In particular, a suitable location for the coffee shop needs to be found.
Locations suitable for coffee shops
- It is recommended that coffee shops be located in areas where office buildings are largely concentrated in order to target office workers, university towns where there is a significant floating population of young people, and areas close to subway stations with excellent accessibility.
- However, as the distribution of coffee shops has increased in recent years, the distance from competing stores and whether the coffee shop is located in the flow of traffic of target customers, and whether the candidate location is likely to lose customers to competitors in the long run need to be carefully reviewed.
Identification of characteristics of surrounding areas
- Identifying the characteristics of the area that you have in mind should be the first thing to do when selecting the location.
- Therefore, the level of development of a trade area may be derived by identifying the distribution and business status of competitors, and the characteristics of other business types within the area. In addition, the suitability of opening a coffee shop may be considered depending on the characteristics of the location, and business strategies to be employed when opening a business in the future can also be established.
Identification of characteristics of commercial power
- In order to evaluate the characteristics of a commercial power, the income level and population of local residents, number of households, residential types, population by age, types of consumption, occupational distribution, educational attainment, etc. need to be researched.
- The total number of households and the proportion of apartments by size need to be accurately identified in areas with a high concentration of apartments. Areas with a high concentration of small-sized apartments display a relatively higher ratio of spending on consumption.
Identification of the characteristics of floating population
- The success and failure depend on the size of the floating population that pass by the store, and the suitability of business type is determined by the characteristics of the floating population.
- The floating population should be, in general, surveyed for weekdays and weekends, and by time slot, age group, and gender. The survey should be conducted during 12 - 2 p.m. during which time office workers have lunch, during 3 - 4 p.m. when homemakers go out to shop, and during 6 - 8 p.m. when workers leave their work.
- In addition to the status of floating population passing by the candidate location, the percentage of visiting population needs to be also identified. The identification of the percentage of those visiting the newly opened stores should be conducted by surveying the visitor status of similar business types in the surrounding area.
Examination of traffic factors
- Areas with concentrated public transportation bring a huge impact on the store business and such areas are called station-adjacent areas.Station-adjacent areas refer to areas where public transportation such as subway stations, bus stops, and intercity bus terminals have a significant impact on commercial areas.
- When selecting a store location close to a station-adjacent area it should be noted that, among other things, the direction in which the users of transportation move should be identified and the store should be located along the moving direction of potential customers.
- When selecting a location in a station-adjacent area, it is necessary to determine which exit shows the busiest movement and identify the characteristics of the floating population.
Researching the strengths and weaknesses of competing stores
- No matter how good the commercial district or the location, if there is already an excessive number of stores for the business type you intend to engage in, it would be meaningless to open your store there. Therefore the purpose of inquiring into competitors should be to assess whether opening a store in a certain location is possible or not, and to establish how a store can differentiate itself from its competitors if it turns out to be possible.
- When researching on competing stores, the following items should be assessed.
· Store awareness
· Size of store
· Characteristics of products handled at the stores
· Pricing strategies
· Major customer base
· Operating hours
· Number of users per day
- Having competitors concentrated in 1 location does not necessarily provide a disadvantage for all, and it should be noted that having stores with similar business type in the surrounding area may create a mutual synergy effect.
Assess the possibility of future growth of the trade area
- Since it is not easy to relocate the store once it is established, although the current locational suitability may be important, the long-term changes in the trade area should also be considered.
- One of the matters to pay attention to when assessing the possibility of future growth is the presence of a subway station. The opening of a station expands the scope of trade area and also increases floating population, making the trade area more likely to develop.
- In addition, the new construction of large government offices, high-rise buildings, and private academies within the trade area need to be also identified. The possibility of road extension also affects the changes in the trade area.
Selection of location that is appropriate for available funds
- When searching for stores to acquire, those that you like often require large fixed investment costs such as expensive premiums and therefore may not be appropriate for your available funds. In such cases, if you start a business with an excessive burden through means such as setting up an unreasonable funding plan or paying a premium that is higher than those of surrounding stores out of hasty hope for success, you will constantly find yourself under financial pressure, making it difficult to focus all your efforts on your business.
- To start a business, you need to be able to secure at least 1.5 times the amount required for your business investment. Therefore it is necessary to invest only 60% to 70% of your available capital and preserve the rest as operating funds in order to carry out minimal business activities.
- Therefore it is important to consider the correlation between sales and investment, and one should not be lured into determining the location by visible sales only and be sure to make a careful review of the relationship between the cost of purchasing the store and its rate of return.