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Four Key Factors to Consider Before Launching a New Retail Development

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Four Key Factors to Consider Before Launching a New Retail Development

Four Key Factors to Consider Before Launching a New Retail Development

By Sybrand Strauss, managing director of Fernridge Consulting

It is widely believed the three key considerations for a successful retail property development are “location, location, location”. While the location of a retail store or shopping centre is a critical differentiator between success and failure, location alone is not the only indicator entrepreneurs and businesspeople should take into account before investing in a new site.

When contemplating a retail space, investors should rather consider these four factors:

1.       Understand the purchasing power of the area

It is not enough to have significant volumes of people walk by or drive by in an area. Far more important for an investor is to have a deep understanding of the demographics of the people in the catchment area – who lives in the houses, what they earn and how they spend their salary.

Once sourced, the data must be analysed against the projected target market and product offering of a planned store to establish if the catchment area is able to transact in the store over a sustained period.

It is also extremely important to consider the growth potential of the area. Are new houses being built? A business will stagnate in an area of low growth, so be sure to ‘fish where the fish are’ – now and in the future.

In sub-Saharan Africa, there is massive growth potential for new retail stores. Prospective customers have money to spend on aspirational goods and services. Automated online tools, such as AfricaEye (, take the pain out of information gathering and provide users with accurate demographic information and retail expenditure in major African cities


2.       Explore if the catchment area wants to purchase from your store

Once the purchasing power of an area is established, the next step is to investigate if the population will want to buy goods or services from your store. You can achieve this by understanding the psychographics of the area-based target audience – their psychological needs, aspirations and preferences. This kind of information can be tricky (but not impossible) to come by in South Africa, where households are more reluctant to speak to the researcher. In the rest of sub-Saharan Africa, local fieldwork teams have great success in garnering information from residents, which can then be analysed and collated into a report.

An analysis of the desire of the target audience to transact with a new store also requires further contemplation of the characteristics of the property: Is the area safe and does the centre provide visible security? Is there easily accessible parking? Are there other factors like movies or restaurants that will attract potential customers to the area? In South Africa, shoppers are mobile and spoilt for choice, and if an area doesn’t offer exactly what they want, they tend to drive on to the next store or mall.

In the rest of Africa, consideration for the comfort and cultural norms of a potential shopper is crucial. An air-conditioned mall in an area servicing a target market used to shopping in open-air markets may seem like a novel idea, but locals can often feel intimidated by something this different.


3.       Investigate the quality of the microsite

Although I offer consulting methodologies to investigate the quality of a microsite, I often advise my clients to do their own microsite evaluation by listing ten factors that will be important to prospective customers visiting a store or centre. These factors can include accessibility, visibility and parking. This exercise works especially well if an investor or storeowner is making a decision between two sites in the same area.

Competition is also an important factor, but contrary to common thinking, this is not always a negative. If you are opening a liquor store, you would like to be near a grocery, butchery or video store, but no other liquor outlet. This is called complimentary attractiveness.

On the other hand, fast food or fashion outlets benefit from synergy with similar stores in proximity. In these instances, customers like variety so that they can compare items before purchasing, or please different people in their group. We call this accumulative attractiveness.

It is also important to consider the monthly rental of a microsite. Sites in high-income or high-volume areas are naturally more expensive, but a storeowner must be confident that the projected increase in sales will justify the higher rent. The most expensive store is not necessarily the best option for your specific offering.

While these comparisons are part of the due diligence process, be sure to look beyond the numbers and take your own experiences of successful microsites into account. Trust your instincts!


4.       Determine a plan to increase traffic through your front door

It is up to the owner or manager to ensure the target audience visits the new store. Without a functional store layout, targeted marketing plan, trained staff and a compelling product offering, a new store in the right location can fail.

The importance of great service cannot be overstated. Once a prospective customer is in the store, staff should offer a service that translates into a sale. It is also important to consider the specific in-store needs of the target audience. For example, customers with children prefer not to queue, therefore, it is crucial to plan multiple checkout points and have in-store assistance on hand.

The hard work that goes into the planning of a new retail location should not be understated, but through due diligence and a well-constructed business plan, storeowners will mitigate risk and find that many aspects of a retail business will take care of themselves once the front doors open.


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