Analysis of the Surrounding Grocery Retail Store Location in the U.K - Literature review Example

Topic: A review of the literature surrounding grocery retail store location in the U.K. Choice of a retail store location is a very important strategic decision taken by a retailer – crucial for the success of a retail chain. In the UK, grocery retailers see it as a tool of measuring site potential and apply different location models on a grocery retail location. The study of retailers’ location decisions goes as far back as the times of Haig, offering competitive bidding for particular sites in the hope of better margins; Hotelling describing the clustering of same stores; Reilly’s Law of Retail Gravitation, showing effects on a retail chain performance of distance and centre appeal, and Christaller’s stress on “real price” of a product including a notional transportation “cost”, covering a period from 1926 to 1966 (Clarkson et al. 1996). In the UK context, retail store location has grown in number and size of retail warehouse parks, and out-of-town shift of retail business, causing shortage in the number of town-centre retail locations. Out-of-town retailing provided consumers the advantage of better shopping choice and lower prices but also created problems for older people and people with disabilities to reach without personal transport. Traditional town centres used to be in walking distance (GLA Economics, 2005). This mushrooming of out-of-town retailing practice propelled the Office of the Deputy Prime Minister (ODPM) to apply Planning Policy Guidance 6 (PPG6), promoting the issue of town centre reformation within walking distance and discouraging such locations, which are not connected by public transport. Grocery retailers are now returning back to town after three decades of doing business in out-of-town locations. One thing noticed is their growth and concentration in affluent areas only, putting underserved communities at a loss. It is considered that such areas are impoverished; showing greater crime rate, lesser education standards, lower income level, resulting in lower profit margins due to increased operating cost and decreased income, making retailers unwilling to operate in such locations (GLA Economics, 2005). According to John Dawson, Professor of Marketing at the University of Edinburgh, retailing has changed considerably due to changes in consumer behaviour and the economic environment in the UK. The period from 1950 to 1970 was growth-oriented, setting the stage for volume sales by companies like Sainsbury and Tesco, requiring extra space for ever-increasing range of products. This was followed by recessionary trend due to rise in oil prices in 1973 and 1974, turning retail market in competition over consumers’ search for lower prices. Grocery retailers faced space constraints in urban retail outlets and as a result started shifting towards out-of-town locations. The other reason of this shifting was cheaper rents there in comparison to town centre locations. The buying power of consumers also promoted bigger and larger locations, which were not available within a city. Moreover, out-of-town locations had ample parking space, which was unavailable in the boundaries of a city. Taking the example of Tesco alone is sufficient to prove how it increased the floor area of its large stores to 25,000 sq ft from just 5 stores in 1972 to 66 in 1980 and to 264 by mid 1990s. Tesco’s smaller stores had covered area of 5,000 sq ft. Earlier in 1972, it had 580 small stores which were decreased to 131 stores by 1981 (GLA Economics, 2005). The latest Planning Policy Statement of the government, replacing PPG6 with PPS6 favours town centre retail locations, encouraging investment into less affluent areas to promote social and economic growth and regeneration of all areas and economies equally. This would certainly change the direction of the wind blowing from out-of-town to town centre locations. The contribution of grocery retailers in latest developments to in-town locations has been leading. Presently, there are 1,000 smaller in-town stores, reviving and enlivening the economic look of High Streets. Not only this, High Street super market retailers have acquired the businesses of small local competitors like pharmacies and reproduced them in-store. The latest news, in this regard is, Apple Retail Store, confirming the opening of 300 Apple Zones into one of the biggest retail stores – Tesco by copying the successful example of French supermarket Carrefour. The latest change to in-town locations will decrease the number of retail outlets and encourage consolidation of business in the hands of few (GLA Economics, 2005). This change of locations from in-town to out-of-town and back again to in-town locations of grocery retail has necessitated the need to ascertain the type, nature and limit of using location models used by the UK grocery retailers in location decisions. There are many retail location theories based on different models. Selecting location, according to Kateryna (2005), for retail market is a big investment decision concerning the problem of optimal location both for scientists as well as businessmen. Maximum capture model provides a technique of a location choice based only on distance. It requires latest methodology for selecting store features, which are applicable to retail market, to be included in the maximum capture model. The choice of a retail location in the wider framework of planned competitive strategy has become very important, especially with the entrance of giant retailers like Tesco, Wal-Mart and others. The important fields in literary review on store locations are competitive-location literature and store-choice literature. Hotelling [1929] laid the theoretical foundations of a retailer’s optimum location in a popular and vastly cited paper “Stability in Competition”. The trend of theoretical concept of the location model started with the beginning of twentieth century, acclaiming popularity by the second half of the century. Earlier, simple location techniques like ‘gut-feeling’, ‘check-list’ and ‘analogue’ were being used instead of the theoretical models of different approaches to the spatial analysis framework [Clarke, 1998]. An important problem in retail location choice is to build a location within the city or outside the city. A researcher named, Risto Murto, from the Nordic Research Network on Modelling Transport Land [2001] has pinpointed the transportation problem within the optimum location choice. The forecast model presented by Murto can measure changes in traffic network from different land use alternatives for shopping trips and goods transport. Bloomley (1989) has analysed the issue of location raised by Wrigley in ‘Store Choice, Store Location and Market Analysis’. Wrigley finds a positive relation in retail spatial analysis and retail capital. Success in retail depends on penetration and manipulation of space. Penny and Broom quote an analyst with particular reference to the UK grocery retail: “the battle lines in the latest round of the grocery wars are being drawn up not around the price wars of the 1970’s, but around the frantic grab for the best superstore sites left in the UK. At stake in the present retail maneuvers is the very structure of large store retailing in the 1990’s”. The “politics of location” is playing with the interests of the consumers. Wrigley has pointed out towards a suburban drift of retail capital without paying any attention to the techniques that help in the analysis and regulation of changing patterns of retail access and particular consumers’ problems. According to Byrom (2001) finding a retail location in the United Kingdom had not been easy since 1984 because of seeming lack of space, which ‘dried up’ [Bowlby et al., 1984]. The government planning policy in the different guises of Planning Policy Guidance (PPG) Note 6 had discouraged retail development away from town and city centres but particularly in grocery retail sector, retailers have managed to relocate their premises at other sites through personal and collective efforts at trade association level by making representations to central government at the time of policy planning [Pal, 1999]. There also exists a scientific aspect of location decision making. Geographical Information Systems is one such scientific computer based technique offering visualization of geographical data. GIS has become popular due to decreased costs particularly within the location planning departments of multiple retailers. It is a decision support tool particularly in the ‘spatially dependent’ field of location decision making and planning. Now, qualitative and intuitive judgement of executives is being properly examined but spatial cognition, which is yet to be fully explored in the field of retail location decision-making. Cognitive mapping is a segment of spatial cognition, defined by Downs and Stea [1973] as: “a process composed of a series of psychological transformations by which an individual acquires, stores, recalls, and decodes information about the relative locations and attributes of the phenomena in his [sic] everyday spatial environment” According to Byrom (2001) as map knowledge can be derived from route knowledge, it has important meaning for studying retail location decision-making activities. Routine visits to would-be locations help in attaining geographical knowledge, providing ‘bird’s-eye’ configuration knowledge of location, discouraging an executive to invest in technical solutions. Sketch mapping technique is preferable in finding an ideal store geographically by location planners. Such an approach has been used by Clarke et al.,[2000] and Clarke and Mackaness [2001]. But care should be taken not to use sketch mapping in isolation. According to Clarkson et al (1996) the UK grocery market has reached a saturation point. There is less scope of new retail stores opening on new locations decreasing the utility of latest location procedures necessitated by growth strategies. The new changed climate of the UK grocery retail store locations encourages retailers to inject capital in re-building and revamping. It doesn’t require a location decision but changes to fulfill assessment needs of the phenomenon of rebuilding in erasing the older sites to build the new ones. References: Blomley, NK 1989, ‘Store choice, store location and market analysis by Neil Wrigley’, Economic Geography, vol. 65, no. 2, viewed 1 February 2007, . Byrom, JW 2001, ‘Say what you see: preliminary observations on the role of spatial cognitive mapping in retail locational planning’, Manchester Metropolitan University Business School Working Paper Series, viewed 1 February 2007, . Clarkson et al., 1996, ‘UK supermarket location assessment’, International Journal of Retail & Distribution Management, vol. 24, no. 6, viewed 1 February 2007, . GLA Economics, Retail and Regeneration in London: Working paper B, viewed 1 February 2007, . Kateryna, S 2005, ‘The optimum location of a retail store’, National University “Kyiv-Mohyla Academy”, viewed 1 February 2007, . News, EuroMac Podcast, Apple Retail Store News, 10 March 2006, viewed 1 February 2007, . Softpedia, More Apple in Tesco’s stores, 6 March, 2006, 13:16 GMT., viewed 1 February 2007, . Read More