Retail Layout: A 6-Step Guide to Effectively Design a Store
Overview In the last chapter, we covered why your retail location matters. Now that you’ve…
Sean ThobiasDecember 6, 2023
Previously, we highlighted that a significant reason businesses fail is due to a poor retail location. A lousy location means customers can’t find your store, resulting in lower profits from fewer sales.
This chapter will help you choose the best retail location for your business. It covers the criteria to think about, various types of locations, and how to negotiate your lease.
For your retail store to thrive, focus on being easily seen and reachable. Choose a spot where many people pass by so your store catches their attention, and they’re more likely to check it out.
Plus, make sure it’s easy for customers to get there, whether they’re walking, driving, or using public transportation, so they find it convenient to visit often.
Select a location that matches the characteristics and preferences of your target customers, making it easy and convenient for them to reach your store.
If your target audience is young professionals, consider setting up shop in a business district or close to office spaces. For a store serving families, opt for a location near residential areas or schools, ensuring your offerings align with the daily requirements of your desired customer base.
Consider your business size when deciding how close to set up shop to competitors. Smaller businesses may encounter more challenges, while larger ones could discover growth opportunities nearby.
A study from the Marriott School of Business suggests that deciding on your store’s location concerning competitors needs careful thought. The survival rate for the smallest businesses drops by 14.1 percentage points, but it goes up by 2.6 percentage points for the largest ones.
Controlling expenses and maximizing profits are crucial to running a successful retail business. Keep your store’s lease and rent manageable by balancing costs and potential revenue for long-term sustainability.
A higher-rent location justifies itself by generating significantly more foot traffic, increasing sales. Conversely, a cheaper location may be practical if it provides sufficient visibility and accessibility to your target audience.
A mall is a vast shopping area where customers can conveniently find various stores under one roof, ranging from big-box retailers to independent shops.
This location suits businesses that do well in a competitive retail environment and want to reach a wide range of customers, like clothing stores and electronic shops.
Stand-alone stores are unique establishments that operate independently, not relying on other retailers or malls to attract customers. They serve as their destination, focusing on specific market segments such as food, health, beauty products, or electronics.
“Ruko” is a term derived from “Rumah Toko,” meaning a place that combines living space and business operations. Usually spanning two or three floors, a ruko is valued for its practical layout, enabling owners to reside and run their businesses conveniently.
Ideal for small retail ventures, local shops, or boutique stores, Ruko is perfect for owners who desire hands-on involvement in daily operations and the convenience of living at the exact location.
Consider setting up your retail store at home, especially when just starting. It’s a practical choice, especially if you’re unsure about other locations.
To succeed in retail, you should emulate larger companies by understanding their customers’ buying habits, preferences, and demographics. Begin by conducting demographic research on potential customers to determine the right location for your business.
Understanding demographics provides basic information, while psychographics delve into opinions, attitudes, and buying behaviors. Although psychographic research may cost more due to in-depth interviews, it uncovers valuable insights that can boost your effectiveness in serving customers and give you a competitive advantage in the retail business.
Ensure your business plan covers startup and operating costs, funding sources, sales projections, and cash flow details. Look closely at the financial analysis to determine a reasonable rent and related expenses budget.
Be practical about location choices, considering your budget constraints, and explore affordable options, such as up-and-coming neighborhoods, to avoid straining your resources.
Identify existing businesses in the area you’re considering and analyze their strengths and weaknesses. Assess whether there is room for your retail business to thrive alongside competitors.
Also, look out for nearby businesses that would complement you. For example, if you’re opening a bookstore, being close to a coffee shop could make shopping more enjoyable for customers.
Choose locations by watching how many people pass by. A bustling street may bring in more customers, but it usually means higher rent.
Think about when foot traffic is busiest during the day and week. Being close to offices with many lunchtime visitors could be smart if your shop sells snacks.
After finding the right spot, talk to the landlord about terms, rent, and any extra expenses — research local rates to make fair comparisons.
As a new retailer with a small business, know that you have negotiating power for your retail lease. Negotiate confidently for terms that fit your budget and business goals. Don’t hesitate to ask for favorable conditions.
In a fixed-rent lease, you pay a set monthly amount, no matter how much you sell. The size of your store usually determines this payment.
A fixed-rent lease can be a good fit if your retail business has a steady and predictable income. It helps you plan your monthly budget by keeping your expenses.
In this unique setup, retail tenants pay rent based on a percentage of their total sales over a specific time, often quarterly, though some prefer monthly or yearly.
This kind of retail lease works well for retail ventures with sales that vary, connecting rent directly to how well the business is doing. It’s a way for landlords and tenants to team up in facing the ups and downs of the business together.
In a percentage-with-minimum lease, you pay rent based on a percentage of your sales, but you must pay a minimum amount even if your sales go down.
This type of retail lease can be a good choice if you’re running a growing retail business. It gives you a fixed cost and the flexibility to pay less when sales are slow or more when they’re booming.
Negotiating a retail lease differs depending on your market, the property, and the landlord. It’s essential to do thorough research because each situation has its quirks.
Collect detailed info on market conditions, property details, landlord reputation, and similar deals. To make informed decisions, compare your current lease terms and costs with industry standards.
When negotiating your retail lease for a retail space, remember it’s not just about numbers and paperwork; it’s about building solid relationships. Foster trust with your landlord through clear, respectful communication, and keep a positive and professional tone throughout the negotiation.
Ensure a solid lease negotiation by getting everything in writing. Verbal agreements don’t count in real estate — only a signed agreement with the terms you’ve discussed matters.
Double-check and clarify every detail by carefully documenting all lease terms. Review the written agreement thoroughly, addressing gaps, errors, or uncertainties to avoid future issues.
Review your lease to understand when the landlord can terminate it. Check if not paying rent or selling the property allows them to evict you.
Find out how you can end the retail lease if you want to grow your business. If you’re closing the business, consider subletting your store to another tenant.
Navigating real estate law can be tricky, especially with the legal jargon and complex clauses found in lease agreements. To steer through this, consider consulting with a real estate lawyer who can break down the complexities and make them easier to grasp.
A specialized lawyer can offer a straightforward explanation of your rights and responsibilities in the retail lease. It ensures that you fully understand the terms you agree to, preventing potential disadvantages.
To find the right spot for your retail business, thoroughly research potential locations, analyze your budget, and understand your target customers well. Making informed decisions at this stage is crucial for the success of your retail venture.
Choosing the right retail location isn’t just about securing a space; it’s a strategic advantage that can boost your business. In the next chapter, we’ll guide you through setting up your store, covering critical elements like layout planning and furnishings.
Ramsey, D., & Ramsey, J. (2010). The Everything Guide to starting and running a retail store: All you need to get started and succeed in your own retail adventure. Adams Media.
Impact Insight Team
Impact Insights Team is a group of professionals comprising individuals with expertise and experience in various aspects of business. Together, we are committed to providing in-depth insights and valuable understanding on a variety of business-related topics & industry trends to help companies achieve their goals.