and DIY items. The Luton retail park clusters many complementary retailers together and attracts more customers for each of the stores than if they are located separately. For instance, in Luton Retail Park, B&Q’s target customers are mainly families who need home improvement and among these families, many of them will have children who will drag their parents to Toys R Us while visiting the retail park.
Besides the major role of location described above, it also exerts great influence on the performance of retailers indirectly through other elements of the retailing mix.
The size of the store affects customer expectation as to the range of products stocked (Newman and Cullen, 2002). From the 800 square feet ELC store, customers will accept a limited high quality range. In contrast, at the 50,000 square feet store of Toys R Us, customers will expect to find all brands and types of toys including bulky items like bicycles and children furniture.
To a large extent, the size of a store is constrained by the chosen location. As with the ELC, only a limited space is available due to the crowded nature of town centre. On the other hand, Toys R Us enjoys the spaciousness of a large retail warehouse where their comprehensive range of toys and games can be stocked.
Merchandise is the core offer of any retail business. Store patronage not only depends on the number of passing trade, more importantly, it depends on the strengths of the store to intercept consumers and convert them into customers. To do that, the right location is not enough; it has to be equipped with the right merchandise.
Merchandise strategy and location strategy are intertwined in a number of ways. In physically grounding their capital in individual locations, it is vital that there is a ‘fit’ between the location and product (Collins, 1992). First, location is important for the type of merchandise since it will determine the local environment where the merchandise will be sold. Luton’s demographics suggest that toys will have a large potential market here. Aside from the statistics gathered by local government, the overwhelming large number of pushchairs and small children on the street is obvious evidence of a promising prospect for toy retailing.
Different positioning will require different types of location within Luton town. The ELC at the Arndale Centre is a high street site where the high rent commands greater value added for the products sold to justify higher prices charged. ELC achieved this high value-added through its unique selling proposition. Their branded toys are believed to be educational as well as being fun, and safer for the children to play with. According to a recent report from the Independent, educational electronic toys were the fastest growing sector in the toy market last year, followed closely by infant toys, reflects the desire of parents to teach their children ever more, ever younger (Pozniak, 2005). ELC exploits this market opportunity fully by targeting the new generation of increasingly affluent, sophisticated parents who knows the importance of education and are willing to invest for their children even when they are very young. In comparison, Toys R Us targets a much wider mass markets by providing the widest range for everyone who has an interest in toys.
Pricing supports the image of the retailer as consumers tend to associate price with the type and quality of the merchandise on offer.
Of the many variables which have some bearing on price, location is a major determinant. The underlying cost of a location is an important consideration when setting prices. For ELC, the higher prices charged justify their presence in the high street. For Toys R Us, the lower rent in the edge-of-town area enables it to set very keen prices to win over competition. In addition, its sheer size exerts great power over suppliers and enables them to secure good purchasing conditions which give them another cost advantage when setting prices.
The store itself is the most important promotion vehicle for the retailer. The location of the store, as well as its design, layout, atmosphere will sent out clear message to customers as to what kind of retailer it is.
The atmosphere and service are important factors consumers consider when deciding where to shop. Children love ELC mostly because they provide a cheerful, warm and child-friendly ambience. A Freeflow design is used and samples of toys are placed in the centre of the store in a low position within the reach of children to encourage trial. Friendly and knowledgably staff is always available for help and advice. In contrast, at Toys R Us, Grid layout dominates the store. Wide aisles are used to facilitate the movement of shopping trolleys. Toys are piled very high to utilise the space effectively. Customers are expected to help themselves and few staff will be there to help.
The location of a store often provides cues to consumers as to the kind of atmosphere and service they can expect to experience.
To sum up, location influences and is influenced by all other elements of the retailing mix. At the high street location of the ELC, consumers enjoy a limited range of high quality toys with slightly higher prices and personal service in a child-friendly environment. These factors in turn dictate that a site in the Arndale Centre would be the right choice for the ELC. The prominent high street location and all the other elements of retailing mix are added together to build the trustworthy, wholesome, educational personality of their brand. At the Toys R Us at Luton Retail Park, customers will enjoy a completely different package including a large warehouse and exhaustive ranges of toys on very high shelves, keen prices and self-service. In the same way, these elements dictate that an edge of town Retail Park will be the right location.
The adage that ‘the three keys to success in retailing are: location, location, location’ have certain veracity in that it accentuate the special role location played in the success or failure of a retailer. However, it is not entirely true since the success of a retail business will require a sound business strategy of which location strategy is only a part, no matter how important it is. All elements of the retailing mix are interrelated and interact with each other. The right location is only meaning for a particular kind of product, at a particular price level and through the particular promotion mix. Management need to look at the marketing mix as a coherent whole when deciding the right location.
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