Asset Based Loan

Loan For New Retail Location: Best Way to judge foot traffic?

Loan for a new retail location – best way to judge foot traffic?

Many businesses, especially retail businesses, including franchises, spend significant amounts of time and money assessing what they can expect in terms of customer volume or customer foot traffic.   Things such as government population block statistics, demographics, tax revenues, year to year growth, and other factors are considered,  and may very well be critical.

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However, in some retail situations, simply closely watching the foot traffic in a shopping center or district over a period of hours on many days and weeks, may be crucial information.   If this is not done and is lacking in the decision making process as to where to locate, it can prove highly detrimental to the business.

A retail business may have found a shopping center or shopping mall for which the ownership can show strong sales for the center and mall overall.   They may also be able to show strong income statistics on residents in the area.    However, other details need to be looked at.

If the shopping center or mall is large and has  a second and even a third floor, the actual customer foot traffic should be looked at real time over the course of hours and even weeks or months.    What should be considered is:

Seasonality – Is the location or center seasonal, does it receive business seasonally, or is business steady throughout the year?

Sales of Largest Stores within Shopping Center – The center or mall may have strong sales overall, but maybe those are total overall sales statistics for the mall as a whole.   Many shopping centers or malls have large anchor stores which may bring in a high percentage of the sales for one store, thus possibly skewing the statistics for the whole center.

Location of Store within Shopping Center – This can be the most important factor.    A shopping center or district may have strong sales but depending upon the actual location of the store, sales may suffer if the location, even within a successful center or mall are strong.

If the location is in the back of the mall, in a corner, or around a corner, this fact can devastate sales.    All it can take is for a store to be just a few doors down from the heaviest traffic area for it to make the difference between success or not.

Another factor is if a store has a higher floor locations, and if so, where on the higher floors is the store, and how is the layout.   In many shopping districts and center, shoppers start out and often stay on the ground or main level and will not go to the trouble of getting to the higher levels.

This can be particularly true of 2 level shopping centers or malls for which many shoppers are using the stairs.    Many shoppers will simply not use the stairs and will stay on the ground floor.    Another difficulty is that of the percentage of the shoppers that do use the stairs, a significant percentage of those will shop a less extensive area of the stores than on the main level.    They often will only go to the first several shops in the higher level.    If a store in such a situation is on the 2nd level  and far from the main stairs and elevator, this can have a major impact on sales.

As a result, the location of a retail store within a shopping center or mall must be carefully considered,  both statistics wise and in person.

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