Case 12: Choosing a Store Location for a Boutique

MKT 351 Retail Management

Summary
• Stephanie Wilson is deciding where to open a ready-to-wear boutique.
• She worked in municipal government ever since college, and she is divorced with two children.
• She wants to open up her own business because she loves fashion and wants to spend more
time with her kids.
• Stephanie has considered three locations— The Downtown Arcade, Tenderloin Village, Apple-
tree Mall.
• The downtown arcade completion of the entire master plan is expected to take another six
years.
• From 1812, the arcade building was once the center of downtown trade, but has been vacant
for the past 15 years.

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• The location Stephanie is considering is 900 square feet and situated near the main ground-

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floor entrance. Rent is $20 per square foot, for an annual total of $18,000. If sales exceed

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$225,000, rent will be calculated at 8 percent of sales. She will have to sign a three-year lease.
• Stephanie lives in Tenderloin Village.

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• The site available to Stephanie is on the village’s main street on the ground floor of an old
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house. Its space is also about 900 square feet. Rent is $15,000 annually. It ill require a two-year
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lease.
• Appletree Mall has been open for eight years. It has three department stores and 100 smaller
shops just off a m major highway about 8 miles from downtown.
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• Mall sales are running 12 percent ahead of the previous year.

• The location available to Stephanie is two doors from the local department store chain. It is
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1,200 square feet, but it is long and narrow—24 feet in front by 50 feet deep. Rent is $24 per
square foot ($28,800 annually). On sales that exceed $411,500, rent is 8 percent of sales. There
is also an additional charge of 1 percent of sales to cover common-area maintenance and mall
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promotions.
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• The mall’s five-year lease includes an escape clause if sales don’t reach $411,500 after two
years.

Discussion Questions
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1. The Downtown Arcade-

Pros: Located in the central business district and is under redevelopment, which will bring in foot
traffic.
Cons: Location will not be completed for another 6 years, it requires a three-year commitment,
and it could potentially take a full 8 percent of sales revenue for rent.
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Tenderloin Village-
Pros: Located near Stephanie’s home, Stephanie knows the landlord and can get away with only
a two-year lease, and rent is the cheapest of all three places.
Cons: The site already has three women’s specialty shops and it has much less foot traffic than
the other locations.
Appletree Mall-

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 Pros: The mall has a successful history, there are nine women’s clothing retailers, it is the largest
store area in square feet.
Cons: She would have to sign a five-year lease, it is the most expensive rent to pay out of all
three options, and she would have to pay additional charges of 1 percent of sales.

2. The type of store that would be most appropriate for The Arcade and Tenderloin Village would
be a specialty store. This is because both of these sites are 900 square feet and they both have a
great location with advantages. For the Appletree Mall, the type of store that would be most ap-
propriate would be a shopping store or a large specialized store. This would be better for the mall
because the space is at 1200 square feet and can be made more use of. This store would also have
a large enough space to promote different kind of products and allow customers to compare
prices.

3. If I were Stephanie, I would choose Tenderloin Village to locate my store. I would choose this
store because she wanted to spend more time with her children and she lives in this location. This
location will also have less responsibilities than a mall would have. I would also choose this lo-

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cation because it has the lowest rent. There will also be a strong target market for the type of
boutique Stephanie is going to have.

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