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Shopping Center LocationUnderstanding retail and shopping center location patterns is very important when investing in retail property. Such an understanding will provide important clues regarding the locations within an urban area that are most valued and, therefore, would command the highest rent, from retailers.
C.S. Craig A. Ghosh and S. McLafferty, in "Models of the Retail Location Proccess"in the Journal of Retailing, Spring 1984, provide a good overview of the literature dealing with consumer spatial behavior and retail/shopping center location models in order to evaluate the state of the art in this type of modeling and identify directions for future research. In this paper the authors discuss broader (macro) patterns of retail and shopping center location by reviewing the literature that focuses on the central place theory and the literature that focuses on the influence of market and infrastructure factors. The Central Place Theory is the best developed normative theory of retail and shopping center location. It's value lies in its ability to consider simultaneously the behavior of consumers and retailers in a spatial market context. Christaller's contribution to central place theory and its implications for shopping center location stems from two fundamental concepts: the range and threshold of a good. Loshe's main argument in the central place theory is that the quantity demanded at a specific location decreases with distances. Working from these basic retail demand and supply concepts, Christaller and Losch inferred that in a perfectly uniform market (in terms of consumer density and other features) the retail location pattern would consist of retailers/suppliers that would be equally spaced and serve equally sized hexagonal market areas.
The early central place theorists envisioned a spatial construct consisting of a hierarchy o central places offering a variety of goods and services. This hierarchy implies also a hierarchy of retail facilities and locations serving regional or very localized populations.The market and infrastructure approach shifts focus and examines location decisions associated with a particular form of retail activity over time. According to this approach, the major market factors that shape retail and shopping center location patterns are capital availability, retail sales potential, the logistics of service and supply, and the elasticity of retailer profitability with respect to sales potential. In addition, certain retail outlets require the appropriate infrastructure, such as paved roads, navigable waterways or public utilities to effectively market a product or service. In the third section of the paper, Craig, Ghosh and McLafferty review models of consumer store choice. The main models and theories discussed by the authors include the nearest-center hypothesis, the "just noticeable" distance hypothesis , Reilly's law of retail gravitation and the revealed preferences approach where the consumer utility function is determined by both locational and non-locational factors. Finally, the fourth section considers the more traditional approaches to site selection, the checklist analog and regression methods along with the more recently developed location-allocation models. Multiple Store Location ModelIn today's global and highly competitive economy retail chains employ multiple store networks covering complete market areas in their countries while expanding internationally. Within this context, when locating single store units, national and multi-national retailers should place such decisions within the context of creating an optimal network of stores covering their target cities and countries. Thus, optimizing the locations of a network of stores as opposed to optimizing the location of a single store is a totally different propositions and requires the development of model of multiple store location. According to Achabal, Gorr and Mahazan (1982, Journal of Retailing, "A Multiple Store Location Model") such models are complex and involve simultaneously determining the size, image, location and profitability of a group of stores. However, they can provide to the managers some multiple-locations solutions with high degree of statistical confidence.Using multiple location modules require the retailer to collect basic consumer purchase data and data on the location of the competition. This will require consumer research studies that will increase the cost of a location study, but retailers can expand their analytical capabilities and the robustness of their location decisions by using multiple location models. In particular, such models can assist retail managers in:
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