Case Overview and Facts
Given case is about Stephanie Wilson, a divorced mother in her late 30s with two children aged five and eight. She has been working for the municipal government since leaving college. Stephanie has a passion for design and wants to start her own business to have more time with her two children. She has been attending evening classes to study fashion design and retail management. There are three available options from which Stephanie has to choose the best location for her ready-to-wear boutique. These include the Downtown Arcade, Tenderloin Village, and Appletree Mall.
Pluses and Minuses for Each Location
Each of the three sites that Stephanie Wilson views as potential locations for her business has various advantages as well as drawbacks.
The Downtown Arcade
The case reveals that the Downtown Arcade once has been a famous center of downtown trade, but has not been functional for the last fifteen years. Major restoration and redevelopment plans are underway, and once completed in the next six years, the renovated Downtown Arcade will comprise a three-level shopping facility, a low-rate garage, and a convention center complex. Renovated facility will accommodate 68 shops, 40 of which will be located on the first floor and 28 on the second floor. Third floor will have a series of restaurants. Stephanie has found a 900-square feet shop located near the entrance of the ground floor. She will pay $20 per square foot equivalent to $18,000 in annual rent. Rent of her business space will be counted as 8 percent of total sales, if her turnover exceeds $225,000.
The Downtown Arcade has various pluses and minuses. The first plus is that the location is well known and is likely to regain its glory as a major business center in the town. People will probably flock the shopping facility once it is reopened since it has been a center of downtown trade earlier. Even though it has not been operating for fifteen years now, it may regain its popularity in the town. Secondly, the Downtown Arcade will have the advantage of continuous customer traffic. Since there will be a number of department stores selling different categories of consumer goods, there will be a huge number of customers, who will possibly pass by Stephanie’s shop. Moreover, there are opportunities for business optimization, mainly because the facility will accommodate restaurants in the future.
On the contrary, the biggest disadvantage of a given location is the completion of the renovation and redevelopment project, which will take at least six years. As such, Stephanie will have to wait for a longer time before she starts her business. The second minus is the noise distraction from passing crowds and vehicles. When distracted, potential customers may lose focus thereby failing to notice Stephanie’s shop. Finally, unfavorable payment and lease terms constitute another disadvantage. Stephanie is required to sign a contract that binds her not to leave the premises for at least three years. Besides, she will incur additional rental costs at a rate of 8 percent of total sales that exceed $225,000.
Tenderloin Village
Tenderloin Village is a renovated urban area with a neat and well-kept neighborhood. There are three small women’s specialty clothing stores. The site is located on the village’s main street. Stephanie has identified a 900-square feet shop on the ground floor of an old house for which she is supposed to pay an annual rental fee of $15,000 with no extra charges. In this case, she will have to sign a two-year lease.
Tenderloin Village has various pluses and minuses as a potential business location for Stephanie. Firstly, there are no additional charges besides rent. Therefore, Stephanie can generate higher profit without incurring extra costs of rent and other business operations. Secondly, the location is described as a newly renovated area in a neat and well-kept neighborhood. Ideally, a decent locality contributes to superior business performance. Thirdly, the area is strategically located on the main street. Stephanie can take advantage of this to transform passersby into potential customers. Finally, Stephanie can optimize her location creating a unique and welcoming storefront, which should generate more business.
On the contrary, Stephanie’s location is on the ground floor of an old house, which is a disadvantage. Thus, people might not be interested in visiting an old building for shopping because of poor aesthetics. Secondly, Stephanie’s business is likely to face fierce competition from the three small women’s specialty clothing stores.
Appletree Mall
Appletree Mall is a suburban mall that has been open for about eight years now. It is a prosperous regional center that accommodates three department stores and 100 smaller shops. The mall is located on a major interstate highway that is about 8 miles from downtown. There are nine women’s clothing retailers, three of which are in a price category considerably higher than Stephanie’s idea. The mall has captured retail business of the city’s southwest quadrant. The space available for Stephanie is a 1,200-square feet store located just two doors from a local department store chain. Rental charges are $24 per square foot equivalent to $28,800 annually. Stephanie will incur additional rent costs at a rate of 8 percent of total sales that exceed $411,500.
As the first two locations, the Appletree Mall has its pluses and minuses. Firstly, the Appletree Mall is located strategically close to an interstate highway. Similarly, Appletree Mall is located just 8 miles from downtown. Establishing a business in this location means numerous opportunities for business growth. Secondly, the space available to Stephanie is just two doors from a local department store, which means that she can attract the traffic from the department store turning it into potential customers. Finally, Stephanie’s business will be located in a location that captures most retail business of the city’s quadrant. Here, businesses continue to run 12 percent ahead of the previous year.
On the other hand, the first disadvantage of this location is that businesses have been declining for the past year. Therefore, Stephanie might start a business in an area with fewer opportunities for growth. Secondly, the space available to Stephanie is long and narrow, which means that the setting of the business might be unattractive. Thirdly, there is high competition in the mall. The location already has nine women’s clothing retailers and thus, Stephanie might be forced to set slightly lower prices to gain customers.
The Type of Store that Would Be Most Appropriate for Each Location
Characteristics of each of the three locations make them suitable for distinct types of stores. The Downtown Arcade is an ideal location for any type of retail businesses, but most preferably for clothing stores and restaurants. The case reveals that restaurants will occupy the entire third floor of the renovated Downtown Arcade. Small retail businesses can occupy 68 shops on both the ground and second floors.
Secondly, the Tenderloin Village is an ideal location for businesses such as boutiques, vegetarian and nouveau cuisine restaurants, and flower shops. Finally, the Appletree Mall is ideal for department stores, fast food restaurants, shoe and clothing stores, and general retail shops due to its location on a major interstate highway that is just 8 miles from downtown.
The Best Selection for Stephanie’s Ready-to-Wear Boutique
If I were Stephanie, I would choose the Tenderloin Village as the best place to establish my ready-to-wear boutique because it is associated with numerous benefits and a few drawbacks. Tenderloin Village is reportedly a gentrified urban area of the city, which means that there is a vast market for Stephanie’s women’s apparel. The location is a well-kept, comfortable and neat neighborhood. Stephanie lives close to this location, which means that she can have more time for her children as she has planned. The location has an excellent visibility and the space available to Stephanie is situated on the Village’s main street, which increases the chances to attract more customers. There are only about 20 small retailers and nouveau cuisine restaurants, which means there is less competition. All other locations host many retailers in the same or higher-end category than Stephanie’s boutique, which means that business growth might be slow due to the stiff competition. Tenderloin Village has the lowest rent rate among the three locations, which means lower business costs The space available to Stephanie costs about $15,000 annually with no additional costs. The lease period of two years for this location is the shortest among the three areas. Moreover, Stephanie knows the landlord and thus, it is easy to enjoy the flexibility of payment and lease terms.
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