Nguyen Duong Khanh Ha - s3479930Tran Phuong To Uyen - s3479986Pham Thi My Ngoc - s3515240

STORELOCATION

Fashion RetailManagement

CASE STUDIES

ZARA - GLOBAL

LOUIS VUITTON - CHINA

GAP - VIETNAM

INTRODUCTION

RCO’S OVERVIEW

EXECUTIVE SUMMARY

CONCLUSION

REFERENCES

APPENDICES

01.CONTENTS

02.03.04.05.

06.

08.

10.

12.13.14.

This report gives an overview of the store location strategies in reatail. Then, it goes deeply investigating some case studies for a more throughly understanding on store location and the decisions and strategies that brands made around this topic.

Firstly, a case study of a successful example, Zara, will be given, identifying what Zara has been doing to be so successful in its store locations. Then, next case study of Louis Vuitton will showcase a failed strategy in store location, that focusing on unnecessary quantity of stores will make the brand loses the quality of the brand. Finally, the report brings out the situation of GAP, particularly GAP Vietnam, to understand more about the importance of store location, and ask the question of what direction GAP Vietnam can take to improve the brand’s sales.

This report collects secondary data from different credible sources.

EXECUTIVESUMMARY 02.

Store location is one of the most important factor which every organization needs to consider to launch their product effectively. According to Pitneybowes (n.d), Physical stores represent a major up-front investment for communication providers, so it is essential that the chosen site offers the optimum coverage and presence. Factors need to be considered while choosing and setting up for a store location including social and demographic factors, customer analysis, transportation, competitor activities and market saturation.

Overall , this report will analyse these factors in term of giving out some case studies relate to some well-known fashion brands which already launch physical stores successfully as well as failed ones. From that result, appropriate elements and strategies relate to store location will be critically emphasized for better launching.

INTRODUCTION 03.

RCO’S OVERVIEW 04.RCO1 – Retail Trade AnalysisA retail trade analysis can help a brand decide whether or not their location is suitable and profitable with the brand’s image, customer target as well as the allocation of its competitors. All the research done will help the brand know more about that particular physical location and get to come to the final decision.

RCO2 – Trade Area SelectionTo identify a trade area, a study must be done on the population characteristic, the supply source location, economic base characteristics, as well as the nature and saturation of competition, which will help the brand come up with store location strategy to mest utilise the offered trade area of the chosen place.

RCO3 - Scouting for a New Fashion Store LocationWhen looking for a new place to open a new store, a lot of research as well as observance should be taken to avoid having an unprofitable store. An in-depth analysis on trend, customer behaviors, trade area, observance for vehicular and pedestrian traffic, as well as occupancy terms will be much useful for brands to better identify the locations matching the brand’s criteria.

RCO4 – Types of Stores and Store LocationThere are a lot of store types like department store, shopping mall, independent store, etc. Choosing the ‘right’ place for the ‘right’ brand is important, and consideration for choosing one particular place for each store type can help the brand reaching out to more potential customers.

RCO5 – Location/Site Evaluation ChecklistA checklist for brands to make sure and reassure their location choice. Having this checklist will help brands control and identify the criteria for store location much better. Hence, more efficiently manage the strategies for this subject.

A full list of the RCO’s for this topic “Store Location” is offered under the Appendices section.

CASESTUDIES

ZARAGLOBAL 06.

Zara, a Spanish fast fashion brand that is currently one of the most successful brands on the markets, always achieves to deliver perfect customer experiences and speediest lead times. One of the reasons behind this tremendous success is the strategies of their store locations. Zara does not advertise. In fact, they only employ 0.3% of their sales into advertisements, these are mostly new store opening announcements on newspapers while most of the competitors spend around 3-5% of their

profits into advertising and campaigns (VK Tailormade 2014). Even though Zara does not advertise, it does not mean that they do not promote their image, which the brand relies on “word-of-mouth” to promote their identity. Then, in order to spread words efficiently, they invests heavily on real estate, looking for the best locations in the world to place their stores so that customers would conveniently find their stores while establishing their brand’s image. Zara always locates their stores in the central of the first and second tier cities all over the world, with high density of shoppers and tourists.

"Prada wants to be next to Gucci, Gucci wants to be next to Prada. The retail strategy for luxury brands is to try to keep as far away from the likes of Zara. Zara's strategy is

to get as close to them as possible."- Masoud Golsorkhi, the editor of Tank -

(Hansen 2012)

07.

They want their stores to be as near as possible to the luxury brands to project the feeling of refinement and uniqueness, and while Zara might situate itself near luxury brands, they target a different segment of customer. Clients with average budget but desire something exclusive and fashionable are Zara’s objective. That is why they not only place their stores in the luxury area but also in high density of locals and tourists to appeal high class but not secluded.

In 2011, Inditex, Zara’s parent company paid $324 million to buy space at 666 Fifth Avenue in New York, a building best known for being the most expensive ever sold in Manhattan (Levitt 2011). The building has a historical appeal, beauty, and according to Telegraph (n.d), it placed number 1 in the top 10 of most expensive shopping streets in the world, located near Versace, Tiffany and Apple with millions of tourists visit every year. In Paris, Zara can be

found on Rue-Saint Honoré between Rue Cambon and Place Vendome, surrounded by Hugo Boss, Zegna & Jimmy Choo.

The clothing brand would go to great length in order to attain their spots. Zara is an established destination store for customers so they have the advantage to position wherever they prefer. Zara favors locations that has high density of locals and tourists, historical appeal, and visibility to match with their brand projected image and attracts target consumers. They are either an isolated store on shopping district or locate in shopping mall. Regardless, these locations are all famous as planned shopping centre so transportation would not be an obstacles. Zara’s store in japan for example, situated on Ginza district, one of the top luxury shopping streets on the world. Japanese often transport by metro so there are not a lot of cars around, shoppers have the advantage of foot traffic to visit any store without a lot of vehicles as hindrances.

LOUIS VUITTONCHINA 08.

company has nearly 50 stores throughout China which receives strong support from Chinese customers, but some of their stores still face issues like shutting down because the store cannot generate enough customers to enter and make purchase (Maosuit 2012).

Not every location in big cities of China can generate high sales for luxury goods and not every Chinese luxury customer is the same. In the cases of launching stores at Guangzhou, Harbin and Urumqi, LV faced low sale that the company had to shut down their stores at these location. This is a failed example of applying wrong strategy when scouting for a new fashion store location.

Firstly, LV overly imagined about optimistic growth and high consumption and thus invested too much in wrong Chinese cities like Guangzhou, Harbin or Urumqi by opened too many stores using the same store composition with top-tier cities, specifically about number and size of stores. Second-tier or third-tier cities have low luxury purchasing power compared to big cities like Shanghai and Beijing and thus, open two to three stores in this area is not an ideal number of outlet. Moreover, LV stores require large space to operate and hence high rental cost along with low sales cannot be maintained for business (Bloomberg 2015). In particular,

according to News (2015), LV had closed down its 12 years first outlet, located at La Perle Shopping centre, one the most famous luxury shopping centre of Guangzhou surrounded by high-end hotels and stores lied on Huan Shi Dong bustling commercial area (Figure 1). This is the evidence of having a good position that include all the required factors such as parking facilities, vehicle traffic, store composition as well as having exclusive store visibility with highlighted decoration and animation but still are not enough to help the brand survive (Figure 2).

Figure 1. Louis Vuitton store in La Perle shopping centre

Louis Vuitton (LV) is a French luxury fashion brand founded in 1854 which specializing in trunks, leather goods, bags, ready to wear shoes and accessories. The brand is best-known for its iconic LV monogram and logo, to be presented as one of the most recognizable high-end brand in the world along with other iconic names such as Hermes, Chanel, Gucci or Burberry. The company markets its product through its own stores located throughout the world, which allows quality control and appropriate pricing as well as offer exclusive shopping experience for its customers (Wikifashion n.d.). In recent years, Louis Vuitton entered China as it is emphasized as an ambitious market for the brand to enhance its market share and to assert its brand identity and positioning among other competitors. The

09.Secondly, LV didn’t conduct any consumer survey related to these location and assume all Chinese luxury customers have the same mindset. In particular, customers in smaller provinces are likely to travel to bigger cities to buy luxury goods as they believe they will receive better services as well as guarantee of product quality. Moreover, these customers might even travel abroad to buy luxury goods oversea in countries like France as they trust the products from its country of origin rather than the same ones in local stores. Despite the uniform product offerings, Chinese consumers still believe the selections in Chinese stores are inferior to those of stores abroad (Knowledge 2012). In general, different types of customers regarding to the pedestrian traffic in terms of luxury market create diversified pattern of buying behaviour that LV need to consider.

Last but not least, economic base characteristics is the essential element which contributed to the collapse of LV stores in these locations. According to Eng, E (2015), luxury goods purchased in LV Chinese stores are more

expensive than buying in France or Japan as the tax applied are from 10 to 20 % percent higher compared to other countries. Statistics from Hypebeast (2015) also reveals that Chinese shoppers also travel abroad to Japan and European stores for luxury goods, since both the Yen and Euro currency are currently weak and thus enticing for consumers.

Overall, not only do LV stores in lower-tier cities need a prominent location, for examples the ones they currently owned which are isolated store or planned shopping centre such as Pa Perle shopping mall in Guangzhou or stores on Wangfujing street in Beijing, but also they need to consider other elements such as legal restrictions, research of pedestrian traffic or economic base characteristics. The example of LV failure shows that investing in quantity instead of quality is not achievable, especially with luxury brands. This mistake will help the brand recall their current strategy of store location to make improvement as well as learn how to understand deeply about customers’ mindset and behaviours.

Figure 2. Louis Vuitton Chinese store has highlighted lightning decorarion and animation

According to Fortune (2016), GAP is closing 175 stores in June, making only 500 stores and 300 outlet stores stays under GAP name. The brand has made changes to its merchandise and the organisational culture, even though this move does not help much for the brand.

This brings up the situation of GAP Vietnam and the future of these stores in this market.

Currently, GAP Vietnam has 3 store locations in Saigon, and all of them are in shopping malls: Crescent Mall, Vincom, and Aeon Mall. These locations all have benefits of shopping malls such as big space, parking lots, many competitors brands, shopping mall’s events, etc. Below is a more detailed investigation on the current stores of GAP in Ho Chi Minh City, Vietnam:

Despite this, the specific location of GAP in Crescent Mall is not a convenient one, with the location being near the main gate, but people use the gate near the parking lot more often due to convenience, which left the main gate remoted (Crescent Mall n.d). Hence, GAP cannot attain a high pedestrian traffic for its store.

There are also many sales competitors overlap with the trade area of GAP, such as Mango, Guess, or department store Robin’s. Then, the brand does not have any particular interesting in-store events or promotions to draw in traffic. The brand has a huge display area but has not bring this benefit to full potential, with only simple mannequins wearing clothes and big sale banners for the window display, even if this method works for the sale season.

GAPVIETNAM 10.

Crescent Mall (Shopping mall, D.7):

This location is near the border of Saigon, so it is not a convenient place for people to go shopping, with the majority of customers are people in the surrounding area only. However, this place is probably the best suited place for GAP in terms of target segmentation, since the people live in this area are a mix of upper-income (Phu My Hung Residence) and middle-low income (further District 7 and Nha Be).

Aeon Mall (Shopping mall, D.Tan Phu):

This location probably gets the most pedestrian traffic between the 3 locations of GAP. However, there is one thing need to be considered that this traffic is not for shopping purpose, but more for food purpose and entertainment purpose (cinema on top floor of Aeon Mall, and special events that happens here every once in a while) (Aeon Mall n.d). The surrounding area of Aeon Mall are people with lower income, which mostly are workers (near the factories in the border of city, Tan Phu). Therefore, this consumer market does not have much interest for material needs as much as people in the District 7 area and District 1 area. This location will probably working with the original pricing of GAP, but because of taxes and tariffs, the pricing of fashion items nearly doubled, and cause a huge target market shift for GAP in Vietnam.

Vincom B (Shopping mall, D.1):

This is the place for many high-end brands and middle-end brands. Gap is located on B1 floor of the building and It has to face many sales competitors like Marks and Spencer. The struggle for GAP here is because of many brands in one place, but the brand itself is lacking in-store promotions or advertising to get more foot traffic for the brand.

11.

Overall, this report has analyzed whether a business wants to open their physical store at any chosen location, there are important factors need to be considered such as customer demographic, legal regulations, facilities, competitor and market saturation. This report also emphasizes essential elements in analysing and evaluating the selection of trade area in related with appropriate choices of store location for successful business launch. To conclude, store location play an important role beside other distribution channels which require conservative research before investing in any particular placement.

CONCLUSION 12.

REFERENCES 13.Aeon Mall n.d, ‘Shop list floor 1’, Aeon Mall, viewed 26 July 2016, <http://aeonmall-tanphuceladon-en.com/shop/lists/shop_genre_id:1/shop_floor_id:1>.

Bloomberg 2015, ‘Louis Vuitton to Close Shops in China Amid Luxury Slowdown’, Business of Fashion, viewed 26th July 2016, <https://www.businessoffashion.com/articles/news-analysis/louis-vuitton-to-close-shops-in-china-amid-luxury-slowdown>.

Crescent Mall n.d, ‘Crescent Mall floor guide’, Crescent Mall, viewed 26 July 2016, <http://crescentmall.com.vn/wp-content/uploads/2014/12/Crescent-Mall-Floor-Guide-EN.pdf>.

Eng, E 2015, ‘Louis Vuitton Preparing to Shut Down Numerous Retail Stores in China’, hypebeast, viewed 24 July 2016, <http://hypebeast.com/2015/11/louis-vuitton-china-stores-shut-down>.

Hansen, S 2012, ‘How Zara Grew Into the World’s Largest Fashion Retailer’, New York Times, viewed 24 July 2016, <http://www.nytimes.com/2012/11/11/magazine/how-zara-grew-into-the-worlds-largest-fashion-retailer.html?pagewanted=all&_r=0>.

Inditex 2016, ‘Zara - Inditex’, Inditex, viewed 23 July 2016, <https://www.inditex.com/brands/zara>.

Jiménez, M 2012, ‘Retail giant Zara launches renewed image at flagship New York store’, viewed 23 July 2016, <http://elpais.com/elpais/2012/03/13/inenglish/1331657219_916192.html [Accessed 28 Jul. 2016>.

Jingxi, X & Wen, W 2015, ‘Louis Vuitton closes store in Guangzhou’, China Daily, viewed 27 July 2016, <http://europe.chinadaily.com.cn/business/2015-11/17/content_22468040.htm>.

Knowledge 2013, ‘Louis Vuitton and the Traveling Chinese Consumer’, Knowledge, viewed 26 July 2016, <http://knowledge.wharton.upenn.edu/article/louis-vuitton-and-the-traveling-chinese-consumer/>.

Levitt, D,M 2011, ‘Zara’s Parent Buys Fifth Avenue Site in Record Retail Deal’, viewed 23 July 2016, <http://www.bloomberg.com/news/articles/2011-03-04/zara-parent-inditex-pays-324-million-for-fifth-avenue-store-in-manhattan>.

Maosuit 2012, ‘Louis Vuitton Opens Biggest China Store’, Maosuit, viewed 24th July 2016, <http://maosuit.com/retail-2/stores/louis-vuitton-opens-biggest-china-store/>.

News 2015, ‘Louis Vuitton shuts its first store in Guangzhou’, news, viewed 26 July 2016, <http://news.rthk.hk/rthk/en/component/k2/1223911-20151116.htm>.

Pitneybowes n.d., ‘Retail Store Location Planning’, Pitneybowers, viewed 25 July 2016, <http://www.pitneybowes.com/au/industries/telecommunications/retail-store-location-planning.html#>.

Telegraph n.d, ‘The 10 most expensive shopping locations in the world’, Telegraph, viewed 23 July 2016, <http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/11239482/The-worlds-10-most-expensive-shopping-locations-in-pictures.html?frame=3070798>.

Thompson, D 2012, ‘Zara's Big Idea: What the World's Top Fashion Retailer Tells Us About Innovation’, viewed 26 July 2016, <http://www.theatlantic.com/business/archive/2012/11/zaras-big-idea-what-the-worlds-top-fashion-retailer-tells-us-about-innovation/265126/>.

VK TAILORMADE 2014, ‘Zara, fast fashion and no advertising’, Wordpress, viewed 24 July 2016, <https://vktailormade.wordpress.com/2014/01/07/zara-fast-fashion-and-no-advertising/>.

Wahba, P 2016, ‘Gap needs to close another 175 stores’, Fortune, viewed 26 July 2016, <http://fortune.com/2016/04/27/gap-closing/>.

Wikifashion n.d., ‘Louis Vuitton’, Wikifashion, viewed 23 July 2016, <http://wikifashion.com/wiki/Louis_Vuitton#Louis_Vuitton_today>.

APPENDICES 14.RCO1 – Retail Trade AnalysisDiscovery of consumer profile.Opportunity of/for promotional activities.Opportunity in media coverage patterns.Assessment of effects of trading area overlap.Ascertain competitors location.Discovery of ideal number of outlets, geographic weaknesses.Review transportation, banks, competition, supplier location.

RCO2 – Trade Area SelectionPopulation characteristicSupply Source LocationEconomic base characteristicsNature and Saturation of Competition

RCO3 - Scouting for a New Fashion Store LocationTrend analysisConsumer surveysComputerised trade area analysisParking considerationsVehicular trafficPedestrian trafficTerms of occupancy

RCO4 – Types of Stores and Store Location Types of Stores:Department storesSupermarketsApparel storesGift storesConvenience storesSmallest Trading Areas LargestDestinations vs. Parasites Store locations:Isolated StorePlanned Shopping CentreConcessionaire

RCO5 – Location/Site Evaluation ChecklistPedestrian Traffic Vehicular TrafficParking FacilitiesTransportationStore CompositionSpecific SiteTerms of OccupancyOverall Rating

List of RCO’s

CR

ESC

ENT

MA

LL G

RO

UN

D F

LOO

R M

AP

15.

AEO

N M

ALL

GR

OU

ND

FLO

OR

MA

PAPPENDICES 16.