How You Can Influence Retail Site Decisions

This is the final article in a trilogy of articles about retail site selection in Alabama. The first article explained how retailers make their site decisions, the second discussed the role of government in this process, and this article will discuss your role. Yes, you, as a citizen and shopper, can have an important role in attracting retailers to your neighborhood.

As explained earlier, retailers make their decision about where to locate stores based on demographics and statistics, and very much on the same–store sales of retailers already in place. These same–store sales show the current sales in comparison to the sales from the previous year. If sales are going up then retailers are interested.

The second article discussed how government can be involved in the process, to not only help retailers understand the market and its characteristics, but also to help fund some of the infrastructure and other required expenses. Yes, retail development is private enterprise, but government can help make the site or environment ripe for that private investment.

Retailers live for the customers, and that, of course, is you. All that retailers do, in their store concepts, their advertisements, their product offerings, their customer service, and every other thing they do, is all about you. Retailers live to make you happy, to make you comfortable, and to make you delighted to part with the contents of your wallet or purse. Therefore, it should be no surprise that you have influence beyond what you might expect with retailers.

For starters, recall that retailers are not simply some corporate giant, but rather retailers are organizations of people, humans, that relate to the world like you do and that respond to your interaction with them as humans. These retailers, these humans, want to keep you interested and they want to cater to your whims.

So, how can you translate this power that you may not have known that you had into influence on where retailers locate next? First, you can recognize that you are the customer, you are the one with the money. You have a voice. Then you can see how the retailer wants to hear from you.

Recall from the earlier articles that same–store sales, how the store is doing this year in comparison to last year, is a strong motivator of retailers. If you frequent and shop the existing retailers in your market then the numbers of those stores will be better. This author does not really want to suggest that you shop where you are not happy, but this author will say that if the same–store sales are not good in the market then retailers looking for new locations will seek greener pastures.

Also, you can think about your neighborhood. Recall too that retail site selectors are those humans and they think like you do. Where do you like to go on vacation? Somewhere nice? Somewhere well tended and fun, where it looks like there is prosperity? Someplace that you feel safe? Retailers are people too, and these same factors influence them.

Recall that the people recommending sites to upper management have reputations to maintain, bonuses to earn, and their personal success on their mind. They want to recommend places where their company will flourish.

You have some control over your community and how it looks and feels. You probably have some control over how your home looks from the street. Retailers drive by your home and try to judge you out their car windows. How your neighborhood looks is a significant factor in site selection. Make your home look neater and better and retailers, driving by, will think better about locating a store in your neighborhood.

Retail site selection may be mysterious at first, but the process is really simple. Retailers look at data, governments help make deals work, and you help present your community in the best light. When all three analyses are positive, we have new stores, and that is, of course, what we all want

How Government Influences Retail Site Decisions

In the first article in this trilogy this author attempted to demystify how retail site decisions are made by retailers. As opposed to being made at the direction of City leaders, the decisions are part art and part science, with a strong dose of human influence. In this article, this author will explain how governments do have a significant role in the siting of retailers in their communities.

As explained previously, municipalities in Alabama depend dramatically on sales – tax collections for the provision of basic government services. Cities really want retailers in their jurisdictions because the sales tax generated is the money that cities use to perform their duties.

Cities, therefore, work hard to encourage retailers to set up shop within their borders and to start collecting sales tax. While government can want retailers in their cities all day long, there are only so many things that Cities can actually do to encourage retailers. Retailers make their own decisions based on demographics and how existing stores are performing, but governments can influence this process notably.

Retail development has never been particularly easy, and following the Great Recession it is certainly more challenging now. Like the rest of us, retailers are stretched and strained and they find it a challenge to open new stores. Government, however, can help retailers, without violating its restrictions about investing only in the public domain.

Sewers and electric service and roadways are very expensive, and these critical services do not generally motivate sales or excite people. When was the last time you heard of someone having a party at their home to celebrate their new air conditioning system? While infrastructure is vital, it does not do more than help create a venue for business. Government can help with this important aspect of retail development.

Government can also help on the front end of a site decision by providing retailers with critical information that may not be otherwise available. As noted, retailers make decisions based on demographics and statistics, and Cities often have access to information required for a decision that is not otherwise easily available.

Governments can also financially incentivize retail development. Cities have long been involved in incentivizing industrial development and job creation, which is wonderful, but Cities increasingly recognize the importance of retail activity to support municipal services and also to generate a high quality of life that industries and potential employers want to see and understand. These incentives now have a broad spectrum, from Tax Increment Financing Districts, which use the difference between the before and after property–tax collections to fund infrastructure, and to other direct investments. 

Direct investments are more common lately as, frankly, municipalities are increasingly desperate for sales tax collections to fund basic government functions. This desperation can lead, sometimes, to poor decisions where Cities over–invest in retail projects. Retail projects, like all investments, can face challenges, and Cities can sometimes be left holding the bag. Still these investments can be prudent and actually necessary to make retail deals happen in communities.

Retail development is private enterprise for sure, but government can help, and government has a highly specific and important interest in helping retail locate in its municipalities. While the incentives and financial assistance can be the difference in whether a retail development occurs or not, Cities need to use caution that their public funds are well and cautiously invested.

How Retailers Make Site Decisions

In Alabama retail sales tax is the lifeblood of municipalities. With the lowest property taxes in the country our cities depend on sales taxes to repair potholes, provide police protection, and to deliver other municipal services. Also, retail offerings are considered fun by most of us. We like to shop and we like the experiences that retailers and restaurants offer us.
So how do these retailers come to our community? How do they make their site decisions? Are our mayors' offices and economic development organizations picking the retailers that come to our neighborhood? How does this work?
Retail site selection can be a mystery, and for sure it is not understood by most of us. In execution, retail site selection is as much art as science, although many of us may think that the decisions just happen or are made by city leaders. Actually, there are a number of factors that influence the decision, and there is a significant human factor involved.
To be sure, retailers keep track of the key indicators that motivate their decisions. These indicators include the population of an area, the income of its residents, the traffic on its roadways, the other retailers in the market that are successful, those stores' specific sales numbers, and the general growth of the community.
Retailers principally base their decisions on how other retailers are doing in the market. Success brings success, and retailers are powerfully motivated by existing retailers' "same – store sales," being the current years' sales volumes compared with last – year's sales volumes. These criteria can create a quandary for some markets where there are simply not stores or same – store sales for retailers to consider. This situation creates a burden on those that want to motivate retailers to come to a market when there are not the principal measures of retail success to generate the necessary interest.
Some citizens think that their mayors or City leaders choose which retailers go where in their cities. This, really, is not the case. While the economic – development activities of cities and chambers of commerce can cause retailers to take notice of a market, the specific demographics and analytical conditions of a market are far more motivating.
This is not to say that retail decisions are all based on numbers and statistics. There is a significant human – nature factor that influences site – selection decisions. Think about your job for a moment, and how you want to help the enterprise with which you work. Think about your recommendations to your senior decision – makers about where the next store should locate. Think about your bonus.
Commercial real estate employees of a retailer or restaurant want to make good and successful recommendations. They want to feel positive about locations where they are asking their companies to invest perhaps millions of dollars. Those people, just like us, want to recommend "nice places," places where they would like to visit and shop, places where they think people will often go to shop and spend money. This is a significant influence on real estate site decisions. Does the place seem nice and prosperous to you?
So, as much as you think that someone in your town may be picking neighborhoods and locations for retail development, it is actually a complicated process that involves numbers, statistics, and a good dose of human analysis. In subsequent articles, this author will discuss what governments can do to foster and encourage retail development, and then what you, as a citizen, can do to be part of this process.