How to Choose a Retail Location (+ 7 Common Options)

Opening a new retail store is exciting. But before you choose the decor and invite your first customers, you need to answer a critical question: Where will your store be located?

A retail location is a place where a business sells goods in person. From traditional freestanding brick-and-mortar stores to mall space, the best retail location is in a high-traffic area where your target customers are known to shop. 

With retail space costing an average of $21.95 per square foot, where you set up shop is important. Pick the wrong retail location and you could be stuck in a long lease with low foot traffic and overhead costs that eat away at your profits. 

This guide discusses how to choose a retail location, with bonus tips on how to maximize the space and improve your retail operation.

The importance of retail location

• Higher foot traffic
• Better community engagement
• Faster fulfillment

Higher foot traffic

The more people you have visiting your store, the higher your chances are of generating revenue. 

Your physical store location plays a large role in this. Areas known to have high footfall could allow you to ease off on local marketing and heavy retail signage. An attractive window display has the potential to pull in passersby who weren't otherwise thinking of visiting. 

Better community engagement

One of the more notable retail shifts in recent years has been toward localism—preferring and buying from nearby brands that support the local community. 

Some retail locations have a greater sense of community than others. For example, independent stores in downtown areas have more local engagement than big-box retailers in busy malls.

Treat your physical location as a hub for supporting the local community. From partnerships with other retailers to participating in community events, choosing a retail location near where the action happens puts your store in a better position to contribute.

Faster fulfillment

A retail location isn’t just a space to meet new customers. Use the stockroom inside your new location as a storage and fulfillment hub.

Your retail location impacts how fast inventory comes in and out. It’s harder for suppliers to deliver stock to some areas, like busy malls with shared unloading bays and tiny storage shelves.

On the other hand, fulfillment strategies like buy online, pick up in-store (BOPIS) don’t work if your store isn’t located in an area already part of your customer’s habits. 

How to choose a retail location: A seven-step guide 

1. Define your brand’s spatial needs and budget
2. Research your target demographic
3. Analyze foot traffic and accessibility
4. Scout the competition and complementary businesses
5. Understand zoning laws and regulations
6. Evaluate the physical space and lease terms
7. Test the location with a popup shop

1. Define your brand’s spatial needs and budget 

Before scouting locations, establish what you can afford and what you actually need. Start by looking at the occupancy cost ratio (OCR). It measures the sustainability of your rent and related expenses against your revenue. 

Then, determine your sales per square foot. This tells you how efficiently you’re using your space. A high number means you're getting a lot of value out of every square foot you pay for. It helps you decide if you need a bigger, smaller, or differently shaped store.

Right now, there aren’t a lot of empty retail locations, so use your business projections to negotiate with landlords and demonstrate your viability. You could also look into popups and shared retail spaces, which give you more flexibility while you establish your business.

2. Research your target demographic 

Your retail location should be situated where your customers live, work, and shop. Use data to find them. Define your trade area, or where your shoppers come from. 

You can plot where your ideal customers live on a map, and then define your trade area by either drawing circles (like a three-mile radius) or by drive times. Once you have your trade area, look up facts like total population, median income (can they afford your products?), and how many people work there during the day.

3. Analyze foot traffic and accessibility 

Use data from mobile phones to see how many people walk or drive by a certain block. This data, offered by services like Placer.ai, shows you the busiest times of day and which neighboring stores are drawing crowds.

You might read that store traffic is up nationally, but what matters is the specific street you're looking at. Go there and see for yourself:

• Choose locations that are near public transportation or major highways.
• Make sure there is parking available near your store. 
• Make entrances accessible for everyone, including those with disabilities.

4. Scout the competition and complementary businesses 

The other businesses around you will affect your store. A small neighborhood strip mall creates a different vibe than a giant center with big box stores. Understand the type of shopping center or area you’re considering and whether its typical shopper fits your target shopper.

Pay attention to the other tenants. Are they businesses that will help you, like a popular cafe next to your boutique? Or are they direct competitors? In today’s market with few empty storefronts, your neighbors might not change for a long time, so choose wisely.

5. Understand zoning laws and regulations 

A zoning law determines what kinds of businesses can operate in a given area. To avoid legal issues and fines, retailers should check with the local planning agency to make sure their type of business is allowed.

How to assess:

• Look into any planned developments or zoning changes in the area that might affect your business.
• Be aware of any signage restrictions, operational limitations (like hours of operation), or special permits you may need.

After you confirm the zoning is okay for your business, you'll still need other permits to operate, like a sales tax license and maybe a health permit. Make a checklist of everything you need.

6. Evaluate the physical space and lease terms 

When you find a retail location you like, it’s time to look closer at the building and the contract. Here are the different elements to consider:

• Understand the lease: In a triple-net (NNN) lease, you pay the base rent plus the big three expenses: common area maintenance (CAM), property taxes, and insurance. A gross lease is simpler, as those costs are already included in your rent.
• Percentage rent: Some leases require you to pay a percentage of your sales to the landlord once you pass a particular sales goal. This goal is called the break point. Make sure you understand how it’s calculated.
• The fit-out deal: This is where you negotiate the details of your tenant improvement (TI) allowance. Be clear about what work needs to be done and what the landlord will pay for before you sign anything.

7. Test the location with a popup shop 

If you're still not 100% sure about your location, a short-term test can be a smart move. Try out different retail locations before committing to a particular space with temporary options, such as:

• Food trucks
• Popup shops
• Shop-in-shops
• Gallery exhibitions
• Local markets or fairs 

Glossier took this approach with their retail location strategy. After opening a popup store in London, CEO Emily Weiss said, “In London, we'll be following our most successful temporary store of all time with our first-ever permanent international flagship.” 

📌 GET STARTED: Shopify POS is the fastest way to accept in-person payments, sell at events, or open a popup shop. Download the Shopify POS app onto any smartphone or tablet and rent a mobile card reader to start selling wherever your customers are.

Seven common types of retail locations to consider

1. Brick-and-mortar
2. Mall space
3. Shopping centers
4. Business parks
5. Downtown
6. Main street
7. Home-based

Now that we know the importance of choosing the right space, here are seven types of retail locations to consider when opening your next store. 

Brick-and-mortar

Brick-and-mortar retail is the most traditional type of physical location. Also known as freestanding or anchor stores, it’s a type of building used by retailers to connect with customers in their own premises. 

Pros of brick-and-mortar stores

• Rent is cheaper: Busy shopping malls can charge a premium to retailers looking to tap into their existing foot traffic. Out-of-town landlords don’t have that luxury, so rent can be much cheaper. 
• They’re more accessible: Brick-and-mortar stores can be situated out of town but on a public road. Proximity to public transport (such as bus stops) and cheaper parking makes this location more accessible. 
• Some customers prefer them: Research shows that 61% of surveyed consumers do most of their shopping in-store because they enjoy it.

Cons of brick-and-mortar stores

• Zoning rules apply: Cities, towns, or village governments often set zoning regulations governing how buildings in any given area can be used. Any building that falls within a residential zone is unlikely to get approval for becoming a retail shop.
• Foot traffic can be a challenge: Expect to invest heavily in local marketing, advertising, and signage that guides potential customers toward your store. 

Mall space

A shopping mall is a place where customers come specifically to shop. Usually spanning millions of square feet, they feature numerous stores—from big-box retailers to independent stores—all under one roof. 

Pros of mall space

• High foot traffic: Your business could be exposed to thousands of shoppers on a weekly basis—without taking on excessive advertising. 
• Co-marketing opportunities: The owner of a mall rarely has any inventory to sell, so owners promote their retailer’s inventory to drive foot traffic.
• It’s secure: Malls often have 24/7 security to protect the millions of dollars’ worth of merchandise stored inside. 

Cons of mall space

• Rent is expensive: Malls often charge premium prices for the exposure they give to retailers. 
• Competition is fierce: Leading shopping malls span more than two million square feet. There’s a good chance your direct competitors will be in the same building, fighting for your target customer’s attention. 
• They can be inconvenient for one-off trips: If someone is making a special trip solely to your store, the hassle of visiting a busy shopping mall can be off-putting.

Shopping centers

A shopping center is a busy building where people come solely to shop. Also known as a strip mall, it can have up to 20 physical stores—including restaurants—situated in a single area. 

Pros of shopping centers

• Foot traffic: Smaller than a mall, shopping centers still have a steady flow of potential customers that could stop by your store. 
• Range of customers: Shopping centers often house grocery stores and restaurants—both of which attract a wide customer base. That can be beneficial for stores that sell widely used products.
• They’re accessible: Public transportation often runs to and from shopping centers.

Cons of shopping centers

• Additional fees: Unlike malls, shopping centers often add the cost of security, parking, and building maintenance onto your retail lease.
• Parking can be hit or miss: On a busy day, parking spaces can fill up fast—some shopping center managers require each store to reserve its own customer parking spaces.

Business parks

A business park is an area used as headquarters for businesses. On some, you’ll find industrial plants and warehouses. But these units can be great spots to expand your retail business.

Pros of business parks

• Parking is plentiful: Businesses located in a business park likely have their own employees driving to work, resulting in large parking lots customers can use.
• Lots of space: A unit in a business park is typically bigger than one you’ll find in a busy shopping center. That leaves plenty of opportunity for storage, creative layouts, and experiential retail.
• You’re surrounded by businesspeople: Build relationships with business owners in nearby units for support when growing your own. 

Cons of business parks

• They’re usually built in semi-residential areas: Customers might be going out of their way to visit your store.
• Foot traffic can be minimal: This largely depends on the other units. If they’re offices or industrial plants, for example, only workers will pass through the business park.
• Public transport: Public transportation is less likely to run there since most employees commute via car.

Downtown

Downtown is the main business and commercial area of a town or city. Many merge retail buildings with residential, such as retail units beneath high-rise apartments. Downtown shopping areas can host many types of retail outlets like convenience stores, specialty stores, and boutiques.

Pros of downtown

• There are lots of people around: Whether they’re passing through on their commute or visiting other retailers, positioning your store downtown exposes you to large volumes of people. 
• They appeal to health-conscious consumers: Unlike busy malls with less-than-ideal air circulation, downtown is considered an open air environment with minimal touchpoints (such as doors), wider spaces, and fewer crowds.
• Big companies are investing in downtown areas: This is driving more foot traffic and events for the local community.

Cons of downtown

• Rent can be expensive: Since building owners merge domestic and commercial units, some charge a premium for retailers who want to tap into residents. 
• Limited customer bases: Unless you’re in a tourist area, downtown is typically dominated by members of a younger demographic who prefer city center living to suburbia.
• Parking is restricted: Many spaces are reserved for residents of the buildings.

Main street

This is a road where there are a bunch of local stores in a village, town, or small city. It’s usually within the central business district and is a place for folks to shop, socialize, and eat and drink. It’s a popular choice for mom-and-pop shops that have been there for generations. 

Pros of main street retail

• Lots of visibility: Main street shopping locations usually have a lot of foot traffic and are visible to drivers and pedestrians.
• Community hub: Main street is the heart of a town where events and activities take place. Retailers here can count on a flow of local residents and tourists alike. 
• Local charm: Often, these areas have historical significance and charm, which attract folks looking for unique shopping experiences outside of malls.

Cons of main street retail 

• High rent: Main street locations are the hot spots in town, which means rent prices can be higher compared to other areas.
• Strict regulations: The local government often has strict zoning laws and aesthetic guidelines to maintain a historical feel. This can limit the signs, renovations, or storefront designs you use. 
• Seasonal fluctuations: Depending on the location, your business might see seasonal changes in foot traffic. If your town heavily relies on tourism, you might see a boom in summer or winter months, but quieter business during off-peak seasons. 

Home-based

There’s a lot that goes into finding a retail location. If you’re still unsure about which is best for your business, consider setting up shop in a place you already have: your home. 

Pros of home-based retail

• It’s much cheaper since you’re not paying extra real estate leases or operating expenses. Plus, small business owners working from home can reduce their tax liability.
• It’s flexible. Minimal visitors means you have ultimate control over your “opening hours.” 

Cons of home-based retail

• Security can be an issue. You can’t have potential customers stop by your home-based store if you don’t want to reveal your home address.
• Distractions come thick and fast, especially if you’re working in a busy household.
• Scaling becomes difficult. Selling more inventory is great for business, but not great if its storage begins to dominate your home.
• Some landlords prevent tenants from using their property as a retail space.

Tools and resources for retail site selection

Selecting a suitable retail location requires analyzing various layers of data. Here are some resources to review:

• American Community Survey (ACS): Population, income, education, housing by census tract/ZIP/county for trade-area sizing and customer fit 
• Census Business Builder (CBB): Point-and-click site-selection app that bundles local resident and business counts for markets 
• BLS Local Area Unemployment Statistics (LAUS): Local labor conditions that correlate with spending resilience by metro/county/city
• Placer.ai: A location analytics platform that provides foot traffic data to help analyze and benchmark consumer behavior at physical properties
• CBRE US Retail Figures: Provides real estate data like availability and rent trends used to make property comparisons and set lease expectations
• Census Monthly Retail Trade (MARTS/MRTS): Offers monthly national retail sales and inventory data to benchmark the overall performance of a specific retail category
• National Zoning Atlas: A fast, map-based snapshot of local zoning rules across thousands of US jurisdictions 
• US Small Business Administration Guide to Pick Your Business Location: This official government guide offers tips around navigating local taxes, zoning laws, and business ordinances. 

Using your retail location for omnichannel fulfillment

Choose a retail location within close proximity to your customer base and treat the store as a fulfillment center to offer blended shipping options, such as:

• Buy online, pick-up in-store (BOPIS)
• Local delivery
• Curbside pickup

Let’s put this into practice and imagine you’re a coffee shop looking for your next retail location. Opening a store within a busy shopping center or mall space might sound like the perfect location, since you’re exposed to casual shoppers. 

But opting for business park units could be a smarter strategy. Not only is rent likely to be cheaper, but customers commuting to work can pick up their morning coffee without too much disruption to their daily routine—especially if there’s space for a drive-thru lane.

💡 PRO TIP: Set up in-store pickup in Shopify to start offering in-store pickup as an option at checkout. Pay less on last-mile delivery, speed up fulfillment times on in-store orders, and drive more foot traffic to your stores.

Reduce location size with omnichannel

Retail locations in busy areas often come with a heavy price tag. That doesn’t mean you need to rule them out altogether. 

Reduce the size of your store—and therefore the square footage you’re paying for—with omnichannel retail strategies like showrooming and endless aisles. In both cases, a shopper visits your physical store and browses a small selection of products. But instead of immediately taking the item home with them, customers either:

• Pay in-store and have the product delivered to their home 
• Email themselves a shopping cart containing the product(s) they viewed, ready to purchase at home

💡 PRO TIP: Encourage store staff to send the carts they save to no-shows by email at the end of their shift. This is an accessible way to recover abandoned store sales and attribute more revenue to your store–even if the transaction happened online.

Find the right location for your retail store

The process of expanding your retail business is a daunting one. Whether you choose downtown or a shopping center, use these tips to secure the best spot for your next store. Remember: The goal is to best position your store to capture potential customers in the local community.