Chapter 7

shopping center

is a group of retail and other commercial establishments that is planned, developed, owned, and managed as a single property.

Central Business Districts

) is the traditional downtown business area in a city or town. • Many central business district locations in the United State are declining in popularity due to: (1) high crime rates, and no control over weather; and (2) lack of planning, and therefore not enough interesting retailers for consumers.

Where are life-style centers usually found? A) in small towns B) in middle-class neighborhoods C) in high-income neighborhoods D) at interstate interchanges E) near discount store malls

C) in high-income neighborhoods

Which of the following does NOT describe shopping malls' advantages over alternative locations? A) They attract many shoppers because of the many different types of stores and the merchandise assortments available within these stores. B) They have a large trade area because the opportunity to combine shopping with entertainment. C) Malls offer retailers a strong level of homogeneous operations with the other stores. D) Competition within shopping centers is not intense. E) They generate significant pedestrian traffic inside the mall and provide an inexpensive form of entertainment.

D) Competition within shopping centers is not intense.

Which of the following does NOT describe neighbor centers? A) These centers are often referred to as "open air centers" because the common areas are not enclosed. B) Smaller neighbor centers are typically anchored by a supermarket or drugstore. C) Larger centers are typically anchored by a discount department store such as Wal-Mart or Target. D) The primary advantages of these centers are that they offer customers convenient locations and easy parking. E) Smaller centers have an unlimited trade area due to open air space.

E) Smaller centers have an unlimited trade area due to open air space.

John is opening a small specialty T-shirts store in an inner city location in Los Angeles. He will feature the locally produced fashionable T-shirts as well as imported T-shirts from China. More than likely, John will experience _________ conducting business in a low-income area as opposed to the suburbs. A) higher leases B) little shoplifting C) little customer loyalty D) more competition E) higher profits

E) higher profits

Types of Leases

There are two basic types of leases: percentage lease and fixed-rate lease.

mall

are shopping centers in which customers park in outlying areas and walk to the stores. Traditional malls are enclosed.

strip center

are shopping centers that usually have parking directly in front of the stores.

merchandise kiosks

are small selling spaces offering a limited merchandise assortment. • They are relatively inexpensive, have short-term leases, and may even operate only seasonally.

Mixed-use developments

combine several different uses in one complex, including shopping centers, office towers, hotels, residential complexes, civic centers, and convention centers.

shopping malls

enclosed climate controlled lighted shopping centers with retail stores on one or both sides of an enclosed walk way.

Freestanding Sites

is a retail location that's not connected to other retailers, although many are located adjacent to malls. • Retailers with large space requirements, such as warehouse clubs and hypermarkets, are often freestanding. • Advantages of freestanding locations are greater visibility, lower rents, ample parking, no direct competition, greater convenience for customers, fewer restrictions on signs, hours, or merchandise, and ease of expansion. • A retailer in a freestanding location must be a primary destination point for customers. It must offer customers something special in merchandise, price, promotion, or services to get them into the store.

power center

is a shopping center that is dominated by several large anchors, including discount stores, off-price stores, warehouse clubs, or category specialists.

regional center

is a shopping mall that provides general merchandise (mostly apparel) and services in full depth and variety. • Its main attractions are its anchors, department and discount stores, or fashion specialty stores.

Main Street Locations

is the CBD located in the traditional shopping areas of smaller towns, or a secondary business district in a suburb or within a larger city. Their occupancy costs are lower than that of the primary CBD. They do not draw as many people and offer smaller overall selection through fewer stores. Main Streets typically don't off the entertainment and recreational activities available in the more successful primary CBDs.

Legal Considerations

issues that affect site decision include environmental issues, zoning, building codes, signs, and licensing requirements.

Category Specialists

likely to be found in power centers or in freestanding locations. • They choose these locations for several reasons. First, such stores typically compete on price, and these locations cost less than CBDs or malls. Second, easy access to parking is important to customers of category specialists since purchases are often large and difficult to carry. Finally category specialists are destination stores. A destination store is one in which the merchandise, selection, presentation, pricing, or other unique features act as a magnet for customers.

traditional shopping center

provides convenient shopping for the day-to-day needs of consumers in their immediate neighborhood.

resorts

• Retailers view resorts as prime location opportunities. There is a captive audience of well-to-do customers with lots of time on their hands. • Resort retailing also attracts small unique local retailers and premium national brands.

Inner-City Locations

• The inner city is typically a high-density urban area consisting of apartment buildings populated primarily be ethnic groups. There are about 8 million households in America's inner cities and these constitute $85 billion in annual retail buying power

Specialty Apparel Stores

thrive in central business districts, Main Street locations, and most types of malls, including regional and superregional shopping centers, lifestyle centers, fashion/specialty centers, and theme/festival centers. • These locations are all capable of drawing large numbers of people, and they provide entertainment and recreational opportunities for their customers. • Specialty apparel stores carry shopping goods - products for which consumers spend time comparing alternatives. Mall and to some extent CBDs facilitate this type of shopping behavior by having several stores with the same types of merchandise so that consumers can compare across stores.

there are two types of strip shopping centers

traditional power

department stores

usually located in central business districts and regional or superregional shopping centers. • CBDs and shopping centers are natural locations for department stores since these locations draw a large number of people due to their large size and merchandise selection.

store within a store

• Another nontraditional location for retailers is within other, larger stores. Retailers, particularly department stores, have traditionally leased space to other retailers such as sellers of fine jewelry or furs. • Grocery stores have been experimenting with the store-within-a-store concept for years with service providers like banks, film processors, and video outlets. • Necessities are important for patients since they can't readily leave. Gift opportunities abound.

fixed rate lease

• Commonly used by community and neighborhood centers and not as popular as % based leases. Retailer pays fixed monthly rent for the life of the lease. B1. Graduated lease • Changing fixed rent payments (i.e. first 3 years-$1,000 per month, next 5 years-$1,250 per month.) B2. Maintenance-increase- recoupment lease • May be used with any of the above leases where landlord may increase rent if expenses increase beyond a certain point. B3. Net lease • May be used with any of the above leases where retailer pays all maintenance and utilities.

shopping mall disadvantages

• First, mall rents are higher • Second, some tenants may not like mall managers' control of their operations. • Third, competition within shopping centers can be intense. • Shopping malls are facing several

shopping mall challenges

• First, there is increasing competition from other types of retail location alternatives, • Second, many of today's shoppers are looking for value alternatives to stores found in shopping malls. • Third, many malls are getting old and are therefore less appealing to customers than they once were. • Shopping malls are addressing the problems in various ways: • Adding more entertainment opportunities. • A more extreme approach is demalling, which usually involves demolishing a mall's small shops, enlarging the sites once occupied by department stores, and adding more entrances onto the parking lot.

hospitals

• Hospitals are an increasingly popular alternative, since both patients and their guests often have time to shop. • Necessities are important for patients since they can't readily leave. Gift opportunities abound.

Licensing Requirements

• Licensing requirements may vary in different parts of a region. For instance, some Dallas neighborhoods are "dry," meaning no alcoholic beverages can be sold; and in other areas, only wine and beer can be sold.

airports

• One important high-pedestrian area that has become popular with national retail chains is airports. • Sales per square foot at airport malls are often three to four times as high as at regular mall stores. However, rents are at least 20 percent higher than at malls. Also, costs can he higher - hours are longer, and since the location is often inconvenient for workers, businesses have to pay higher wages. • The best airport locations tend to be ones where there are many layovers and international flights.

Percentage lease

• Rent is based on a percentage of sales. Rents go up and down with sales and inflation. A1. Percentage lease with specified maximum/minimum • Maximum-Retailer pays percentage of sales up to a maximum point. • Minimum-Retailer pays minimum amount no matter how low sales are. A2. Sliding scale • Percentage/sale amount decreases in specified dollar amount intervals as sales go up (e.g., 4% for first $200,000, 3% for sales >$200,000) B. Fixed-rate lease

Signs

• Restrictions on the use of signs can impact a particular site's desirability. Size and style may be restricted by building codes, zoning ordinances, or even the shopping center management.

Environmental Issues

• Two environmental issues have received particular attention in recent years. First is "above-ground risks" such as asbestos-containing materials or lead pipes used in construction. The second issue is hazardous materials that have been stored in the ground. This issue may be of particular importance to a dry cleaner and an auto repair shop. • Retailers may protect themselves against environmental hazards with protective lease clauses in their leases, and/or by purchasing environmental protection insurance policies.

Zoning and Building Codes

• Zoning determines how a particular site can be used. Building codes are similar legal restrictions that can determine the type of building, signs, size and type of parking lot, etc. that can be used at a particular location.

lifestyle centers

• an outdoor traditional streetscape layout with sit-down restaurants and a group of retailers, but no discount stores. • The centers offer shoppers convenience, safety, an optimum tenant mix, and a pleasant atmosphere. • Nearly all lifestyle centers are located in high-income areas.

outlet centers

• consist mostly of manufacturers' stores selling their own brands, • A strip configuration is most common for outlet centers, although some are enclosed malls, and others can be arranged in a "village" cluster. • Outlet centers are often located some distance from regional shopping centers so they don't compete directly for department and specialty store customers.

shopping mall advantages

• different types of stores, • the merchandise assortments available within those stores, • and the opportunity to combine shopping with entertainment, shopping malls have become the Main Street for today's shoppers. • Second, tenant mix can be planned. Shopping mall owners control the number of different types of retailers • Third, retailers and their customers don't have to worry about their external environment.

fashion/ specialty centers

• is composed mainly of upscale apparel shops, boutiques, and gift shops carrying selected fashions or unique merchandise of high quality and price. • similar to lifestyle centers in terms of the clientele and types of stores they attract. • They are usually found in trade areas having high-income levels, in tourist areas, or in some central business districts.

super regional centers

• similar to a regional center, larger size in size , it has more anchors and a deeper selection of merchandise, and draws from a larger population base.