Location Analysis for WindowsWear Museum - Example

Executive summary

This paper aims to present a location analysis for WindowsWear, an American fashion technology company, which allows consumers to digitally shop the latest, must-have products in the windows of the fashion retailers. While WindowsWear is considering opening a physical museum to showcase its assets and focus on the visual merchandizing, the location analysis is important to impact consumers’ store choice decision, strategic orientation and in general to enable the WindowsWear to succeed even of its strategy mix is mediocre. The selection of location requires extensive decision making by the company due to the number of criteria to be considered. These criteria include the size and characteristics of the surrounding population, the level of competition, access to transportation and other necessary attributes. This analysis presents such factors as taxes and financing, title complexities and other legal factors, transportation availabilities and skill level and suitability of the labor market. The location analysis includes presence of competitors and explains how WindowsWear can use location analysis to place its operation, leverage its unique assets in creating a unique physical structure and experience for guests.

Introduction

The location analysis is one of the most important determinants for store’s success or failure. The reason for that is because real estate represents a long-term and fixed investment that is unique and immobile. Consequently, the problem of the initial bad choice in locating a store is not easy to overcome. Yet, through involvement of some of the important elements will help the company to understand what needs to be done for success of business in terms of location analysis. These elements include overview of the surrounding market and macro trends such as employment and population growth. The other aspect refers to delineation of trade area boundaries for the store based on drive time analysis and other factors that influence business, such as competition and regional accessibility. Therefore, location decisions arise from the variety of reasons, such as adding new facility as a part of marketing strategy, growth in demand and shifts in the market. The integral part of location analysis belongs to location planning, which a firm should conduct in order to better understand methods used to decide the best location, or the alternatives for the company. Through planning stage, the company can identify the country or area for setting a new store, understand the general region characteristics of business surrounding. Here, several factors can impact the location positioning and they include materials, proximity to the market and culture. This paper is going to present the main elements of location analysis and their impact on WindowsWear in its striving to open a physical museum.

Analysis

When considering opening a new physical store, for companies like WindowsWear it is important to understand that location analysis provides the basis for delineating trade area of the new store. Such analysis includes a variety of location decisions such as whether the store is low cost, convenient to attract market share and impact competitive advantage. Location analysis is made of evaluation of essential for the new store characteristics, such as demographic characteristics of the area, where companies use geographic information systems to determine trading areas and evaluate the alternative specific store sites, unplanned and planned business districts (Jaravaza & Chitando, 2013). Thus, the system enables the company to collect, store and retrieve data that will aid decisions makers in targeting market segments, identifying locations relative to market potential and planning distribution networks. To place its operation, WindowsWear should understand that for effective and efficient performance, location decisions for the facility can be more critical decisions, therefore, it should establish long-term planning and sett long-term conditions for which the facility will operate. Spaeder (2016), recommends checking demographics as the main determinant for sophisticated location analysis tools. That will enable the company to understand traffic pattern information, demographic and lifestyle data and consider competitive environment. In fact, looking into competitors’ eyes is the answer that many experts recommend for location analysis.

Numerous researchers presented other factors that affect location of a store. Thus, Badri (2007), suggests that transportation, labor, materials, markets, utilities and government attitudes are among the main that affect business.

If WindowsWear decides to pursue its operations on the international market, MacCarthy and Atthirawong (2003), recommend to pay attention to such factors as costs including transportation and wage rate and trends in wages costs, labor characteristics such as quality and availability of labor force, as well as attitudes toward work and labor turnover. In addition, infrastructure, and in particular existence of modes of transportation, quality and reliability of access to major roads and locations are essential to physical store. Quality of life and environment, community attitudes toward the business and industry in general also affect the location of new store (See Table 1). Jaravaza (2013), has also displayed the main factors affecting location of store (See Appendix A).

Table 1. Factors that shape and influence store location

Major factors

Sub-factors

Costs

Fixed costs, transportation costs, R&D and management costs

Labor characteristics

Quality of labor force, prevailing wage rate, skills level available, attitudes toward work and labor turnover

Infrastructure

Access to roads, railroads, airports, quality and reliability of modes of transportation, telecommunication system

Quality of life

Quality of environment, attitude of community toward business and industry

Proximity of competitors

Competitors location

Economic factors

Taxes and financing (state income tax, local property tax), real estate cost

Social and cultural factors

Cultural characteristics (language, customs)

Stevenson (2007), recommends to pay attention to language and cultural differences when deciding location for the new store, travel costs, level of technology and personnel. The shifts in modern world, and in particular with more technological availabilities, it became possible to use new ways to leverage unique assets of companies in creating a unique physical structure and experience for customers. These shifts can be seen through perspective of MacKenzie, Meyer and Noble (2013) (See Appendix B). Thus, when setting the new physical store, it is essential to take into account new trends that will matter most. These are demographic changes, multichannel and mobile commerce and personalized marketing. The rise of boomers, Hispanics and millennials also offer new opportunities for leveraging store’s unique assets. Among the other benefits that offers location analysis, companies such as WindowsWear can observe improved customer experience and network improvement, better competitive position in the market. Some other benefits include improvement of brand image and more opportunities for future growth.

Conclusion and recommendations

Location as an important part of physical store should be defined by the strategy of the company not only in foreign but in the domestic locations. The main reasons for location analysis importance are connected to the improved market access, reduces operation costs and consolidation of operations along with the improved productivity and developed new technologies. At the same time, a firm such as WindowsWear should understand that many factors influence its location analysis and be ready to respond to changes if such occur.

Based on the location analysis provided in this paper, it is essential to recommend WindowsWear following initiatives. It is necessary to set clear objectives to the new physical store and its main purpose. Along with that, the company should make precise analysis of such characteristics as demography of the location, evaluate trading area and take into account factors that would promote the development of store. In addition, the company should identify the ways for evaluation of location alternatives, such as locational cost-profit-volume analysis, factor rating. Thus, for cost-profit-volume analysis, WindowsWear should follow such steps as determine the fixed and variable costs related to the location, plot total-cost lines for a location, and determine whether the alternative location will have lowest total cost for the expected level of output. Additionally, the company should understand that when conducting location planning, capacity planning is also important as it provides insights to finance input to finalize location decisions and marketing, which impact the organization. Capacity planning decision is made simultaneously with location analysis since the location of the facility relates to the capacity. Both are necessary to assess needs, develop alternatives and evaluate these alternatives.

Appendices

Appendix A.

Source: Jaravaza and Chitando, (2013).

Appendix B.

Source: MacKenzie (2013).