Retail site selection has always been an essential component of a brand’s strategy. Great locations position retailers for success, while poor locations yield disappointing results.
For decades, retail real estate professionals have defined site selection criteria to identify the elements that separate great retail sites from the rest. These criteria are critical because they shape the brand’s real estate strategy.
Related: The Ultimate Guide to Retail Site Selection
However, the depth of market research invested in defining a site selection strategy can vary dramatically. Sometimes the process is based on simple demographic counts, mileage rings, or foot traffic trends. In other cases, it’s based on more nuanced factors identified through a site selection model.
Related: How to Choose a Retail Site Analysis Solution
Why Your Site Selection Strategy Still Matters
Relying solely on demographic data and intuition for site selection is no longer sufficient. The retail market is inherently complex, with numerous variables influencing success. Given the high cost of making a mistake, brands must consider more sophisticated strategies that account for this complexity to remain competitive and make informed decisions.
If your brand is still basing your retail site selection decisions on demographic criteria and gut feeling, here are three reasons why you need to give your site selection strategy an upgrade:
1. Competitive Pressure is Intense
The U.S. retail sector is increasingly “over-stored,” with many markets saturated by existing stores. This competitive pressure is one reason for a record number of store closures. According to Coresight Research, major retailers announced more than 7,100 store closures through the end of 2024, outpacing 2023’s total by about 69%.[1]
While growth opportunities remain for brands with unique value propositions or in untapped markets, the days of easy real estate wins are over. Retailers also face competition from e-commerce giants like Amazon, which further reduces revenue and compresses margins. A carefully researched site selection strategy has become essential to thriving in this environment.
2. Brands Are Making Fewer Investment Decisions
Not only have some retailers reduced their brick-and-mortar store count to better align with market demand, but also many retailers have become more cautious about opening new stores.
One reason for the slower growth rates is less access to capital. Higher interest rates designed to cool inflation have put a damper on new development and made it more expensive for brands to expand. Other funding sources have also become more difficult to access. Private equity investments in U.S. retail have declined, falling from 15% of total deal volume in the early 2000s to just 7% in the last decade, according to Dealogic data.[2]
Other reasons for slower growth include wanting to keep financial balance sheets healthy after the pain of closing underperforming stores and difficulties with finding quality real estate in a competitive market.
This doesn’t mean that all brick-and-mortar growth has stopped. 72% of U.S. retail sales are projected to occur in brick-and-mortar stores by 2028, signaling the enduring relevance of physical locations. Fashion brands like Skims and Revolve are opening retail stores, highlighting the profitability of well-executed real estate strategies.[3]
In response to these trends, retailers are adopting a more selective approach to site selection. Every investment must be meticulously planned, leaving no room for error.
3. The Site Selection Process Influences More Than Brick-and-Mortar Sales
Most retailers now operate across multiple sales channels, including online platforms, catalogs, and wholesale networks. Real estate decisions influence not only in-store revenue but also brand perception, fulfillment logistics, and customer experience across all channels.
Your brand may not be opening as many stores as in the past, but your site selection strategy remains critical. Before launching a new location, ensure your decisions are informed by sound analysis and insights to maximize performance.
Related: Retail Location Strategy: Key Trends and Best Practices
Getting Started with Refining Your Site Selection Strategy
To get started with refining your site selection strategy, we recommend you consider the following steps:
- Review financial metrics to ensure you have an up-to-date understanding of typical profitability for brick-and-mortar locations relative to other sales channels.
- Work with an analytics expert like Buxton to identify the factors that correlate with better-performing locations.
- Define your inventory of potential locations that meet desired performance thresholds. This tells you your brand's runway for growth.
- In light of the analysis, work with your leadership team to decide how aggressively you want to expand, then use analytics to guide each expansion decision.
Related: Strategic Site Selection: 3 Best Practices for Consumer Businesses
The Bottom Line
Selecting the right location for your retail business requires more than focusing on basic customer demographic metrics. Factors like market demand, competitive pressure, operational feasibility, and long-term growth must be considered. Leveraging site selection analytics ensures that your strategy is comprehensive and aligned with your business goals.
A strategic site selection strategy isn’t a luxury—it’s a necessity in today’s competitive market. With Buxton’s expertise, you can navigate these challenges confidently and make informed, data-driven decisions.
Ready to Optimize Your Site Selection Strategy with Buxton?
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Works Cited
- CBS News. (2024, December 12). Retail store closures surge in 2024: Family Dollar, CVS, and Big Lots among top closures. Retrieved from https://www.cbsnews.com/news/retailers-closing-stores-surged-2024-family-dollar-cvs-big-lots/
- Reuters. (2024, March 6). Why retail has lost its sparkle for private equity firms. Retrieved from https://www.reuters.com/markets/us/why-retail-has-lost-its-sparkle-private-equity-firms-2024-03-06/
- Forbes. (2024, June 26). Why digital-era brands are opening brick-and-mortar stores. Retrieved from https://www.forbes.com/sites/kaleighmoore/2024/06/26/why-digital-era-brands-are-opening-brick-and-mortar-stores/
